1. Thinking about the analysis of profit maximising behaviour in a monopoly, which statement will be true? a) To maximise profits, the firm will set a lower output and a higher price than if the market was perfectly competitive. b) The firm sets output so that its marginal cost of production equals the market price. c) When the firm maximises its profit, marginal revenue will be zero. d) The demand for a monopoly’s product will be greater than the market demand under perfect competition. 2. We would not consider the motorway system to be a public good because a) It is possible for private operators to run toll roads. b) Users can enter the system freely until there is a problem of congestion. c) Users can free ride, enjoying the service without making any payment for it. d) Although the system is used by the public, it is owned by the government. 3. In many cities, there is some form of rent control, restricting how much landlords can charge for accommodation. A direct effect of this policy might be a) Conditions of excess demand, with renters struggling to find properties. b) Rapidly increasing property sale values as people compete to buy accommodation to rent out. c) A very elastic supply of rental properties at the maximum rental. d) Very high rates of property construction to take advantage of the profit opportunities in the rental market.
1. Thinking about the analysis of profit maximising behaviour in a
a) To maximise profits, the firm will set a lower output and a higher
b) The firm sets output so that its marginal cost of production equals the market price.
c) When the firm maximises its profit, marginal revenue will be zero.
d) The demand for a monopoly’s product will be greater than the market demand under perfect competition.
2. We would not consider the motorway system to be a public good because
a) It is possible for private operators to run toll roads.
b) Users can enter the system freely until there is a problem of congestion.
c) Users can free ride, enjoying the service without making any payment for it.
d) Although the system is used by the public, it is owned by the government.
3. In many cities, there is some form of rent control, restricting how much landlords can charge for accommodation. A direct effect of this policy might be
a) Conditions of excess demand, with renters struggling to find properties.
b) Rapidly increasing property sale values as people compete to buy accommodation to rent out.
c) A very elastic supply of rental properties at the maximum rental.
d) Very high rates of property construction to take advantage of the profit opportunities in the rental market.
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