Question
9. Which of the following is INCORRECT regarding monopoly? (a) The socially desirable outcome cannot be obtained because a monopolist maximizes its profit based on
9. Which of the following is INCORRECT regarding monopoly?
(a) The socially desirable outcome cannot be obtained because a monopolist maximizes its profit based on marginal revenue curve which is located below demand curve.
(b) The monopolist maximizes profit by producing at the price level at which the marginal cost equals marginal revenue.
(c) If a huge fixed cost is required for producing a certain good, then the market for that good can naturally become a monopoly, exhibiting economies of scale for a certain range of output level.
(d) A deadweight loss occurs with monopolies because demand curve shifts leftward with a high price, resulting in underproduction.
Answer: ______________
10. Which of the following is INCORRECT regarding discounting in CBA?
(a) Social discount rates are always chosen to be consistent with individuals' time preferences.
(b) In CBA, the terminal value should be considered because CBA is conducted in a limited time horizon.
(c) If the analyst deals with nominal values for the cash flow stream, then nominal interest rate, not real interest rate, should be applied when calculating present values of the stream.
(d) Time-declining social discount rates can be applied for PFS to include environmental effects in the future because discounting in a compounding way will significantly lower the effects of 20-30 years from the beginning year.
Answer: ______________
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