At his current level of output, a monopolist has a MR of 10, a MC of 6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve is upward sloping, the monopolist:
a. is producing at the profit-maximizing level of output.
b. could increase profit by increasing output.
c. could increase profit by increasing his price.
d. should exit the market if significant fixed costs have been incurred.
Question 2
According to empirical observations, the cost of restricting international trade in the U.S. is much greater than the benefits generated from restriction. In the light of the above observation, which of the following statements is true?
a. Domestic producers end up earning lower profits than what they would earn without trade restrictions.
b. Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer.
c. U.S. GDP would be over 14 billion higher with import restrictions than without restrictions.
d. Protection of the U.S. textile and sugar industries means that all consumers pay a lower price for clothing and sugar.
e. Protection of the domestic industries enable the producers to charge lower prices for their products.
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