Econ Final

According to Arrow's Impossibility Theorem, when you are choosing from a menu of voting methods, you are really choosing from a menu of directions costs paradoxes impossibilities

Paradoxes

Tony has a cell phone, and his service provider is Verizon. When he calls his wife, Meleah, who is also a Verizon customer, he does not have to pay for those minutes. The more Verizon customers there are in the market, the more benefit Tony receives. This is: a network externality. a Pigouvian subsidy. a technology spillover. the Coase theorem.

a network externality

To be called an oligopoly, an industry must have: a small number of interdependent firms. independence in decision making. relatively easy entry and exit. a horizontal demand curve.

a small number of interdependent firms.

Which example is MOST likely to be observed when firms engage mainly in nonprice competition? low interest rates for financing the purchase of big-ticket items discounts offered through coupons advertising and product differentiation actively encouraging the sale of generic as opposed to brand-name products

advertising and product differentiation

Positive externalities: are difficult to measure since marginal social benefits are hard to observe. are likely to be solved with the use of a Pigouvian tax. result from greater than optimal production of a good. are similar to negative externalities in their ease of measuring marginal benefits.

are difficult to measure since marginal social benefits are hard to observe.

Excess capacity is a problem in monopolistic competition because, if there were fewer firms in the industry: average total costs would be higher and profits would be lower. there would be more choices for consumers. there would be less need for government regulation. average total costs would be lower and the prices paid by consumers could be lower

average total costs would be lower and the prices paid by consumers could be lower

An external benefit is a: negative externality. benefit that accrues to domestic firms as a result of the actions of foreign (external) firms. benefit that individuals or firms confer on others without receiving compensation. benefit that accrues to foreign (external) firms as a result of the actions of domestic firms.

benefit that individuals or firms confer on others without receiving compensation.

In long-run equilibrium, a firm in monopolistic competition is similar to a monopoly because it: charges a price equal to marginal cost. charges a price greater than marginal cost. earns no economic profit. charges a price equal to average total cost.

charges a price greater than marginal cost.

A monopolist responds to a decrease in demand by _____ price and _____ output.

decrease; decrease

A strategy that is the same, regardless of the action of the other player in a game, is a _____ strategy. trigger dominant competitive tit-for-ta

dominant

Whether or not they pay for them, people cannot be excluded from receiving the benefits of _____, but they can be excluded from the benefits of _____. either public goods or common resources; private goods public goods; private goods and common resources common resources; public goods and private goods private goods; public goods and common resources

either public goods or common resources; private goods

De Beers became a monopoly by: use of technological superiority. use of economies of scale. establishing control over diamond mines. ownership of a patent.

establishing control over diamond mines.

Which good is MOST likely a public good? fire protection from the fire department in a town an amusement park a pair of pants the Internet

fire protection from the fire department in a town

When a monopolistically competitive industry earns economic profit, the result of competition among sellers is usually that: firms in the industry gain market share. the price of the product quickly reaches the perfectly competitive level. the price of the product increases to monopoly level. firms in the industry lose market share.

firms in the industry lose market share.

In an oligopoly: there are no barriers to entry. there are many sellers. total surplus is maximized. firms recognize their interdependence.

firms recognize their interdependence.

In a long-run equilibrium, firms in a monopolistically competitive industry sell at a price: less than marginal cost. greater than marginal cost. less than marginal revenue. equal to marginal cost

greater than marginal cost

The marginal social cost of a common resource is _____ than an individual's marginal cost, and without government intervention the market will allow provision of _____ of the common resource than is socially optimal. less; more greater; more greater; less less; less

greater;more

When tradable emissions permits are used, if the demand for goods that produce emissions shifts to the right, the equilibrium price of permits _____ and the equilibrium quantity _____. decreases; increases stays the same; increases increases; stays the same decreases; decreases

increases; stays the same

Which example is a good or market activity that is associated with a positive externality? innovation in the semiconductor industry listening to a new CD with earbuds smoking cigarettes an indoor classical music concert with tickets that cost $50

innovation in the semiconductor industry

Oligopoly is a market structure characterized by: substantial diseconomies of scale. independence in decision making. interdependence: each firm's decision affects the profit of the other firms. a large number of small firms.

interdependence: each firm's decision affects the profit of the other firms.

My Attempt A good is MOST likely to be artificially scarce if :it is nonexcludable but rival .the seller is a monopolist. it is excludable but nonrival .it is nonexcludable and nonrival.

it is excludable but nonrival.

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a _____ demand for swimming at the pool than do residents. greater less elastic lower more elastic

less elastic

Marginal revenue for a monopolist is: equal to price. equal to average revenue. less than price. greater than price.

less than price

Marginal revenue for a monopolist is: equal to price. equal to average revenue. less than price. greater than price.

less than price.

Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry. We can assume that monopoly output will be _____ than will the competitive output and that _____. higher; deadweight loss will emerge higher; consumer surplus will decrease lower; deadweight loss will emerge lower; consumer surplus will increase

lower; deadweight loss will emerge

Because most communities have a large number of similar but not identical substitutes, the market for financial planners is BEST considered to be: perfect competition. a monopoly. monopolistically competitive. an oligopoly.

monopolistically competitive.

_____ firms have the MOST market power Duopoly Oligopoly Monopoly Monopolistic competition

monopoly

The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a _____ demand for bus service than do other passengers more elastic less elastic lower greater

more elastic

Airlines are prone to price wars because: airlines operate close to capacity. airlines have the same costs. airline pricing is easy to understand. most fliers choose airlines on the basis of schedule and price.

most fliers choose airlines on the basis of schedule and price.

An artificially scarce good is similar to a public good in that it is _____, but it is also similar to a private good in that it is _____

nonrival in consumption; excludable

An artificially scarce good is similar to a public good in that it is _____, but it is also similar to a private good in that it is _____. nonrival in consumption; excludable nonexcludable; rival in consumption nonrival in consumption; nonexcludable excludable; nonrival in consumption

nonrival in consumption; excludable

Which factor would make it difficult for Georgia peach suppliers to collude?

only a few buyers of peaches

The land you own has the only known source of aloe needed to make anti-itch lotion. In this case, your monopoly results from: government restrictions. ownership of scarce inputs. location. sunk costs.

ownership of scarce inputs.

If a good that involves external costs is priced to take these costs into account, then its price will likely: rise, and output will likely fall. fall, and output will likely rise. not change, but output will likely fall. rise, but output will likely stay the same.

rise, and output will likely fall.

If the toothpaste market is monopolistically competitive, product differentiation would NOT take the form of: differentiation in the locations where certain toothpastes are available. production of many varieties of toothpaste, including those with whitening agents. quality differences among the various brands. setting the price of the product well below the price charged by the rivals.

setting the price of the product well below the price charged by the rivals.

Price leadership occurs if: smaller firms in an industry silently agree to charge the same price as the largest firm. competition among a large number of small firms generates similar but slightly different prices. competition among a large number of small firms generates a stable market price. two or more firms in an industry agree to fix the price at a given level.

smaller firms in an industry silently agree to charge the same price as the largest firm.

To calculate the Herfindahl-Hirschman index (HHI), one must _____ market share(s) of _____ in the industry. divide the; the largest firm by the sum of the four largest firms sum the; all of the firms sum the squared; all of the firms sum the; the four largest firms

sum the squared; all of the firms

When firms in a particular industry informally agree to charge the same price as the largest firm in that industry, it is called: overt collusion. satisfying. tacit collusion. price extortion.

tacit collusion.

When firms in a particular industry informally agree to charge the same price as the largest firm in that industry, it is called: tacit collusion. price extortion. overt collusion. satisfying.

tacit collusion.

The excess capacity in monopolistic competition may be viewed as: the cost of product diversity. the advantage of monopolistic competition over monopoly. the reason P = MR = MC in monopolistic competition. efficient.

the cost of product diversity.

In the short run, if a monopoly is forced to charge a price equal to marginal cost: consumer surplus will decrease. output will fall. the deadweight loss will decrease. other firms will enter the industry.

the deadweight loss will decrease.

Suppose that government officials have set an emissions tax to reduce pollution. Assume that the optimal tax would be $500, but government officials have set the tax at $900. At the equilibrium with the $900 tax

the marginal social benefit of pollution will be $900.

Market structures are categorized by: the number and size of the firms. the size of the firms and the extent of advertising. whether products are differentiated and the extent of advertising. the number of firms and whether products are differentiated.

the number of firms and whether products are differentiated.

Suppose that government officials have set an emissions tax to reduce pollution. Assume that the optimal tax would be $1,500, but government officials have set the tax at $500. At the equilibrium with the $500 tax: the marginal social benefit of pollution will be less than $500. there will be too much pollution. the marginal social cost of pollution will be less than $500. the marginal social benefit of pollution will be more than $500

there will be too much pollution

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog, then at the equilibrium price and quantity of hogs: the price will be less than the marginal social cost. the price will be less than the marginal cost to hog farmers. too few hogs will be raised. the price will be less than the marginal social benefit.

too few hogs will be raised.

Suppose that government officials have set an emissions tax to reduce pollution. Further suppose that, with the emissions tax, the marginal social cost of pollution exceeds the marginal social benefit of pollution. The emissions tax is: optimal. efficient. too high. too low.

too low

The marginal cost of producing an artificially scarce good is usually equal to: the marginal benefit if consumer surplus equals zero. its price. the average total cost. zero

zero

The marginal cost of producing an artificially scarce good is usually equal to: zero. the marginal benefit if consumer surplus equals zero. the average total cost. its price

zero

(Figure: Demand and Marginal Revenue) Use Figure: Demand and Marginal Revenue. The figure refers to a software upgrade. The producer incurred fixed costs of $10 million to produce the upgrade; the marginal cost of allowing consumers to download the upgrade is zero. What is the efficient price of the upgrade?

0

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

19

The Herfindahl-Hirschman index equals _____ when _____ have/has _____% of the market. 100,000; one firm; 100 5,000; two firms each; 50 5,000; three firms each; 33 10,000; four firms each; 25

5,000; two firms each; 50

Which statement concerning monopoly is TRUE? Monopolists produce more output than does a competitive market with the same demand and cost structure. Monopoly firms are always larger than are perfectly competitive firms. Barriers to entry do not prevent other firms from entering a monopolized industry. A monopoly has no rivals.

A monopoly has no rivals.

Which activity does NOT generate a negative externality? Bob's Service Station donates a car to charity. Bob occasionally drives while drunk. Bob renovates a run-down house in the neighborhood. Bob's Service Station dumps used oil in the river.

Bob's Service Station donates a car to charity.

What is difficult about using cost-benefit analysis to estimate the level of a public good that will maximize social welfare? The government cannot use cost-benefit analysis to estimate this. The costs of using it may make the provision of the public good prohibitive. It is difficult to estimate the marginal social benefits of supplying a public good. It is difficult to estimate the marginal costs of supplying a public good.

It is difficult to estimate the marginal social benefits of supplying a public good.

Which statement is TRUE? It is straightforward to estimate the marginal social benefits of public goods. It is possible to observe how much people benefit from consuming an additional unit of a public good. It is difficult to get an accurate estimate of the marginal social benefits of public goods because individuals have an incentive to distort the truth about their willingness to pay. Individuals tend to underestimate the amount of a public good that they desire.

It is difficult to get an accurate estimate of the marginal social benefits of public goods because individuals have an incentive to distort the truth about their willingness to pay.

You own a lemonade stand in a competitive market, and as such, you are a price-taking firm. Which event would MOST likely increase your market power? The government abolishes the system of patents and copyrights. The average total cost curve for firms in the industry becomes horizontal. You acquire exclusive rights to harvest lemons from all domestic citrus orchards. A booming economy increases the demand for lemonade and attracts entry into the market.

You acquire exclusive rights to harvest lemons from all domestic citrus orchards.

Which statement BEST describes a negative externality? Your neighbor loves to bake bread and always brings you a loaf fresh and hot from the oven. Your neighbor has invested in beautiful landscaping, increasing the value of all of the houses on the block. Your neighbor has a pool and has given you an open invitation to come over and swim. Your neighbor has an ornamental pond that breeds mosquitoes.

Your neighbor has an ornamental pond that breeds mosquitoes.

Because of the lack of substitutes, the market for a newly developed and freshly patented prescription drug is BEST considered to be: in perfect competition. an oligopoly. in monopolistic competition. a monopoly.

a monopoly.

Network externalities are often: not likely to move toward market domination. less likely to occur in the communications or technology industries than they are in other industries. separate from positive feedback. a reason for natural monopolies.

a reason for natural monopolies.

In long-run equilibrium, a firm in monopolistic competition is similar to a monopoly because it: earns no economic profit. charges a price greater than marginal cost. charges a price equal to average total cost. charges a price equal to marginal cost.

charges a price greater than marginal cost.

Diamond rings are relatively scarce because: diamond producers limit the quantity supplied to the market. the demand for diamonds is so high. according to geologists, diamonds are less common than is any other gem-quality stone. of monopolistic competition.

diamond producers limit the quantity supplied to the market.

Accordinng to the video, the Tragedy of the Commons refers to peasants overgrazing a common resource, but the "Tragedy" ___________ was actually a comedy arose solely from interdependence did not actually occur was easily preventable.

did not actually occur

In game theory, when a player has an action that is always best for that player, regardless of the action taken by the other player(s) in a game, we say this player has a _____ strategy. competitive tit-for-tat dominant trigger

dominant

The wedding dress industry is monopolistically competitive. As a result: it has freedom of entry but not exit. thousands of dress suppliers all sell identical products. prices tend to be lower than if the dress industry approximated perfect competition. dresses tend to be differentiated among the many sellers serving this market.

dresses tend to be differentiated among the many sellers serving this market.

The wedding dress industry is monopolistically competitive. As a result: prices tend to be lower than if the dress industry approximated perfect competition. it has freedom of entry but not exit. dresses tend to be differentiated among the many sellers serving this market. thousands of dress suppliers all sell identical products.

dresses tend to be differentiated among the many sellers serving this market.

Activities that generate external costs will likely be carried out at levels that _____ those that would be efficient. are less than compete with are equal to exceed

exceed

Which example BEST fits the characteristics of a private good? disease prevention a professor giving a lecture in a large classroom an ice-cream cone fire protection

ice cream cone

Suppose a monopolistically competitive firm is making a profit, but it can increase its profits by increasing output. At the current level of output: marginal revenue is less than marginal cost. price is less than marginal cost. price is less than average total cost. marginal revenue is greater than marginal cost.

marginal revenue is greater than marginal cost.

If an activity generates external costs, the decision makers generating the activity will: be faced with no costs. be faced with excessive costs. not be faced with its full costs. be faced with its full costs.

not be faced with its full costs

If the use of a common resource is determined in the private market, the resource will be _____ since the marginal social benefit will be equal to the marginal private cost of production, which is _____ than the marginal social cost

overused; less than

Suppose that government officials have set an emissions tax to reduce pollution. Assume that the optimal tax would be $1,500, but government officials have set the tax at $500. At the equilibrium with the $500 tax:

there will be too much pollution.

In the long run, if a monopolistically competitive firm produces the optimal level of output: P = ATC > MR > MC. P > ATC > MR = MC. P = ATC > MR = MC. P = ATC = MR = MC.

P = ATC > MR = MC

Whenever human activity generates a concentration of a substance in the environment sufficient to cause harm to living things, it is called: pollution. a free good. an external shock. a result of human greed.

Pollution