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Author Question: Explain what will happen when the government imposes a minimum price that is below the market ... (Read 126 times)

Mimi

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on: Jun 29, 2018
Explain what will happen when the government imposes a minimum price that is below the market equilibrium price. Why is this true?
 
  What will be an ideal response?

Question 2

A bureaucrat at a public utility commission hearing testifies that the local area telephone monopoly is able to maximize its revenue. For that reason the rate-hike request should be denied.
 
  What will be an ideal response?


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bubulittle310@msn.cn

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

The minimum price will have no impact on the market. This is true because the price floor will only have an impact when the market equilibrium price is below it. Firms and consumers will otherwise not change their behavior.

Answer to Question 2

The goal of any firm is to maximize profits, not to maximize revenue. Even if the monopoly were maximizing its revenue this would be no guarantee that it is maximizing its profits.


Mimi

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Reply #2 on: Jun 29, 2018
Thank you :)


bubulittle310@msn.cn

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Reply #3 on: Jun 29, 2018
Happy to help you


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