Solutions to Chapter 8 (Selected Questions)
Not if its loss is less than its fixed cost. See explanation of problem 1.
Even a pure monopoly has to consider the possibility of demand falling below
the level sufficient to earn a profit.
Solutions to Chapter 7
a. Sunk cost is a cost that is incurred in the past that is not affected by a current decision (except
for purposes of taxes and possibly for the full-cost pricing of a product).
Incremental cost is a cost that is affe
Supply and Demand
Lets think about something we likecheesecake!
o If we consider the amount of cheesecake you would consumewould the amount go up
or down when the price of cheesecake goes up?
o That is an inverse relationship with a negative slope.