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TOTAL REVENUE, MONOPOLISTIC COMPETITION: The revenue received by a monopolistically competitive firm for the sale of its output. Total revenue is one of two parts a monopoly needs to calculate economic profit, the other is total cost. In general, total revenue is the price received for selling a good times the quantity of the good sold at that price. Because a monopolistically competitive firm has some degree of market control and faces a negatively-sloped demand curve, it charges a different price for a different quantities. If a monopoly sells a relatively small quantity, it charges a relatively high price. If it sells a relatively smaller quantity, it charges a relatively lower price. However, once the monopolistically competitive firms determines its' price/quantity combination, total revenue calculation is relatively straightforward, multiple the price times the quantity.

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Lesson 1: Economic Basics | Unit 3: The Economy Page: 8 of 18

Topic: A Mixed Economy: Markets and Government <=PAGE BACK | PAGE NEXT=>

Markets do an effective (and efficient) job of answering the three questions of allocation--most of the time.
  • Markets are the VOLUNTARY exchange of goods and services.
  • A pure market economy is an economy that uses nothing but markets to allocate resources.
  • A pure market economy is a useful theoretical benchmark.
Market responses to the allocation questions:
  • What? Resources are used to produce goods with the highest prices.
  • How? Goods are produced using the combination of resource with the lowest prices.
  • For Whom? People with more income buy more goods.

Government also helps answer the three questions of allocation.
  • Government allocation is INVOLUNTARY. It sets the laws and rules.
  • A pure command economy is an economy that uses nothing but government to allocate resources.
  • A pure command economy is another useful theoretical benchmark.
Government responses to the allocation questions:
  • What? When government spends taxes, it dictates what goods will be produced.
  • How? Government has laws and rules that specify how resources will be used to produce goods.
  • For Whom? Government collects taxes from some people and distributes them among other people.

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SCREENING

When confronted by asymmetric information, the use of small bits of information, or indicators, that suggest more comprehensive information. Screening occurs when those with limited information try to identify indicators suggesting more complete information. It is used in markets with adverse selection and moral hazard, especially in labor markets and in the provision of insurance. Common methods of screening include aptitude tests, affiliations, past behavior, and personal characteristics. A related method is signalling.

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Today, you are likely to spend a great deal of time at a crowded estate auction seeking to buy either a birthday gift for your grandmother or a T-shirt commemorating yesterday. Be on the lookout for mail order catalogs with hidden messages.
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In the late 1800s and early 1900s, almost 2 million children were employed as factory workers.
"Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost. "

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