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Author Question: Which of the following is motivated by an efficiency concern? A) The United Network for Organ ... (Read 27 times)

james0929

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on: Jun 29, 2018
Which of the following is motivated by an efficiency concern?
 
  A) The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs.
  B) In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina.
  C) Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes, and parents in the 80,000-seat stadium.
  D) The federal government's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Question 2

Why is it true that under monopolistic competition the price is above marginal revenue while under pure competition price is equal to marginal revenue?
 
  What will be an ideal response?
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tofugiraffe

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

A

Answer to Question 2

The reason is that under pure competition the firm can sell as much as output as it desires at the going market price. Therefore total revenue will always increase by the amount of the price with each new additional unit sold. However, under monopolistic competition the firm must reduce price to sell more output. Therefore total revenue still increases but by less than the price because the price concession is not just made on additional units but on all previous units as well.


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