Author Question: The ability to set a price greater than marginal cost guarantees an economic profit for the ... (Read 10 times)

CORALGRILL2014 · **on:** Jul 1, 2018

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Indicate whether the statement is true or false

Question 2

The marginal expenditure of a monopsonist is 4. The wage it currently pays is 3. The labor supply curve has a constant elasticity. What is the elasticity of the labor supply?

A) 0.33
B) 0.66
C) 1
D) 3

wfdfwc23 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

False. Although the firm is a price setter entry in the long run will drive price down until no economic profit exists.

Answer to Question 2

A