1. Suppose that the demand curve for a monopolist is Q= 500 – P, and the marginal revenue function is MR = 500 – 2Q. The monopolist has a constant marginal and average total cost of $50 per unit. A) Find the monopolist’s profit-maximizing output and price. B) Calculate the monopolist’s profit. C) What is the Lerner Index for this industry?
2. Given each of the following price elasticities, determine whether marginal revenue is positive, negative, or zero.
a. -5
b. -1
C. -0.5
3. Explain whether transfer payments, such as Social Security and unemployment compensation, are counted as government spending in calculating GDP.
4. What is a fractional reserve banking system? What is its role in the monetary side of the economy?