Question

64

When the government forces a monopoly to price its product or service at the point where​ Price = Marginal Cost, then what is happening?

Multiple Choice

• This is the point that maximizes the efficiency of capital

• This is the second-best profit maximization point

• This is the maximum productive efficiency point

• This point reflects where the competitive market might have been if we had a competitive market

65

We already know what the standard monopoly graph looks like. Academically speaking, what does a government run monopoly graph for Social Security and Medicare look like?   

Multiple Choice

• The government uses the Price = AFC graph

• The government doesn’t have a monopoly graph and they don’t use the MC=MR formula

• The government uses the cartel graph to represent government-run programs

• The government uses the same monopoly graph as business and they use the MC=MR formula

66

The California CalPERS and STRS pension plans provide lifetime benefits for CA state workers and teachers. They have been grossly mismanaged. They are about $50 billion in the hole or underfunded and multiple investments have lost a great deal of money. There have also been several scandals whereby investments were made in firms that were owned by the members of the Sacramento State legislature. What can we call this situation?

Multiple Choice

• This is an example of Rent Seeking

• All of the statements are correct. This story has elements of all three definitions.

• This is an example of Unfunded Liabilities

• This is an example of Political Corruption

67

If a typical private sector employee took 4-hour lunch breaks, wasted more time doing online shopping, and gossiped all day long, then their value to the employer could be represented by the following formula: MB < MC.            

True or False

Answer 1

in monopoly, produce attain maximum profit when MC=MR and it produces less output than a competitive market and also charges high prices as compared to a competitive market. in a competitive market, producer produces at MR=AR=MC.

264 Ans. This points. points reflects where the competi- tive market might have had competitive market. been if lue Y Price MC AR, MR लि På AR MR М. C we can seet where. انس be consumer output that in in: monopoly profit maximises MR = MC (at B) and monopoly price will be Olm & quantity, produce, will OM, this is to higher profits. without considering considering welfare of MC = Prices at point D. then prices will fall to Pc. and output will increase to to Oc i.e.t..it will! so act as competitive market because in competitive prarket equilibriumisis attain -atPe MR = AR=MC But if fos