This topic contains a solution. Click here to go to the answer

Author Question: Why would a profit maximizing monopolist in a contestable market set its price at a level below that ... (Read 85 times)

faduma

  • Hero Member
  • *****
  • Posts: 528
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
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
Thanks for the timely response, appreciate it


Dominic

  • Member
  • Posts: 328
Reply 3 on: Yesterday
:D TYSM

 

Did you know?

During pregnancy, a woman is more likely to experience bleeding gums and nosebleeds caused by hormonal changes that increase blood flow to the mouth and nose.

Did you know?

People about to have surgery must tell their health care providers about all supplements they take.

Did you know?

Intradermal injections are somewhat difficult to correctly administer because the skin layers are so thin that it is easy to accidentally punch through to the deeper subcutaneous layer.

Did you know?

Aspirin may benefit 11 different cancers, including those of the colon, pancreas, lungs, prostate, breasts, and leukemia.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

For a complete list of videos, visit our video library