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AREC 202

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If coal mining produces a negative externality because it leads to environmental damage, then, at the market equilibrium, the:

quantity of coal produced will be greater than the socially optimal quantity.

Industries in which firms have high fixed costs and low marginal costs are likely to have a:

small number of large firms.

The No-Cash-on-the-Table Principle states that there are:

never exploited opportunities available to individuals in equilibrium.

Local fishermen and bird watchers would be willing to compensate Erie Textiles ________ for operating with a filter.

no more than $235 thousand dollars 180 + 130 = 310 50 + 25 = 75 310 - 75 = 235

If a good can be consumed by one person without reducing its availability to others, then it is a ______ good.

nonrival

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, what is consumer surplus?

$4,000 per day (8 x 1000)/2 = 4000

If the market supply curve does not capture all of the costs to society of producing an additional unit of good, then:

the market equilibrium will not be efficient.

A price ceiling that is set above the equilibrium price will result in:

an increase in consumer surplus.

Price discrimination means changing:

different prices to different buyers for essentially the same good or service.

The allocative function of price is to:

direct resources away from markets that are overcrowded and toward markets that are underserved.

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

faces downward-sloping demand curve.

The marginal benefit of additional information:

falls as more information is collected.

One difference between the long run and the short run in a perfectly competitive industry is that:

firms necessarily earn zero economic profit in the long run but may earn positive or negative economic profit in the short run.

Suppose the table below describes the demand for a good produced by monopolist. Based on the data in the table, we know the firm should:

not produce the seventh unit.

If a firm functions in an oligopoly, it is:

one of a small number of firms that produce goods that are either close or perfect substitutes.

The essential cause of the tragedy of the commons is the fact that:

one person's use of a commonly held resource imposes an external cost on others.

Since the cost of using more of any resource is ________, viewing any resource's price as zero leads to ________.

positive; over-utilization

Suppose a monopolist faces the demand curve shown below. The monopolist maximizes its profit by:

producing the level of output at which marginal revenue equals marginal cost.

Generally, _______ motivates firms to enter an industry, while _______ motivates firms to exit an industry.

economic profit; economic loss

A cost-saving innovation in a perfectly competitive industry will lead to:

economic profits for a few firms for a short time.

A natural monopoly is a monopoly that arises from:

economies of scale

The profit maximizing rule P = MC applies to:

perfectly competitive firms only.

Several web sites, like Pricewatch.com, allow consumers to input the name of a product, and the site then returns a list of suppliers with their respective prices for the product. This:

reduces the cost of search.

Suppose all the firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ______ and the market price will ______.

rise; fall

In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that:

firms will produce the quantity that minimizes average total costs in the long run.

One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:

positive economic profit is only possible in the short run.

A benefit of an activity received by people not participating in the activity is called a(n):

positive externality.

Another name for a legal maximum price is a(n)

price ceiling.

A good or service that is both rival and excludable is a:

private good.

If an activity generates a positive externality, the government can increase total economic surplus by ________ the activity, and if an activity generates a negative externality, the government can increase total economic surplus by ________ the activity.

subsidizing; taxing

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. All else equal, an increase in the price of corn creates an incentive for farmers to:

switch away from growing soy beans and into growing corn.

One reason why market-based changes make both consumers and producers better off is

that they would not freely agree to the transaction if they did not benefit from it.

Consumer surplus is the cumulative difference between:

the amount consumers are willing to pay and the price they actually pay.

Professor Plum, who earns $100,000 per year, read in the paper today that the university pays its basketball coach one million dollars per year in exchange for his agreement to remain the university for at least three more years. The coach earns more than Professor Plum because:

the coach is able to earn economic rent due to his unique talent.

Economic rent is:

the difference between the payment made to the owner of a factor of production and the owner's reservation price.

The benefit to producers from selling an additional unit is

the difference between the price the firm receives and the marginal cost of that unit.

If a firm faces a downward-sloping curve, then:

the firm marginal revenue from selling an additional unit of output is less than price.

If a firm is earning zero economic profit, then:

the firm's account profit is equal to the firm's implicit costs.

Because of ________, the market will provide ________ the socially optimal level of information.

the free-rider problem; less

Rationally, search should continue until:

the marginal benefit of search equals the marginal cost of search.

If the market demand curve does not capture all of the benefits to society of buying an additional unit of good, then:

the market equilibrium will not be efficient.

If the marginal cost of reducing pollution is positive, then:

the optimal amount of pollution is greater than zero.

A monopolistically competitive firm is one:

of many firms that sell products that are close but not perfect substitutes.

Economies of scale exist when:

the average cost of production falls as output rises.

Suppose a monopolist faces the demand curve shown below. The marginal revenue of the 35th unit of output is:

$0 (on horizontal intercept)

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, then producer surplus will be ____ per day.

$0 1500 x 8=12,000 1,000 x 12=12,000 so there is no producer surplus.

If a good is both rival and excludable is is a:

Private good

Factors of production are the most likely to earn economic rent when they:

cannot easily be duplicated.

A price setter is a firm that:

has some degree of control over its price.

A monopoly that results from economies of scale is called a(n):

natural monopoly

When a perfectly competitive firm sells additional units of output, ____, and when a monopolist sells additional units of output ____.

total revenue always rises; total revenue could rise, fall, or remain unchanged

Accounting profit is equal to:

total revenue minus explicit costs

Economic profit is equal to:

total revenue minus the sum of explicit and implicit costs. Total Revenue - Explicit Cost - Implicit Cost

The sum of producer surplus and consumer surplus is:

total surplus.

The free-rider problem arises when people:

who do not pay for a good cannot be excluded from consuming it.

If the consumption of good generates an external benefit, then the market equilibrium quantity:

will be less than the socially optimal quantity.

The figure below shows the supply and demand curves for jeans in Smallville. The equilibrium price will NOT lead to the largest possible total economic surplus if:

the production of jeans generates air pollution.

In the presence of the free-rider problem, the market will provide ________ of a good or service.

the socially optimal quantity?

If the production of a good generates a positive externality, then:

there will be deadweight loss at the market equilibrium quantity.

Superstar professional athletes can sustain their economic rents because:

they have unique talents that they can sell to the highest bidder.

Refer to the table below. An output level of 25 units, this firm's accounting profit is _______, and its economic profit is _________. Quantity Total Revenue Explicit Cost Implicit Costs 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9

zero; -$8

Suppose a monopolist faces the demand curve shown below. If the monopolist were to sell 20 units of output, its total revenue would be:

$1,000 20 x 50 = 1000

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. Which no subsidy, the equilibrium price of sugar is ____ per ton, and the equilibrium quantity is ____ tons per day.

$1,500; 8

$1000; 12

Refer to the table below. An output level of 15 units, this firm's accounting profit is _________, and its economic profit is _________. Quantity Total Revenue Explicit Cost Implicit Costs 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9

$12; $6

Assume that all firms in this industry have identical cost curves, and the the market is perfectly competitive. In the long run, the equilibrium price will be _____ per gallon, and each firm's profit-maximizing quantity will be _____ gallons per week.

$15; 3 hundred

The figure below shows the supply and demand curves for jeans in Smallville. Suppose jeans initially sell for $60 per pair. If the price of jeans falls to $40 per pair, then total economic surplus will increase by ____ per day.

$160 1/2 x 8 x 40 = 160

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The external benefit of each dose is:

$20 80-60=20

The cost (in thousands of dollars) of the filter to Erie Textiles is ________, and the net benefit (in thousands of dollars) of the filter to the fishermen and bird watchers is ________.

$200; $235 $400 - $200 = $200 $180 - $50 = $130 $130 - $25 = $105 $130 + $105 = $235

Suppose the table below describes the demand for a good produced by monopolist. The monopolist's total revenue from selling 3 units is ________, and the monopolist's marginal revenue from selling the 3rd unit is ________.

$24; $6 Total revenue- 3 x 8 = 24 Marginal revenue- 2 x 9 = 18 24 - 18 = 6

In the market depicted in the table above, total producer surplus when the price is $10 is

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket cots are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______.

$34,000; -$1,000 Accounting profit = 50,000-12,000-1,000-3,000 = 34,000 Economic profit= 50,000-12,000-1,000-3,000-35,000= -1,000

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Christine's opportunity cost of working as a consultant last year was ______.

$40,000

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces fish and bird reproduction. This causes damage to local fishermen and bird watchers. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird watchers will not suffer any damage. The relevant gains and losses (in thousands of dollars) for the three parties are listed below. When Erie Textiles operates without a filter, the total gain (in thousands of dollars) to all three parties is ________.

$475 $400 + $50 + $25 = $475

$50

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Last year, Christine explicit costs were _____, and her implicit costs were ______.

$51,000; $40,000 Explicit - 15,000 + 3,000(12 mo) = $51,000

When Erie Textiles operates with a filter, the total gain (in thousands of dollars) by all three parties is ________.

$510 $200 + $180 + $130 = $510

$6,000 500 x 12 = 6000

If Quick Burger has the legal right to operate a drive-through window, then the Sunshine Café would be willing to pay Quick Burger as much as ________ per month to NOT operate a drive-through window.

$9,000 $24000-$15000=$9000

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides subsidy of $500 per Ron, then consumer surplus will be ____ per day.

$9,000 (12 x 1500)/2 = 9000

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket cots are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. For Pat to earn normal profit, Pat's accounting profit would have to be _______.

Suppose the figure below shows the demand curve, marginal curve and marginal cost curve for a monopolist. At this monopolist's profit-maximizing level of output, its total revenue equals the area:

0FJB

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. In the long run, there will be ______ firms in this market.

10 ATC reaches min @ $10 with 30 units Entire market price $10 = 300 units # of firms = 300/30 = 10

100

This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase. If the original curves are MB0 and MC0, the optimal quantity of information about this product is:

Suppose a monopolist faces the demand curve shown below. If the monopolist's marginal cost is constant and equal to $30, its profit-maximizing level of output is:

20 units.

Which of the following is most likely to be used efficiently?

A privately-owned natural resource

Refer to the figure below. If the original curves are MB1 and MC1, rational consumers will gather ________ units of information.

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curve for a representative firm in that market. Assume that all firms in this market have identical cost curves. The long-run market equilibrium quantity in this industry is:

500

The following data show the relationship between the number of drivers who leave for work at 8:00 a.m., their average commute time, and their marginal benefit of commuting. If commuters view highway use as having a price of zero, then one can predict that ________ drivers will leave for downtown at 8:00 am.`

500

Refer to the figure below. If the relevant curves are MC1 and MB2, a rational consumer will acquire ________ units of information, the amount for which marginal ben for information is ________ its marginal cost.

5; equal to

Use the figure for the question(s) below. The tax collected is indicated by area

The sum of the consumer and producer surplus after the tax is imposed is indicated by areas

A + B + C

Refer to the figure below. When the market is unregulated, consumer surplus is represented by the area:

ABC Consumer surplus- area above price and below demand curve Producer surplus- above supply curve and below price Total surplus- both triangles CS+PS

Suppose the figure below shows the demand curve, marginal curve and marginal cost curve for a monopolist. When this monopolist maximizes profit, consumer surplus equals the area:

ABJ Consumer surplus- below demand curve and above price

Which of the following statements is true?

Accounting profit is greater than or equal to economic profit.

When buyers and sellers are not equally informed about the characteristics of the goods and services offered for sale, information is said to be:

Asymmetric

Suppose your economics professor has en extra copy of textbook that he or she would like to give to a student in the class. Which of the following schemes is the most likely to result in an efficient outcome?

Auctioning off the textbook to the highest bidder.

Suppose the figure below shows the demand curve, marginal curve and marginal cost curve for a monopolist. The profit-maximizing price for this monopolist to charge is:

Use the figure for the question(s) below. In the figure, a price floor of $5 would result in a loss of consumer surplus of

Which of the following is an example of the rationing function of price?

Bill Gates purchasing the Mona Lisa for $5 billion.

Which of the following is NOT necessarily true in a market equilibrium?

Both rich and poor have adequate access to the good.

The insight that people can always arrive at efficient solutions to the problems caused by externalities if they can negotiate the purchase and sale of the right to perform activities that cause externalities is called the ________.

Coase Theorem

If a good is non-rival, then:

Consumption of a good by 1 person does NOT diminish it's availability to others.

Use the figure for the question(s) below. The deadweight loss is indicted by area

Refer to the figure below. When the market is unregulated, producer surplus is represented by the area:

DBC Consumer surplus- area above price and below demand curve Producer surplus- above supply curve and below price Total surplus- both triangles CS+PS

Refer to the figure below. If a price ceiling were imposed at point G, then producer surplus would be represented by the area ____.

DGF

Suppose the figure below shows the demand curve, marginal curve and marginal cost curve for a monopolist. The profit-maximizing level of output for this monopolist is ____ units per day.

F Monopolist = Max Profit produce as long as MR >= MC

Refer to the figure below. If a price ceiling were imposed on point G, the loss in total economic surplus would be represented by the area ____.

FEC (deadweight)

Refer to the figure below. If a price ceiling were imposed at point G, the consumer surplus would be represented by the area ____.

GAEF

Suppose the figure below shows the demand curve, marginal curve and marginal cost curve for a monopolist. The socially optimal level of output is ____ units per day.

Suppose the figure below shows the demand curve, marginal curve and marginal cost curve for a monopolist. At the monopolist's profit-maximizing level of output, deadweight loss equals the area:

JLN

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Is it socially optimal for Quick Burger to operate a drive-through window?

No, because total payoffs are higher when Quick Burger does not operate a drive-through window.

Suppose that Erie Textiles can only negotiate with one of the affected groups. Will Erie operate with a filter?

No, regardless of which group they negotiate with.

Types of goods

Non-rival and Non-exclusive= Public good Non-rival and excludable= private good Rival and non-excludable= common good

In exchange for a share of the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell its products on campus. The beneficiaries of this deal is/are _______.

State U and CheapFizz

Subsidizing production of the vaccine. Positive Extenality- to little consumed and produced Negative Externality- to much consumed and produced

If it is difficult, or costly, to prevent people who do not pay for a good from consuming the good then:

The food is non-excludable

If a good can be consumed by 1 person without reducing it's availability to others then:

The good is non-rival

Which of the following statements about implicit cost is true?

The measure the forgone opportunities of the firm's owners.

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curve for a representative firm in that market. Assume that all firms in this market have identical cost curves. Given that the current equilibrium price is $8, what will happen to the number of firms in this market in the long run?

The number of firms in the market will rise as firms enter the market in response to positive economic profit.

Which of the following would be most vulnerable to the tragedy of the commons?

Timber on public land

Refer to the figure below. Suppose MC1 is the marginal cost of information and MB1 is the marginal benefit of information. Should a rational consumer pay $6 to get a 5th unit of information?

Yes, because at this price, the marginal benefit of the 5th unit equals its marginal cost.

If all three parties can communicate and negotiate with each other at no cost, will Erie Textiles use a filter?

Yes, because fishermen and bird watchers are willing to pay enough to Erie Textiles to offset the cost of using a filter.

The existence of a negative externality will result in:

a greater than optimal level of production.

Which of the following best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand curve would shift to the right, leading to:

a higher equilibrium price in the short run and entry into the market in the long run.

A price floor is a(n)

a legal minimum price imposed by the government.

Given that most people like the smell of baking cinnamon rolls and dislike the smell of burning tires, baking cinnamon rolls generates ________ externality, and burning tires generates ________ externality.

a positive; a negative

A price ceiling that is set below the equilibrium price will result in:

a shortage of the good.

A pure monopoly exists when:

a single firm produces a good with no close substitutes

Better information about consumers' reservation prices generally leads to:

acquisition of goods by consumers who are willing to pay the highest price.

A per-unit tax

adds a fixed-dollar amount to each unit of a good sold.

The profit maximizing rule MR = MC applies to:

all firms.

Duke is a highly skilled negotiator who could work for many law firms. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can for any other negotiator in town. The increased revenue will:

all go to Duke because, if it didn't, another firm could hire Duke away.

A market equilibrium is only efficient if:

all relevant costs and benefits are reflected in the market supply and demand curves.

The role that prices play in directing resources away from overcrowding markets and toward market that are underserved is known as the _______ function of price.

allocative

The major prediction of the lemons model is that:

asymmetric information reduces the average quality of goods offered for sale.

A good is characterized by network economies if it:

becomes more valuable as more people own it.

Information about the quality of a product is:

both beneficial to have and costly to obtain, and therefore subject to economic principles.

Adam Smith's invisible hand only leads to an efficient outcome when:

buyers are fully informed about all relevant aspects of a product and the market in which it is traded.

The following data show the relationship between the number of drivers who leave for work at 8:00 a.m., their average commute time, and their marginal benefit of commuting. One way for the government to increase economic efficiency would be for it to:

charge a toll to use the highway during rush hour

The marginal cost curve for information is upward sloping because:

consumers tend to start with the least expensive sources of information and then progress to more expensive sources.

If a good is a nonrival, then:

consumption of the good by one person does not diminish its availability to others

This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase. Suppose this graph describes a town in which the only way to gather any information abo the good is through Consumer Reports. If the subscription price of Consumer Reports increases, then the impact of this could be portrayed by the marginal:

cost curve shifting from MC1 to MC0.

Refer to the figure below. The growth of access to the Internet will cause the marginal:

cost curve to shift from MC1 to MC2.

decrease; $1,000

Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at a higher cost. The residents of Dry Gulch will overuse water relative to the social optimum because ________.

each resident will fail to adequately consider the external cost of his or her own water use

If the owners of a business are receiving total revenue just sufficient to cover all of their explicit and implicit costs, then they are:

earning a normal profit.

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. As a result of the increase in the price of corn, farmers who were already growing corn will earn an:

economic loss in the long run

In a market with barriers to entry:

economic profit will not fall to zero in the long run.

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S1, then in the long run firms will:

enter the market, leading the market supply curve to shift out to S2.

the Total economic surplus will be ________ in nations with well-defined property rights than in nations with poorly-defined property rights.

higher

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. In the short run, firms in this market will shut down if the market price is:

horizontal at the market price.

In markets with incomplete information, middlemen tend to ________ total economic surplus by ________.

increase; matching sellers with buyers who have high reservation prices

Suppose that there is not enough parking at an urban university. Sometimes students come to campus, spend a few minutes searching for a parking spot, and then decide that going to class isn't worth the effort of continuing to search for a parking spot, so they go home. Assume that all professors give midterm exams on the same day. Youwould expect the optimal amount of time spent searching for a parking spot on that day to ________

increase; the marginal benefit of search is higher

Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Suppose Steven was able to purchase a ticket at the box office for $60. Steven's reservation price for the ticket is $65. If Steven attends "Mamma Mia!" and Ingrid does not, then this situation is:

inefficient because Steven and Ingrid could have made a mutually beneficial trade.

If it is possible to make a change that will help some people without harming others, then the situation is:

inefficient.

When auctions, such as those used on eBay, are used to sell a product, then:

information about consumers' true reservation prices is revealed.

The reason the marginal benefit of information curve is downward sloping is because:

information adds less and less benefit as more of it is acquired.

The deadweight loss is that is due to a tax

is the sum of the losses in consumer and producer surpluses.

Suppose the table below describes the demand for a good produced by monopolist. The monopolist's total revenue from selling the 4th unit of output is less than $7 because:

it has to charge $1 less for each of the first 3 units of output.

Both the perfectly competitive firm and the monopolist find that:

it is best to expand production until the benefit and the cost of the last unit produced are equal.

If a natural monopoly increases the quantity of output it produces, then:

its average cost will increase.

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. In the long run, this increase in the demand for corn is likely to _________ the price of soy beans.

lead to an increase in

Barriers to entry are forces that:

limit new firms from joining an industry.

If Erie Textiles does not install the filter, there will be a net social ________ of _______ (in thousands of dollars).

loss; $35 200 + 180 + 130 = 510 400 + 50 + 25 = 475 510 - 475 = 35

A firm is most likely to experience economies of scale if its start-up costs are high and its marginal cost is ____.

low

Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit of output, it must:

lower its price.

Consider an industry with 2 firms producing similar products. Each firms total cost (in dollars) is shown below. ACME: TC=100 + 3QGeneric: TC= 500 + 3QWhen each firm is producing the same quantity as ACME the average total cost is:

lower than Generic's average total cost

For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

marginal revenue.

The lemons model is used to analyze:

markets with asymmetric information.

The primary objective of an imperfectly competitive firm is to:

maximize profit

A quota is a

maximum quantity that can be bought and sold over a specific period of time.

Unlike economic profit, economic rent:

may not be driven to zero by competition.

Explicit costs:

measure the payments made to the firm's factors of production.

more than 75 cents because CheapFizz is the only company that can sell soda on campus.

If a firm's production process exhibits increasing returns to scale, then doubling all the firm's inputs will lead output to _____.

more than double

The following data show the relationship between the number of drivers who leave for work at 8:00 a.m., their average commute time, and their marginal benefit of commuting. If there is no charge to use the highway, then one would expect that ________ than socially optimal number of drivers will leave at 8:00 a.m. because ________.

more; each driver's use of the highway imposes an external cost on other drivers by increasing the commute time

To sell an extra unit of output, a perfectly competitive firm ____, and an imperfectly competitive firm ____.

need not alter its price; must lower its price

A cost of an activity that falls on people not engaged in the activity is call a(n):

negative externality.

Suppose you observe that Erie has not added a filter. You could conclude that the Coase Theorem failed to solve the externality problem because:

negotiation with many individual fishermen and bird watchers was too costly.

If it is difficult, or costly, to prevent people who do not pay for a good from consuming the good, then the good is a _____ good.

non excludable

In the case of either a positive or negative externality, a good's market price will:

not fully reflect a good's social marginal cost or social marginal benefit.

A situation is efficient if it is:

not possible to find a transaction that will make at least one person better off without harming others.

If you were to start your own business, your implicit costs would include the:

opportunity cost of the time you spend working at the business.

This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase. Suppose the marginal cost and marginal benefit curves were MC0 and MB0 several decades ago. However, because information about this product is now available online, the:

optimal amount of information will increase.

The tragedy of the commons refers to the:

overuse of resources that have no price.

Gasoline prices tend to be higher at stations that are just off the freeway than they are at stations in the middle of town. The most likely reason for this is that:

people who buy gas at freeway exit stations tend to have higher search costs.

The free-rider problem occurs when:

people who do not pay for a good or service cannot be excluded from enjoying it.

"Market power" refers to a firm's ability to:

raise its price without losing all of its sales

The role that price play in distributing scarce goods and services to those consumers who value them the most highly is known as the _______ function of price.

rationing

Use the figure for the question(s) below. In the figure above, a quota placed on this market would

reduce consumer surplus by area A + C and reduce producer surplus by ares B + D

In the market depicted in the table above, in a free market Consumer D will

refuse to buy the item.

The marginal cost of collecting information:

rises as more information is collected.

In the market for used cars, the lemons model predicts that:

sellers are more likely to sell low-quality cars than high-quality cars.

If either the production or consumption of a good generates an external benefit, then the:

social marginal cost curve will lie to the left of the private marginal cost curve.

Tingnan ang lahat ng mga set ng pag-aaral

AREC 202

Kaugnay na mga set ng pag-aaral

Chapters 18.1-18.14- 15.5-15.7

Chapter 31 Quizzes

Chapter 21 The Breast (WB)

Main characters of The Fifth of March

STAT1401 EXAM 4 STUDY GUIDE

2510 Exam One Study Guide

Cardiovascular System: Blood

Honan-Chapter 24: Nursing Management: Patients With Intestinal and Rectal Disorders

Business Mathematics Chapter 22 Statistics

Chapter 7, Chapter 8, Chapter 9, Chapter 10

Real Estate Principles

1.4 Stakeholders

chapter 1 biotech notes

evr chapter 16

Lesson 1 - BIOCHEM

Exam 1 - Developmental Psychology (Ch 1-5)

TeasV Math, TEAS Math

Accy 306 exam 2

Russia

Chapter 1