Eco 201

Pamela sells 10 bottles of olive oil per week at $5 per bottle. She can sell 11 bottles per week if she lowers the price to $4.50 per bottle. The quantity effect would be:

4.50

The efficient rate of emissions occurs when:

MSB = MSC .

If a firm faces a downward-sloping demand curve:

P > MR.

A cost imposed on bystanders is _____ cost.

an external

Mr. Parker sells 10 bottles of wine per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity effect of the sale of an additional bottle would be _____, whereas the price effect of the sale of an additional bottle would be _____.

$45; -$50

How does marginal revenue compare to price for a seller with market power?

Beyond the first unit sold, marginal revenue is below price.

How is the result of the Rational Rule for Sellers different for companies with market power versus companies with no market power?

The price is higher for companies with market power.

The demand curve for a monopoly is:

above the MR curve.

One of the main problems with the Coase theorem is that:

bargaining costs are generally not low (or zero)

If a monopolist is producing a quantity that generates MC = MR, then profit:

is maximized

In a perfectly competitive market, a company's marginal revenue equals _____. For a company with market power, marginal revenue is _____.

marginal cost; greater than marginal cost

The supply curve of a firm is also its _____ cost curve.

marginal private

Emissions from large pulp and paper factories create health risks for pedestrians and discomfort for residents of the city of Ashdown, Arkansas. In this case:

the externality can be solved by imposing a specific tax on the pulp and paper factories.

Because the general market mechanism does not take into account the side effects that harm bystanders, a market economy will produce _____ without any government regulation.

too much pollution

One of the market failures caused by market power is

underproduction

If Penelope, a monopolist, is producing a quantity where MC = P, then profit:

can be increased by decreasing production.

If Penelope, a monopolist, is producing a quantity where MC > MR, then profit:

can be increased by decreasing production.

If a monopolist produces a quantity that generates MC < MR, then profit:

can be increased by increasing output.

If a monopolist produces a quantity that generates MC > MR, then profit:

can be increased by increasing price.

If Penelope, a monopolist, is producing a quantity where MC < MR, then profit:

can be increased by increasing production.