a.Employers set wage rates equal to marginal revenue products. True or false. Explain. (2 marks)

b.When a monopolist is maximizing profits, price is greater than marginal cost. Thus, consumers will pay more for additional units of output than they cost to produce. So why doesn't the monopolist produce more?

c.ABC company produced 10,000 cups last year. It sold the cup at a price of each, but each cup cost only $3 to make. With a profit margin of $2 per cup, should the company have produced more if it wanted to maximize profits?

d.What do we mean when we say that monopolistic competition leads to excess capacity? Is this outcome necessarily undesirable? Explain.