« previous next »

Author Question: If, for a given percentage increase in price, quantity supplied increases by a proportionately ... (Read 66 times)

maychende

  • Hero Member
  • *****
  • Posts: 556
on: Jun 29, 2018
If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is
 
  A) unit elastic. B) relatively inelastic. C) elastic. D) perfectly elastic.

Question 2

What is the average cost pricing rule? Why is it not an efficient way of regulating monopoly?
 
  What will be an ideal response?
InMicro ¦ Hubbard, O'Brien ¦ 1st Edition
Buy Test-Bank


mjbamaung

  • Sr. Member
  • ****
  • Posts: 343
Reply #1 on: Jun 29, 2018
Answer to Question 1

C

Answer to Question 2

An average cost pricing rule requires that the firm set its price equal to its average total cost and produce the quantity at which the LRAC curve intersects the demand curve. This pricing rule leads to an inefficient quantity of output. Allocative efficiency requires that the quantity produced be the amount for which the marginal social benefit, shown on the demand curve, equal marginal social cost, which is shown on the marginal cost curve. Efficiency requires that P = MC. When a natural monopoly is regulated using an average cost pricing rule, P = LRAC and at the quantity produced LRAC > MC. Combining these results shows that P > MC, which means that the firm is producing an inefficient amount of output.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Certain topical medications such as clotrimazole and betamethasone are not approved for use in children younger than 12 years of age. They must be used very cautiously, as directed by a doctor, to treat any child. Children have a much greater response to topical steroid medications.

Did you know?

Eating carrots will improve your eyesight. Carrots are high in vitamin A (retinol), which is essential for good vision. It can also be found in milk, cheese, egg yolks, and liver.

Did you know?

Cocaine was isolated in 1860 and first used as a local anesthetic in 1884. Its first clinical use was by Sigmund Freud to wean a patient from morphine addiction. The fictional character Sherlock Holmes was supposed to be addicted to cocaine by injection.

Did you know?

Critical care patients are twice as likely to receive the wrong medication. Of these errors, 20% are life-threatening, and 42% require additional life-sustaining treatments.

Did you know?

Always store hazardous household chemicals in their original containers out of reach of children. These include bleach, paint, strippers and products containing turpentine, garden chemicals, oven cleaners, fondue fuels, nail polish, and nail polish remover.

Species richness increases with island size. Species richness increases with island size.
The recent mass upheavals in Tunisia, Egypt, Libya, Yemen, and Syria gave political scientists a cha The recent mass upheavals in Tunisia, Egypt, Libya, Yemen, and Syria gave political scientists a cha
Percentage of Foreign-Born Whites and Native Whites of Foreign or Mixed Parentage in Total Populatio Percentage of Foreign-Born Whites and Native Whites of Foreign or Mixed Parentage in Total Populatio
Compression used to increase circulation when the athlete is clothed. Compression used to increase circulation when the athlete is clothed.
Greenhouse gases increase in the stratosphere Greenhouse gases increase in the stratosphere
Crossing over in prophase I increases genetic variation Crossing over in prophase I increases genetic variation
Video: Lipid digestion - mouth, stomach and small intestine

For a complete list of videos, visit our video library