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Author Question: Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a ... (Read 134 times)

joe

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on: Jun 29, 2018
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
 
  A) 2; The product is elastic. B) 0.5; The product is inelastic.
  C) 0.2; The product is inelastic. D) 50; The product is inelastic.

Question 2

Why can a monopoly make a positive economic profit even in the long run?
 
  What will be an ideal response?
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jaymee143

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

Barriers to entry prevent the monopoly firm from enduring the pressure of competition, and allow it to choose the quantity of output that is associated with the profit-maximizing market price. This allows a monopoly firm to potentially enjoy positive economic profit, even in the long run.


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