This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Why would a profit maximizing monopolist in a contestable market set its price at a level below that ... (Read 77 times)

faduma

  • Hero Member
  • *****
  • Posts: 528
on: Jun 29, 2018
Why would a profit maximizing monopolist in a contestable market set its price at a level below that which maximizes short run profits?
 
  What will be an ideal response?

Question 2

Diminishing marginal utility means a downward sloping total utility curve. True or false? Explain.
 
  Indicate whether the statement is true or false


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

frejo

  • Sr. Member
  • ****
  • Posts: 349
Reply #1 on: Jun 29, 2018
Answer to Question 1

A firm in a contestable market is not protected by barriers to entry. Thus while it is currently the only firm in the market, it might worry that other firms will enter the market. In this case, setting a relatively lower price is known as limit pricing. It is a pricing strategy that deters entry by sending a signal to potential entrants that entering the industry would result in economic losses.

Answer to Question 2

False. Diminishing marginal utility means a downward sloping marginal utility curve. A total utility curve stays upward-sloping as long as marginal utility is positive.


faduma

  • Member
  • Posts: 528
Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

aliotak

  • Member
  • Posts: 326
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

A serious new warning has been established for pregnant women against taking ACE inhibitors during pregnancy. In the study, the risk of major birth defects in children whose mothers took ACE inhibitors during the first trimester was nearly three times higher than in children whose mothers didn't take ACE inhibitors. Physicians can prescribe alternative medications for pregnant women who have symptoms of high blood pressure.

Did you know?

The senior population grows every year. Seniors older than 65 years of age now comprise more than 13% of the total population. However, women outlive men. In the 85-and-over age group, there are only 45 men to every 100 women.

Did you know?

Less than one of every three adults with high LDL cholesterol has the condition under control. Only 48.1% with the condition are being treated for it.

Did you know?

In the United States, congenital cytomegalovirus causes one child to become disabled almost every hour. CMV is the leading preventable viral cause of development disability in newborns. These disabilities include hearing or vision loss, and cerebral palsy.

Did you know?

The first documented use of surgical anesthesia in the United States was in Connecticut in 1844.

Variation in the level of multicellularity among volvocine algae Variation in the level of multicellularity among volvocine algae
Three routes of tissue-level transport in plants: transmembrane, symplastic, and apoplastic. Three routes of tissue-level transport in plants: transmembrane, symplastic, and apoplastic.
Effect of Perceived Price of a Drug on Placebo Analgesia Effect of Perceived Price of a Drug on Placebo Analgesia
Drive-on ramps are dangerous to use. The wheels on the ground level must be chocked (blocked) to ... Drive-on ramps are dangerous to use. The wheels on the ground level must be chocked (blocked) to ...
Reaction 7: The First Substrate-Level Phosphorylation Reaction 7: The First Substrate-Level Phosphorylation
Share of Hours Worked by Education Level, 1940–2008 Share of Hours Worked by Education Level, 1940–2008
Video: Properties of macromolecules (Explained with No Audio)

For a complete list of videos, visit our video library