CHAPTER 11-16

A market where there is only one buyer for a good or service is called a monopoly. True False

False

A monopolistically competitive firm influences market price by virtue of its size. True False

False

Average total cost is minimized in long run equilibrium for a monopolistically competitive firm. True False

False

Capital stock is defined as the retail value that was paid for a​ firm's productive assets.

False

Economic systems should only be judged on efficiency. True False

False

Equity should never be used to judge economic policy. True False

False

Firm​ A's dominant strategy is to not advertise. True False

False

For a policy to be Pareto efficient it must make everyone at least a little better off. True False

False

General equilibrium exists when any one market in an economy is in equilibrium. True False

False

If there are no​ externalities, producing where price is greater than marginal cost is inefficient because for every unit​ produced, consumers derive benefits that are less than the cost of the resources needed to produce it. True False

False

In long−run equilibrium in monopolistic​ competition, P​ = MR​ = MC​ = ATC. True False

False

Injunctions are good remedies for problems where damage has already occurred. True False

False

Monopolistically competitive firms are like perfectly competitive firms in that they both sell homogeneous products. True False

False

Monopolistically competitive firms experience​ "excess capacity" in the short run but not in the long run. True False

False

Owning a corporate bond entitles the bondholder to a portion of the​ firm's profits. True False

False

Price leadership is an example of the Cournot model. Part 2 True False

False

The Federal Trade Commission was given the power to issue ​"cease−and−​desist" orders where it found behavior to violate antitrust laws. True False

True

The HHI is calculated by summing the square of the percentage shares of the firms in the market.

True

The U.S. beer industry has an HHI of​ 3,525. If two beer producers propose a merger that would increase the industry HHI by 75​ points, then the merger would be challenged based on the change in the HHI. True False

True

The basic function of​ advertising, according to its​ proponents, is to assist consumers in making​ informed, rational choices. True False

True

The benefits of any investment project take the form of future profits. True False

True

The drop−in−the−bucket problem is intrinsic to public goods. True False

True

The fact that the behavior of one firm depends on the behavior of other firms is what differentiates oligopoly markets from the other three market structure types​ (perfect competition,​ monopoly, and monopolistic​ competition). True False

True

The funds that firms use to buy capital come directly or indirectly from households. True False

True

The level of household savings constrains firm investment. True False

True

The more differentiated the products produced by​ oligopolists, the more their behavior will resemble that of the monopolist. Part 2 True Your answer is correct. False

True

The strategy to respond in kind to a competitor is called a tit−for−tat strategy. True False

True

The used−car market is an example of an market with imperfect information. True False

True

The​ Celler-Kefauver Act gave the Justice Department the authority to monitor and enforce the merger provisions from the Clayton Act. True False

True

Under the collusion​ model, the outcome in an oligopoly is the same as a monopoly.

True

We call a market where there is only one producer of a good or service a monopoly. True False

True

When there are economies of​ scale, larger and fewer firms bring cost efficiencies even as they reduce price competition. Part 2 True False

True

Monopolistic competition is a common form of market structure in the United States. True False

True

Nonresidential structures are examples of physical capital. True False

True

People cannot be excluded from using a common resource. True False

True

Firm XYZ sells calculators. It operates in a plant worth ​$2,500,000 and maintains production equipment worth ​$5,000,000. ​Currently, it has 175,000 calculators in reserved inventory that it plans to sell next month to retail stores for ​$70 each. Its board of directors has ​$1.50 million in government bonds and ​$115,000 in savings for use as payroll and emergency funds. In​ addition, XYZ employs several workers whose collective worth in terms of skill and knowledge is equal to ​$275,000. The capital stock of firm XYZ is ​$_____________________. (Enter your response rounded to the nearest dollar.​)

$20025000 2,500,00 + 5,000,000 + (175,000 * 70) + 275,000

Four firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. At the profit−maximizing output, the profit on each pack of gum is A. ​$0.04. B. ​$0.09. C. ​$0.15. D. ​$0.25.

0.09

Assume that you are in the business of providing medical malpractice insurance. You have analyzed the market​ carefully, and you know that at a price of ​$120,000 per​ year, you will sell 400 insurance policies per year. In​ addition, you know that at any price above ​$120,000​, no one will buy your insurance policies because the government provides​ equal-quality policies to anyone who wants one at ​$120,000. You also know that for every ​$10,000 you lower your​ price, you will be able to sell an additional 100 units. For​ example, at a price of ​$110,000​, you can sell 500 ​policies; at a price of ​$100,000​, you can sell 600 ​policies; and so on.

1. Draw horizontally from 120,000 to point then go down to 1,600 2..draw horizontally from 120,000 then down to point then to 800 3. both 400 and 120,000$

Total revenue is ​$260260. ​(Enter your response as an​ integer.) Part 5 Total cost is ​$300300. ​(Enter your response as an​ integer.) Part 6 Total profit or loss is ​$negative 40−40. ​(Enter your response as an integer and include a negative sign where​ appropriate.) Part 7 In the long​ run, firms will A. ​enter, shifting the demand facing the remaining firms to the left until the firms earn an economic profit. B. ​exit, shifting the demand facing the remaining firms to the right until the firms earn an economic profit. C. ​enter, shifting the demand facing the remaining firms to the left until the firms earn a normal profit. D. ​exit, shifting the demand facing the remaining firms to the right until the firms earn a normal profit.

20 13$ 260 300 -40 D. ​exit, shifting the demand facing the remaining firms to the right until the firms earn a normal profit.

The following table shows the investment choices and expected rate of return facing a hypothetical firm. At an interest rate of 14 percent, this firm will undertake $_______ million worth of investment spending. (Enter your response as an integer.​) The firm will undertake all of the potential investment projects if and only if the interest rate is __________ ________ percent. (Enter your response as an integer.​)

20; less than 7 You get 20 by adding up all the costs that have a lower or equal to rate of return of 14. Find the lowest rate of return. A firm will undertake all projects if the rate of return is lower than the lowest rate of return on the table.

Assume there are 25 firms in the industry for plasma TV manufacturers. Their market shares are as​ follows: 55​%, 15​%, 8​%, 22 each with​ 1%. The value of the​ Herfindahl-Hirschman Index is 33363336. ​(Enter your response as an​ integer.)

3336

If a firm borrows ​$8,000 from households at an annual interest rate of 6 ​percent, how much will the firm pay in interest payments each​ year? The firm will pay ​$_______ in interest payments each year. (Enter your response as an integer.​) A loan that involves more risk will generally charge __________ interest rate than a loan with less risk.

480; higher 8,000*.06

The diagram on the right shows a firm​ (industry) that earns a normal return to capital if organized competitively. Price in the market place is Pc under competition. We assume at first that marginal cost is fixed at ​$60 per unit of output and that there are no economies or diseconomies of scale. Total revenue for the competitive​ firm, assuming free​ entry, is $__________. Total cost to the competitive​ firm, assuming free​ entry, is $_________. (Enter your response as an integer​.) Consumer surplus under competition is $_________. (Enter your response as an integer​.) Now assume that you bought all the firms in this​ industry, combining them into a​ single-firm monopoly protected from entry by a patent. The​ profit-maximizing price, Pm​, for a monopoly is $_________. (Enter your response as an integer​.) Total revenue from the monopoly is $__________. (Enter your response as an integer​.) Total cost for a monopoly is $_________. (Enter your response as an integer​.)​ Total profit for a monopoly is $________. (Enter your response as an integer​.)​ Consumer surplus for a monopoly is $________. (Enter your response as an integer​.) The deadweight loss for a monopoly is $_______. ​(Enter your response as an integer.​) Which of the following expresses the correct set of​ relationships? A. PM < PC​; QM ​> QC​; CSM ​< CSC B. PM ​> PC​; QM ​< QC​; CSM ​> CSC C. PM > PC​; QM ​< QC​; CSM ​< CSC D. PM < PC​; QM ​> QC​; CSM ​> CSC What potential remedies to a monopoly are​ available? A. Reducing barriers to​ entry, imposing price​ ceilings, and imposing sanctions on those who violate antitrust laws. B. Obtaining a consent decree to stop the anticompetitive behavior. C. Breaking up the monopoly. D. All of the above. E. None of the above.

648000; 648000; 324000 90; 486000; 324000; 162000; 81000; 81000 C. PM > PC​; QM ​< QC​; CSM ​< CSC D. All of the above.

The diagram on the right shows a firm​ (industry) that earns a normal return to capital if organized competitively. Price in the market place is Pc under competition. We assume at first that marginal cost is fixed at ​$60 per unit of output and that there are no economies or diseconomies of scale. Total revenue for the competitive​ firm, assuming free​ entry, is $​____________. ​(Enter your response as an integer.​) Total cost to the competitive​ firm, assuming free​ entry, is $​___________. ​(Enter your response as an integer.​) Consumer surplus under competition is ​$___________. ​(Enter your response as an integer​.) Now assume that you bought all the firms in this​ industry, combining them into a​ single-firm monopoly protected from entry by a patent. The​ profit-maximizing price, Pm​, for a monopoly is ​$_______. ​(Enter your response as an integer.) Total revenue from the monopoly is ​$___________. ​(Enter your response as an integer.​) Total cost for a monopoly is ​$___________.​ (Enter your response as an integer.​) Total profit for a monopoly is ​$___________. ​(Enter your response as an integer.​) Consumer surplus for a monopoly is ​$___________. ​(Enter your response as an integer​.) The deadweight loss for a monopoly is ​$___________. ​(Enter your response as an integer.​) Which of the following expresses the correct set of​ relationships? A.PM < PC​; QM ​> QC​; CSM ​< CSC B. PM ​> PC​; QM ​< QC​; CSM ​> CSC C. PM ​> PC​; QM ​< QC​; CSM ​< CSC D. PM < PC​; QM ​> QC​; CSM ​> CSC What potential remedies to a monopoly are​ available? A. Breaking up the monopoly. B. Obtaining a consent decree to stop the anticompetitive behavior. C. Reducing barriers to​ entry, imposing price​ ceilings, and imposing sanctions on those who violate antitrust laws. D. All of the above. E. None of the above.

648000; 648000; 324000; 90; 486000; 324000; 162000; 81000; 81000; C. PM ​> PC​; QM ​< QC​; CSM ​< CSC D. All of the above.

Refer to the information provided in the figure at right to answer the question that follows. At 20 units of output there are external A. costs of​ $2 per unit. B. benefits of​ $5 per unit. C. benefits of​ $2 per unit. D. costs of​ $5 per unit.

A. costs of​ $2 per unit.

If the firm maximizes profits and the government​ ________, it will produce 20 units of output. A. does not require it to take damages into account B. establishes a price ceiling of​ $8 C. establishes a price floor of​ $6 D. requires it to take damages into account

A. does not require it to take damages into account

The following table represents the market share percentage for each firm in a hypothetical industry. Firm A B C D E F G H Market Share 19 15 6 7 12 10 20 11 The​ four-firm concentration ratio for this industry is 66. ​(Enter your response as an integer.​) Part 2 The​ Herfindahl-Hirschman Index​ (HHI) for this industry is 1436 ​(Enter your response as an integer.​) Part 3 Would the Justice Department consider this industry as​ unconcentrated, moderately​ concentrated, or​ concentrated? A. Mildly concentrated because the HHI is under​ 2,000. B. Moderately concentrated because the HHI is below​ 1,800. Your answer is correct. C. Unconcentrated because the​ four-firm concentration ratio is under 90. D. Concentrated because the​ four-firm concentration ratio is over 60. Part 4 Suppose firms C, D, and F merge. The value of the HHI following this merger is 17801780. ​(Enter your response as an integer.​) Part 5 Would the Justice Department most likely challenge this​ merger? Why or why​ not? A. ​Yes, according to antitrust​ laws, any time a merger raises the HHI—even by 50 points—it must be challenged. B. ​No, even though the merger increases the​ HHI, the industry is still considered unconcentrated. C. ​Yes, because the merger would increase the HHI by more than 100 points. Your answer is correct. D. ​No, the HHI for this industry would have to be over​ 1,800 for the Justice Department to challenge the merger.

66 1436 B. Moderately concentrated because the HHI is below​ 1,800. 1780 ​C. Yes, because the merger would increase the HHI by more than 100 points.

Identify whether the following represents a public good. • A fireworks show in downtown Minneapolis on the Fourth of July. This is _________.

A public good

A monopolistically competitive firm that is incurring a loss will shut down if A. revenues are less than variable costs.. B. price is less than marginal cost. C. marginal revenue is less than marginal cost. D. price is less than average total cost.

A. revenues are less than variable costs.

Assume there are 16 firms in the industry for plasma TV manufacturers. Their market shares are as​ follows: 65​%, 14​%, 8​%, 13 each with​ 1%. What is the value of the​ Herfindahl-Hirschman Index? Part 2 A. 4,498 B. 4,421 C. 87 D.233

A. 4,498

​________ is a group of firms colluding to make price and output decisions.

A. A cartel

Public goods represent​ ________ because by their very nature they are nonexcludable and nonrival which makes it difficult for the private sector to supply them profitably. A. a market failure B. a negative externality C. a positive externality D. efficient production

A. a market failure

In order to have​ ________ distribution of final products to​ households, free and open markets are essential. A. an efficient B. a fair C. an equitable D. All of the above are correct.

A. an efficient

Product differentiation that makes the product​ ________ is known as vertical differentiation. A. better than a​ rival's product from​ everyone's perspective Your answer is correct. B. more similar to the​ rival's product C. less expensive to produce D. better for some consumers and worse for others

A. better than a​ rival's product from​ everyone's perspective

There are​ 25,000 families in a small community that are affected by air pollution from a local factory. The air pollution could be reduced if the company spent​ $10,000 on upgraded ventilators. The company agrees to install the ventilators if the families in the community contribute the​ $10,000. Since there are so many families they fail to come to a resolution to which they will all agree. This outcome is an example of the A. collective action problem​ (that arises when there are too many parties​ involved). B. drop−in−the−bucket problem. C. free−rider problem. D. Coase theorem.

A. collective action problem​ (that arises when there are too many parties​ involved).

The textbook presents data on eight national manufacturing industries in the U.S. which have the characteristics of monopolistic competition. Each of those industries Part 2 A. consists of hundreds or thousands of​ firms, and the largest four firms account for less than half of industry shipments. Your answer is correct. B. consists of millions of​ firms, and the largest four firms account for less than a fifth of industry shipments. C. consists of less than a hundred ​firms, and the largest four firms account for nearly three quarters of industry shipments. D. consists of a few dozen​ firms, and the largest four firms account for more than eighty percent of industry shipments.

A. consists of hundreds or thousands of​ firms, and the largest four firms account for less than half of industry shipments. Your answer is correct.

The case against advertising includes the fact that A. firms spend large sums of money to create artificial differences among products. Your answer is correct. B. it increases competition by decreasing barriers to entry of new firms into an industry. C. it ensures high quality and efficient production. D. it provides consumers with valuable information about product​ availability, quality, and price.

A. firms spend large sums of money to create artificial differences among products.

Firms that offer to pay for professional development for their employees are investing in​ ________ capital. A. human B. social C. productive D. None of the above are correct.

A. human

If the marginal cost of producing a public good is less than​ society's total willingness to pay per​ unit, then A. less than the optimal amount of the public good is being produced. Your answer is correct. B. the optimal amount of the public good is being produced. C. the amount of output being produced could be either greater than or less than the optimal amount. D. more than the optimal amount of the public good is being produced.

A. less than the optimal amount of the public good is being produced.

For a monopolistically competitive ​firm, A. marginal revenue is less than the price because the firm must lower the price for each additional unit it wants to sell. B. marginal revenue is less than the price because the firm can sell as much output as it chooses at the standardized market price. C. price is equal to marginal revenue because the firm must lower the price for each additional unit it wants to sell. D. price is equal to marginal revenue because the firm can sell as much output as it chooses at the standardized

A. marginal revenue is less than the price because the firm must lower the price for each additional unit it wants to sell.

A common resource is A. nonexcludable and rival in consumption. Your answer is correct. B. excludable and rival in consumption. C. nonexcludable and nonrival in consumption. D. excludable and nonrival in consumption.

A. nonexcludable and rival in consumption.

In cases where there is low productivity in extraction methods for a common​ resource, A. overuse is less of a problem. B. the resource becomes excludable. C. the resource becomes nonrival in consumption. D. overuse is more likely.

A. overuse is less of a problem.

LoJacks convey​ ________ to third parties. A. positive externalities B. negative externalities C. economies of scale D. public goods

A. positive externalities

Assume The Hand Made Shirt Shop has fixed costs of​ $150 and is a monopolistically competitive firm. If the firm produces the profit−maximizing level of output and sells it at the profit−maximizing ​price, the firm​ ________ of​ $100. A. suffers a loss Your answer is correct. B. has a marginal cost C. has an average variable cost D. earns a profit

A. suffers a loss

Related to the Economics in​ Practice: Green Advertising As cities​ go, Las Vegas is about as "​over-the-top" as is imaginable. Where else in the world can you find a​ 350-foot tall glass​ pyramid, a​ half-scale replica of the Eiffel​ Tower, a​ fire-spewing volcano, and patrons being serenaded in Italian while riding in authentic Venetian​ gondolas, and all of this along one​ street, Las Vegas​ Blvd? Despite the​ city's numerous​ excesses, the four largest casino companies in the United​ States, all based in Las​ Vegas, have each spent millions of dollars on environmental sustainability​ programs, with the earliest program dating back to 2007. Part 2 Some negative effects of engaging in such programs are​ _________ . Please check all that apply. A. the costs of promoting such policies to the public Your answer is correct. B. the potential higher costs of implementing and engaging in these policies Your answer is correct. C. these programs force casino companies to use fewer flashing lights and other​ high-profile advertising on the outside of their casinos D. these programs promote an image of responsibility instead of the fun and exciting image Las Vegas is famous for Part 3 All four companies have chosen to implement these environmental programs anyway because​ _________. A. they can get numerous tax breaks B. the costs of implementing the programs are negligible C. they want to create less light pollution in Los Vegas D. they want to have less impact on the environment

A. the costs of promoting such policies to the public Your answer is correct. B. the potential higher costs of implementing and engaging in these policies D.they want to have less impact on the environment

Assume there are two people in a society. Person A is willing to pay​ $70 to have one unit of a public good produced and Person B is willing to pay​ $80 to have one unit of a public good produced and​ $70 to have two units produced. As a​ result, for​ ________ unit(s) of this public good society would be willing to pay a price of​ ________. A. ​1; $150 B. ​ 5; $80 C. ​ 3; $100 D. ​ 1; $100

A. ​1; $150

If the government stops enforcing its collusion laws and oligopolies are now able to​ collude, they will​ ________ the price charged and​ ________ the total output produced. Part 2 A. ​increase; decrease Your answer is correct. B. ​decrease; increase C. ​decrease; decrease D. ​increase; increase

A. ​increase; decrease

​[Related to the Economics in Practice​] Many experts have noted the increase in sales of books that have been endorsed by Oprah​ Winfrey's book club. While Oprah receives no payment for her book club​ endorsements, many celebrities are compensated greatly to endorse specific​ products, and for many​ products, these endorsements do appear to increase sales.​ However, celebrity endorsements can backfire as​ well, with the endorsement doing more harm than good for the product or company. Which of the following are examples of actions of a celebrity endorsement that would actually hurt a​ company's sales or​ reputation? ​(Check all that apply.​) Part 2 A. A famous singer that endorses a​ company's product is caught using a racial slur. Your answer is correct. B. A famous actress that endorses a​ company's product fails to win the best actress award at the Oscars four years in a row. C. A famous quarterback that endorses a​ company's product fails to make the playoffs this year. D. A famous athlete that endorses a​ company's product

A. A famous singer that endorses a​ company's product is caught using a racial slur. D. A famous athlete that endorses a​ company's product is arrested for spousal abuse.

When a monopolist sells two units of output its total revenue is​ $600. When a monopolist sells three units of output its total revenue is​ $630. When the monopolist sells three units of​ output, the price per unit is A. $210. B. $230. C.​ $300. D. $630.

A. $210.

If the interest rate is 6​ percent, to get back​ $300 in two years you would need to deposit​ ________ today. A. $267.00 B. $275.22 C. $283.02 D. $291.26

A. $267.00 https://www.moneygeek.com/compound-interest-calculator/ Use this shit. just set rate of return to interest rate and initial amount to one of the answers. Set contribution amount to 0.

If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of​ $4 per unit of providing the​ product, then the monopoly maximizes its profits by charging​ _____ per unit and selling​ _____ units of output. A. $7; 4 B. $5; 6 C. $8; 3 D. $6; 5

A. $7; 4

The marginal revenue of the sixth pound of burritos is A. $9. B. $14. C. $20. D. $84.

A. $9.

Do you agree or disagree with each of the following​ statements? The government should be involved in providing health care for all citizens because health care is a​ "public good." A. Disagree, because health care is a mixed or private good. B. Disagree, because health care is a private good that is nonrival and nonexcludable. C. Disagree, because health care is a public good that generates a negative externality. D. Agree, because health care is a public good that generates a positive externality in consumption. From the standpoint of economic​ efficiency, an unregulated market economy tends to underproduce public goods. A. Agree, as an unregulated market tends to underproduce public goods because they are nonrival and nonexcludable. B. Agree, because an unregulated market economy tends to underproduce public goods because they are rival. C. Disagree, an unregulated market economy only underproduces public goods when they are also mixed goods. D. Disagree, because unregulated market economies only overproduce public goods because they are rival.

A. Disagree, because health care is a mixed or private good. A. Agree, as an unregulated market tends to underproduce public goods because they are nonrival and nonexcludable.

For each of the​ following, decide whether you agree or disagree and explain your answers. Savings and investment are just two words for the same thing. A. Disagree: Savings is the supply of capital from households and investment is the demand for capital from firms. B. Disagree: Savings is the flow of capital and investment is the stock of capital. C. Disagree: Savings refers to physical capital and investment refers to intangible capital. D. Disagree: Savings is the demand for capital from households and investment is the supply of capital from firms. E. Agree. When I buy a share of Microsoft​ stock, I have​ invested; when I buy a government​ bond, I have not. A. Disagree: Neither purchasing a share of stock nor buying a government bond is an investment. B. Disagree: Purchasing a government bond is an​ investment, but purchasing a share of stock is not. C. Disagree: Purchasing a share of stock is only an investment if the company makes capital equipment. D. Disagree: Both purchasing a share of stock and a government bond are investments. E. Agree. Higher interest rates lead to more investment because those investments pay a higher return. A. Disagree: When interest rates are​ low, the opportunity cost of an investment project is​ lower, and firms are more likely to invest in new plants and equipment. B. Disagree: When interest rates are​ high, firms are more likely to invest to replace old plants and​ equipment, because depreciation is higher. C. Disagree: When interest rates are​ high, firms are more likely to invest in new plants and​ equipment, because households are more likely to save. D. Disagree: When interest rates are​ low, the direct cost of an investment project is​ higher, and firms are more likely to invest in new plants and equipment. E. Agree.

A. Disagree: Savings is the supply of capital from households and investment A. Disagree: Neither purchasing a share of stock nor buying a government bond is an investment. A. Disagree: When interest rates are​ low, the opportunity cost of an investment project is​ lower, and firms are more likely to invest in new plants and equipment.

When a​ monopolist's marginal profit is​ negative, then it follows that A. MR ​< MC. B. MR ​> MC. C. MR ​> ATC. D. MR​ = MC.

A. MR ​< MC.

​________ is the cost of using resources to produce another unit of a good. A. Marginal cost B. Total cost C. Price D. Marginal revenue

A. Marginal cost

The demand curve facing Microsoft is most likely represented by A. Panel A. B. Panel B. C. Panel C. D. Panel D.

A. Panel A. The one sloping downward

Which of the following are examples of​ Pareto-efficient changes? Explain your answers. The Hooterville Police Department implements​ cost-saving programs without having to sacrifice the quality of their services. A. Pareto​ efficient, because services are provided at a lower cost without making any members of society worse off. B. Pareto​ efficient, because services are provided at a lower cost regardless of the quality of the service. C. Not Pareto​ efficient, because services provided by a government agency are public goods. D. Not Pareto​ efficient, because service quality does not increase with the​ cost-saving programs. Competition is introduced into the satellite television​ industry, and monthly rates drop. A study shows that benefits to consumers are larger than the lost monopoly profits. A. Potentially​ efficient, because the gains exceed the losses. Your answer is correct. B. Pareto​ efficient, because competition increases. C. Pareto​ efficient, because consumers are better off. D. Not Pareto​ efficient, because only consumers who want to buy satellite televisions are better off. James trades his​ Harley-Davidson motorcycle to Lola for her John Deere tractor. A. Not Pareto​ efficient, because the tractor is worth less than the motorcycle. B. Pareto​ efficient, because Lola will be better off more than James will be worse off. C. Pareto​ efficient, because James and Lola agree to exchange voluntarily. Your answer is correct. D. Not Pareto​ efficient, because a motorcycle is worth less than a tractor. The government eliminates an international transportation tax on airline tickets when airlines complain that the tax was costing them business. A. Not Pareto​ efficient, because only consumers who purchase airline tickets are better off. B. Pareto​ efficient, because airlines sell more tickets at a lower cost. C. Potentially efficient if we assume the gains for consumers and firms exceed the losses. D. Pareto​ efficient, because consumers are better off.

A. Pareto​ efficient, because services are provided at a lower cost without making any members of society worse off. A. Potentially​ efficient, because the gains exceed the losses. Your answer is correct. C. Pareto​ efficient, because James and Lola agree to exchange voluntarily. Your answer is correct. C. Potentially efficient if we assume the gains for consumers and firms exceed the losses.

A positive externality is A. a benefit bestowed on an individual or a group that is outside of, or external to, the transaction. B. a program devised by the private sector. C. a cost imposed on an individual or a group that is outside the transaction D. an increase in consumer spending. What type of externalities misallocate resources and result in market​ failure, waste, or lost​ value? A. positive externalities only B. positive externalities and negative externalities C. technological externalities D. negative externalities only

A. a benefit bestowed on an individual or a group that is outside of, or external to, the transaction. B. positive externalities and negative externalities

Society will benefit from more of a good being produced when the price of a good is A. greater than the marginal cost to produce that good. B. greater than the marginal benefit of producing that good. C. less than the marginal cost to produce that good. D. less than the marginal benefit of producing that good.

A. greater than the marginal cost to produce that good.

Society will benefit from more of a good being produced when the price of a good is A. greater than the marginal cost to produce that good. B. less than the marginal cost to produce that good. C. less than the marginal benefit of producing that good. D. greater than the marginal benefit of producing that good.

A. greater than the marginal cost to produce that good.

Do you agree or disagree with each of the following​ statements? Explain your reasoning. For a​ monopoly, price is equal to marginal revenue because a monopoly has the power to control price. This statement is A. incorrect because price is greater than marginal revenue. B. incorrect because price equals marginal revenue due to demand constraints. C. incorrect because price instead is set equal to marginal cost. D. incorrect because price always equals marginal revenue regardless of market power. E. correct. Because a monopoly is the only firm in an​ industry, it can charge virtually any price for its product. The statement is A. incorrect because a monopoly is constrained by the government. B. incorrect because a monopoly is constrained by consumer demand. C. incorrect because a monopoly is not necessarily the only firm in an industry. D. incorrect because new firms may enter a​ monopoly's industry. E. correct It is always true that when demand elasticity is equal to −​1, marginal revenue is equal to 0. This is A. incorrect because when demand elasticity is equal to −​1, total revenue is equal to 0. B. incorrect because when demand elasticity is equal to −​1, marginal revenue increases. C. incorrect because when demand elasticity is equal to −​1, marginal revenue is negative. D. incorrect because when demand elasticity is equal to −​1, marginal revenue is at its maximum. E. correct.

A. incorrect because price is greater than marginal revenue. B. incorrect because a monopoly is constrained by consumer demand. E. correct.

Suppose a policy change generates​ $90,000 of benefits for low−income families and​ $150,000 of costs for high−income families. We can best describe the change as A. inefficient. B. Pareto efficient. C. potentially efficient. D. equitable.

A. inefficient.

The Antitrust Division of the Justice Department A. initiates action against those who violate antitrust laws and decides which cases to prosecute. B. has established a set of trade regulations that make clear what practices it deems unfair and subject to action. C. can issue​ cease-and-desist orders to offenders. D. is composed of five members appointed by the president and confirmed by the Senate for terms of 7 years.

A. initiates action against those who violate antitrust laws and decides which cases to prosecute.

Related to the Economics in Practice on page​ 235: In​ 2010, Tesla Motors decided to become a public company by offering shares of stock to the public on a stock exchange. Like most other​ firms, Tesla relied on​ ________ to manage the sales of stock from its initial public offering. A. investment banks B. its board of directors C. inside management D. the Federal Reserve

A. investment banks

Which of the following is not an example of price​ discrimination? A. mattress sales on Memorial Day B. rental car companies charging lower prices to local residents than to out−of−state residents C. children's discounts at amusement parks D. student discounts at museums

A. mattress sales on Memorial Day

Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. If the monopoly supplies 400​ widgets, it will A. maximize profits. B. earn a​ profit, but less than it would earn if it produced 500 widgets. C. break even. D. suffer an economic loss

A. maximize profits. If MC = D then they are maximizing profits.

Capital goods yield benefits A. over their life span. B. before they are put to use. C. in the present only. D. as soon as the investment decision is made.

A. over their life span.

As cellular phones have become more​ popular, some families have chosen not to have a​ "land line"​ (wired phone) in their homes. This has led to a reallocation of labor between the labor market for cellular phone manufacturing and the labor market for telephone installers. The new demand curve for workers who install land lines A. shifts left. B. changes in an indeterminate way. C. shifts right. D. does not change.

A. shifts left.

China has invested heavily in turbine manufacturing and in 2009 had become the​ world's largest wind power market. The investment in turbine manufacturing is an example of​ ________ investment. A. tangible capital B. social capital C. human capital D. intangible capital

A. tangible capital

The expected rate of return on a project is best described​ as: A. the annual rate of return that a firm expects to obtain through a capital investment. B. income earned on savings that has been put to use through the financial capital markets. C. the interest payments expressed as a percentage of the loan. D. new capital additions to a​ firm's capital stock. If an investment project costs​ $400,000 and saves​ $100,000 per​ year, the expected rate of return of the investment is 25 percent. Calculate the rate of return on a similar investment. The rate of return on a ​$375,000 investment that saves ​$135,000 per year is ________ percent.​ (Enter your response rounded to two decimal places.​)

A. the annual rate of return that a firm expects to obtain through a capital investment. 36 Divide saved by investment. 135,000/375,000

You borrow​ $10,000 at an interest rate of​ 5% to open Movies​ Galore, a DVD rental store. You will earn an economic loss if A. the return on your investment is less than​ 5%. B. the return on your investment is exactly​ 5%. C. the return on your investment is greater than​ 5%. D. indeterminate from given information.

A. the return on your investment is less than​ 5%.

Assuming there are no​ externalities, if a firm is producing at an output level where the benefits to consumers are less than the cost to the suppliers to produce​ it, then price A. is less than marginal revenue. B. is less than marginal cost. C. equals marginal cost. D. is greater than marginal cost.

B. is less than marginal cost.

Refer to the information provided in the figure at right to answer the question that follows. If this firm is maximizing profits and is not required to take into account​ damages, it will produce Part 2 A. 6 units of output. B. 20 units of output. C. 15 units of output. D. 0 units of output.

B. 20 units of output.

Suppose we have an industry with two firms producing the same product. Acme Corporation produces 1,000 ​units, while Zoltar Corporation produces 19,000 units. The price in the market is ​$24​, and both firms have marginal costs of production of ​$8. Which firm is more likely to lower its​ price? Part 2 A. Zoltar is more likely to lower its price since doing so would eliminate Acme from the market. B. Acme is more likely to lower its price because of the number of customers that Zoltar controls. Your answer is correct. C. Zoltar is more likely to lower its price since it has more established customers. D. Acme is more likely to lower its price because its cost of production is lower to produce fewer units. Part 3 What incentives do the two firms have to lower prices as a way of trying to get consumers to switch to the firm from which they are not currently​ purchasing? A. The firms have no incentive to lower their prices. B. The firms will lower their prices if they can make their competitor worse off from the loss of customers. C. The firms will lower their prices if they can gain enough new customers to increase their profits. Your answer is correct. D. The firms will lower their prices if they can maintain the same level of profits with the new customers gained.

B. Acme is more likely to lower its price because of the number of customers that Zoltar controls. C. The firms will lower their prices if they can gain enough new customers to increase their profits.

Product variety and innovation are​ ________ associated with the oligopoly model. A. never B. benefits Your answer is correct. C. only D. rarely

B. Benefits

Industry A has four firms that each control 25 percent of the market. Industry B has six​ firms, where one firm controls 50 percent of the market and the other five firms control 10 percent of the market each. According to the​ HHI, which industry is more​ concentrated? A. Industry A B. Industry B C. Both industries are equally concentrated. D. indeterminate from the given information.

B. Industry B

Madame Defarge hires another worker to load her cart with food and sell it during the lunch hours. That worker costs ​$10 per hour and typically sells out the entire cart of 100 meals in 2 hours. The cart is rented for ​$90 per​ 5-day week.​ (The carts are not in operation on the​ weekends, when Madame Defarge is too busy at her​ restaurant.) Part 2 What factors make this a monopolistically competitive​ market? ​(Mark all that​ apply.) Part 3 A. Madame Defarge only operates on specific days. B. There are no licensing fees for​ food-cart vendors. Your answer is correct. C. There are many types of food from which students can choose. Your answer is correct. D. Madame Defarge is one of many vendors. Your answer is correct. E. Madame Defarge sells out the entire cart in 2 hours. Part 4 Madame​ Defarge's profit per meal is equal to ​$0.720.72. ​(Enter your response rounded to the nearest​ penny.) Part 5 What would you expect to see happen in this​ business? A. Firms would enter this market due to positive economic profit in the short run. Your answer is correct. B. Firms would enter this market due to positive economic profit in the long run. C. Firms would exit this market due to negative economic profit in the short run. D. Firms would exit this market due to negative economic profit in the short run.

B. There are no licensing fees for​ food-cart vendors. C. There are many types of food from which students can choose. Your answer is correct. D. Madame Defarge is one of many vendors. 0.72 A. Firms would enter this market due to positive economic profit in the short run.

The demand curve facing a dominant firm in the price leadership model is derived by subtracting the Part 2 A. amount supplied by the smaller firms from market supply. B. amount supplied by the smaller firms from market demand. Your answer is correct. C. amount demanded by customers from the smaller firms from market supply. D. dominant​ firm's marginal cost curve from the​ industry's supply curve.

B. amount supplied by the smaller firms from market demand.

MSC − MC reflects A. marginal benefit. B. an external cost. Your answer is correct. C. an internal cost. D. average marginal cost.

B. an external cost.

Related to the Economics in Practice on page​ 306: Almost 90 percent of advertisements seen in movie theaters are produced and sold by two firms. This movie theater advertisement industry would be characterized as A. monopolistically competitive. B. an oligopoly. Your answer is correct. C. perfectly competitive. D. a monopoly.

B. an oligopoly.

Monopolies can earn positive economic profits in the long run while monopolistically competitive firms cannot due to A. the less elastic demand faced by monopolies as compared to monopolistically competitive firms. B. barriers to entry in monopoly but not in monopolistic competition. Your answer is correct. C. market power of monopolies while monopolistically competitive firms have no market power. D. economies of scale in monopolies but not in monopolistic competition.

B. barriers to entry in monopoly but not in monopolistic competition.

Physical capital refers to material things used as inputs in the production of future goods and services. True False

True

The​ Herfindahl-Hirschman Index is A. calculated as the sum of the market shares for all firms in the industry. B. calculated by summing the squared market share percentages for all firms in the industry. C. not used by the government in considering mergers. D. calculated as the sum of the market shares of the top four firms.

B. calculated by summing the squared market share percentages for all firms in the industry.

A​ ________ industry has a relatively small number of firms that dominate a market. Part 2 A. monopolistically competitive B. concentrated Your answer is correct. C. contestable D. Cournot

B. concentrated

A local campaign is asking for contributions of​ $5.00 per citizen to fund the renovation of the boardwalk in Atlantic City following Hurricane Sandy. The total cost of the renovation is estimated to be​ $125 million. You decide not to contribute because your contribution would be so small relative to the total that it​ wouldn't make any difference whether you contribute or not. This is an example of the A. free−rider problem. B. drop−in−the−bucket problem. C. nonexcludable problem. D. nonrival in consumption problem.

B. drop−in−the−bucket problem.

From​ society's point of​ view, the​ ________ level is 25 haircuts. A. shut down B. efficient output Your answer is correct. C. monopoly output D. minimum output

B. efficient output

The​ Celler-Kefauver Act of 1950 A. extended the language of the Federal Trade Commission Act to include​ "deceptive" as well as​ "unfair" competition methods. B. extended the​ government's authority to ban vertical and conglomerate mergers. Your answer is correct. C. declared every contract or conspiracy to restrain trade illegal. D. outlawed specific monopolistic behaviors such as tying​ contracts, price​ discrimination, and unlimited mergers.

B. extended the​ government's authority to ban vertical and conglomerate mergers.

For a monopolistically competitive ​firm, A. price is equal to marginal revenue because the firm can sell as much output as it chooses at the standardized market price. B. marginal revenue is less than the price because the firm must lower the price for each additional unit it wants to sell. C. price is equal to marginal revenue because the firm must lower the price for each additional unit it wants to sell. D. marginal revenue is less than the price because the firm can sell as much output as it chooses at the standardized market price.

B. marginal revenue is less than the price because the firm must lower the price for each additional unit it wants to sell.

Which of the following features distinguishes monopolistically competitive firms from monopolies and​ oligopolies? A. monopolistically competitive firms are not constrained by market demand while monopolies and oligopolies are. B. monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can.. C. monopolistically competitive firms sell a homogeneous product while monopolies and oligopolies sell a differentiated product. D. monopolistically competitive firms are price takers while monopolies and oligopolies are not.

B. monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can

The airline industry is an example of​ a(n) ________ industry. Part 2 A. monopolistically competitive B. oligopolistic Your answer is correct. C. perfectly competitive D. monopolistic

B. oligopolistic

An example of a common resource is A. cable television. B. public grazing land. C. sunlight. D. an amusement park.

B. public grazing land.

Velma, a book editor for a local publishing​ company, and​ Daphne, an opera singer in a local opera​ company, share a townhouse in Miami. Velma enjoys reading and editing books at​ home, and Daphne enjoys rehearsing her arias at home. Daphne is willing to pay Velma​ $200 per week if she will find another place to read and edit books. Velma offers Daphne​ $240 per week to find someplace else to rehearse. If Daphne has the right to rehearse in her​ home, explain why the townhouse will be free of aria rehearsals. If Velma has the right to read and edit books in her​ home, explain why the townhouse will​ still be free of aria rehearsals. If Daphne has the right to rehearse her arias​, ​____________. A. she will only accept a payment more than $240 from Velma to stop rehearsing at home. B. she will be willing to accept some payment between $200 and $240 from Velma to stop rehearsing at home. C. she has to learn to enjoy silence. D. she will be willing to accept some payment less than $200 from Velma to stop rehearsing at home.

B. she will be willing to accept some payment between $200 and $240 from Velma to stop rehearsing at home.

Los Angeles International Airport​ (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del​ Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel. If the government assigns property rights to​ ________ and no negotiations occur between the​ parties, the resulting level of air travel is 120 units. A. both the airlines and the residents of Playa Del Rey in a 50−50 split B. the airlines C. the residents of Playa Del Rey D. indeterminate from the given information.

B. the airlines

To the extent that oligopolies differentiate their​ products, A. there is overproduction from​ society's point of view. B. there is the promise of new and exciting products. Your answer is correct. C. they are also likely to price at marginal cost. D. they force themselves into deadlocks that waste resources.

B. there is the promise of new and exciting products.

The​ free-rider problem arises A. whenever there is a surplus of the product in the market. B. when people realize they will still receive the benefits of a good whether they pay for it or not. Your answer is correct. C. when people feel their contribution is so small relative to the total amount needed that it​ won't make a difference whether they contribute or not. D. whenever the government produces a good or service.

B. when people realize they will still receive the benefits of a good whether they pay for it or not.

If the interest rate is​ 5%, Nashbar Bicycle should A. not fund any of the projects. B. fund all of the projects. C. fund only the employee fitness center. D. fund all of the projects except for the employee fitness center.

B. fund all of the projects.

Product differentiation can lead to gains in economic welfare.

True

Refer to the data provided in the table below to answer the following question. The table shows the situation facing two​ firms, both of which are polluting. Assume that each firm emits 5 units of pollution. Reduction of Pollution by Firm A MC of reducing pollution for Firm A TC of reducing pollution for Firm A Reduction of Pollution by Firm B MC of reducing pollution for Firm B TC of reducing pollution for Firm B 1 ​$1 ​$1 1 ​$8 ​$8 2 3 4 2 12 20 3 6 10 3 16 36 4 10 20 4 20 56 5 15 35 5 24 80 Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do​ this, the government caps each​ firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade​ permits, what is the total cost of the pollution​ reduction? Part 2 A. ​$24 B. ​$46 C. ​$76 D. ​$115

B. ​$46

Table 16.4 shows the situation facing two​ firms, both of which are polluting. Assume that each firm emits 5 units of pollution. Firm A Firm A Firm A Firm B Firm B Firm B Reduction of Pollution by Firm A MC of reducing pollution for Firm A TC of reducing pollution for Firm A Reduction of Pollution by Firm B MC of reducing pollution for Firm B TC of reducing pollution for Firm B 1 ​$2 ​$2 1 ​$16 ​$16 2 6 8 2 24 40 3 12 20 3 32 72 4 20 40 4 40 112 5 30 70 5 48 160 Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do​ this, the government caps each​ firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade​ permits, what is the total cost of the pollution​ reduction? Part 2 A. ​$48 B. ​$92 C. ​$152 D. ​$230

B. ​$92

What is the Nash equilibrium in the​ game? Part 2 A. ​(Don't Advertise,​ Don't Advertise) B. ​(Advertise, Advertise) Your answer is correct. C. ​(Don't Advertise,​ Advertise) D. ​(Advertise, Don't​ Advertise)

B. ​(Advertise, Advertise)

If both firms follow a maximin​ strategy, the equilibrium in the game is​ ________. A. ​(Raise Price,​ Don't Raise​ Price) B. ​(Don't Raise​ Price, Don't Raise​ Price) C. ​(Raise Price, Raise​ Price) D. ​(Don't Raise​ Price, Raise​ Price)

B. ​(Don't Raise​ Price, Don't Raise​ Price)

Compared to a perfectly competitive firm having the same cost​ curves, a monopolistically competitive firm​ ________ output and​ ________ prices. A. ​ reduces; reduces B. ​ reduces; raises Your answer is correct. C. ​ raises; reduces D. ​ raises; raises

B. ​reduces; raises

You are asked to lend a friend​ $10,000 for a year. At the end of the year your friend agrees to pay you​ $10,500. The interest rate on this loan is A.​ 0.05%. B. 5.0% C. 105%. D. indeterminate from this information.

B. 5.0%

Related to the Economics in Practice on page​ 316: According to the Economics in Practice​, which of the following statements is true​? A. Even though tastes tend to differ across​ areas, we tend to see a smaller variety of products available from an online retailer than from an individual​ brick-and-mortar retailer. B. Because tastes tend to differ across​ areas, we would expect to see a wider variety of products available from an online retailer than from an individual​ brick-and-mortar retailer. C. Because tastes tend to be roughly the same across​ areas, we would expect to see about the same variety of products available from an online retailer as from an individual​ brick-and-mortar retailer. D. Because tastes tend to differ across​ areas, we would expect to see a smaller variety of products available from an online retailer than from an individual​ brick-and-mortar retailer.

B. Because tastes tend to differ across​ areas, we would expect to see a wider variety of products available from an online retailer than from an individual​ brick-and-mortar retailer.

For each of the​ following, decide whether you agree or disagree and explain your answers. Savings and investment are just two words for the same thing. A. Disagree: Savings is the flow of capital and investment is the stock of capital. B. Disagree: Savings is the supply of capital from households and investment is the demand for capital from firms. C. Disagree: Savings is the supply of capital from firms and investment is the demand for capital from households. D. Disagree: Savings refers to intangible capital and investment refers to physical capital. E. Agree. When I buy a share of Microsoft​ stock, I have​ invested; when I buy a government​ bond, I have not. A. Disagree: Purchasing a share of stock is only an investment if the company makes capital equipment. B. Disagree: Purchasing a government bond is an​ investment, but purchasing a share of stock is not. C. Disagree: Both purchasing a share of stock and a government bond are investments. D. Disagree: Neither purchasing a share of stock nor buying a government bond is an investment. E. Agree. Higher interest rates lead to more investment because those investments pay a higher return. A. Disagree: When interest rates are​ low, the opportunity cost of an investment project is​ lower, and firms are more likely to invest in new plants and equipment. B. Disagree: When interest rates are​ high, firms are more likely to invest to replace old plants and​ equipment, because depreciation is higher. C. Disagree: When interest rates are​ high, firms are more likely to invest in new plants and​ equipment, because households are more likely to save. D. Disagree: When interest rates are​ low, the direct cost of an investment project is​ higher, and firms are more likely to invest in new plants and equipment. E. Agree.

B. Disagree: Savings is the supply of capital from households and investment is the demand for capital from firms. D. Disagree: Neither purchasing a share of stock nor buying a government bond is an investment. A. Disagree: When interest rates are​ low, the opportunity cost of an investment project is​ lower, and firms are more likely to invest in new plants and equipment.

​________ is a good measure of what society gives up by using resources to produce more of a good or service. A. Total cost of production B. Marginal cost C. Marginal revenue product D. Marginal revenue

B. Marginal cost

The Blume​ quintuplets, Aster,​ Dahlia, Iris,​ Jasmine, and​ Poppy, have an opportunity to purchase a wholesale florist company. Each of the women would have to put up ​$300,000 to make the purchase. The revenue from the business is expected to remain constant at ​$650,000 per year for the next several years. The costs​ (not including the opportunity costs of the​ investment) of operating the florist are expected to remain constant at ​$430,000 for the next several years. The current market interest rate on enterprises with comparable risks is 18.03 percent per year. Should the Blume quintuplets purchase the wholesale​ florist? A. Yes​, the expected rate of return is greater than the market interest rate. B. No​, the expected rate of return is less than the market interest rate. C. No, the florist​ company's past earnings performance does not guarantee its future performance. D. Yes, there are positive profits.

B. No​, the expected rate of return is less than the market interest rate.

In this monopolistically competitive​ industry, in the long run A. product supply will decrease so prices will go up. B. firms will enter until all firms break even economically. C. firms will suffer economic losses profits. D. demand for the product will increase so that profits are increased.

B. firms will enter until all firms break even economically. If a firm is earning economic profit in the short run, in the long run, they will begin to earn normal profits (breaking even). If a firm is suffering loss in the short run, in the long run, they will exit the industry.

If the interest rate is 4​ percent, to get back​ $200 in one year you would need to deposit​ ________ today. A. $187.43 B. ​$192.31 C. $195.55 D. ​$208.00

B. ​$192.31

Assume that the craft beer industry in Hawaii in​ 2014 was competitively structured and in​ long-run competitive​ equilibrium; firms were earning a normal rate of return. In​ 2015, a young entrepreneur quietly bought up all the breweries​ and began operations as a monopoly called​ "Tropical Suds." To operate​ efficiently, Tropical Suds hired a management consulting​ firm, which estimated​ long-run costs and demand. These results are presented in the figure on the right. ​(ΣiMCi=the horizontal sum of the marginal cost curves of the individual​ branches/firms.) ​1.) Using the point drawing tool​, indicate output and price when the market was competitive in 2014. Label your point​ 'Competition'. ​2.) Using the rectangle drawing tool​, shade in the​ monopoly's economic profit after the consolidation. Label your rectangle​ 'Profit'. ​Note: Carefully follow the instructions above and only draw the required objects. Compare the perfectly competitive outcome with the monopoly outcome. A. The competitive outcome is​ efficient, but the monopoly is inefficient because it charges a price that is too low. B. The competitive outcome is​ efficient, but the monopoly is inefficient because it charges a price that is too high. C. The competitive outcome and the monopoly outcome are both inefficient because they charge prices that are too high. D. The competitive outcome and the monopoly outcome are both efficient. E. The competitive outcome is inefficient because it charges a price that is too low and the monopoly outcome is inefficient because it charges a price that is too high. In​ 2015, a bar owner files a complaint with the Antitrust Division of the Justice Department claiming that Tropical Suds has monopolized the craft beer industry. Justice concurs and prepares a civil suit. Suppose you work in the White House and the president asks you to prepare a brief memo​ (one or two​ paragraphs) outlining the issues. In your​ response, be sure to​ include: (1) The economic justification for action and​ (2) a proposal to achieve an efficient market outcome. You propose to​ ____________. A. regulate the​ monopoly's price to be zero to eliminate profits. B. regulate the​ monopoly's price to equal lowest average cost to eliminate consumer surplus. C. regulate the​ monopoly's price to equal lowest average cost to eliminate the loss of surplus to society. D. bust the monopoly up into many competitive firms to eliminate producer surplus. E. regulate the​ monopoly's price to equal marginal revenue to eliminate the loss of surplus to society.

B. The competitive outcome is​ efficient, but the monopoly is inefficient because it charges a price that is too high. C. regulate the​ monopoly's price to equal lowest average cost to eliminate the loss of surplus to society. Make a box where MR = MC for a monopolistic firm and make sure the 2 for the corners are touching the A curve and the D curve.

A major source of chicken feed in the United States is​ anchovies, small fish that can be scooped out of the ocean at low cost. Every 7​ years, when the anchovies disappear to​ spawn, producers must turn to​ grain, which is more​ expensive, to feed their chickens. What is likely to happen to the cost of chicken when the anchovies​ disappear? A. The cost of chicken will fall. B. The cost of chicken will increase. C. The cost of chicken is unrelated to the cost of anchovies. D. The cost of chicken will not change. What is a substitute for​ chicken? A. Chicken feed B. Fish C. Turkey D. Both B and C. How are the markets for these substitutes affected when the anchovies​ disappear? A. Demand shifts to the left​: Equilibrium price and quantity will both decrease. B. Supply shifts to the right​: Equilibrium price will decrease and quantity will increase. C. Supply shifts to the left​: Equilibrium price will increase and quantity will decrease. D. Demand shifts to the right​: Equilibrium price and quantity will both increase. How might the allocation of farmland be changed as a result of the disappearance of​ anchovies? A. A smaller amount of farmland will be devoted to goods that are substitutes for anchovies. B. A greater amount of farmland will be devoted to goods that are complements to anchovies. C. A greater amount of farmland will be devoted to goods that are substitutes for anchovies. D. Farmland and anchovies are unrelated goods.

B. The cost of chicken will increase. D. Both B and C. D. Demand shifts to the right​: Equilibrium price and quantity will both increase. C. A greater amount of farmland will be devoted to goods that are substitutes for anchovies.

You and nine of your softball teammates are offered the chance to buy a pool hall. Each partner would put up ​$50,000. The revenues from the operation of the pool hall have been steady at ​$200,000 per year for several years and are projected to remain steady into the future. The costs​ (not including opportunity​ costs) of operating the pool hall​ (including maintenance and​ repair, depreciation, and​ salaries) have also been steady at ​$50,000 per year.​ Currently, 5-year Treasury bills are yielding 1.5 percent interest. Would you go in on the​ deal? Explain your answer. A. No, operating costs exceed revenues. B. Yes, the expected rate of return exceeds that of the opportunity cost of your money. C. Yes, revenues exceed operating costs. D. No, you could make more by investing your money in Treasury bills.

B. Yes, the expected rate of return exceeds that of the opportunity cost of your money.

A monopolist who has a horizontal ATC schedule and charges the same monopoly price to all buyers A. appropriates less consumer surplus as profit than a perfectly competitive firm does. B. appropriates less consumer surplus as profit than a perfect price discriminator does. C. does not lower the amount of consumer surplus that buyers have compared with what they would have if instead they faced a perfectly competitive firm. D. appropriates more consumer surplus as profit than a perfect price discriminator does.

B. appropriates less consumer surplus as profit than a perfect price discriminator does.

Due to the network externalities in the game console​ market, we would expect this market to A. overproduce game consoles. B. be highly concentrated. C. be efficient. D. be serviced by a natural monopoly.

B. be highly concentrated.

As interest rates​ fall, a firm would A. have higher expected costs of investment. B. be willing to pay more now to purchase the same number of future dollars. C. be willing to pay less now to purchase the same number of future dollars. D. have decreasing present value of expected earning.

B. be willing to pay more now to purchase the same number of future dollars.

The market in which households supply their savings to firms that demand funds in order to buy capital goods is the​ ________ market. A. savings B. capital C. investment D. money

B. capital

Goods produced by the economic system that are used as inputs in the production of future goods and services are A. consumable goods. B. capital goods. C. depreciation goods. D. tangible goods.

B. capital goods.

If a monopolist is at a point on its demand curve such that marginal revenue is greater than marginal​ cost, then it can increase profit by A. decreasing both price and output. B. decreasing price and increasing output. C. increasing both price and output. D. increasing price and decreasing output.

B. decreasing price and increasing output.

In perfect​ competition, P​ = MC is the condition that A. encourages firms to enter an industry. B. ensures that firms produce the right things. C. holds only in the long run. D. guarantees that firms will make an economic profit.

B. ensures that firms produce the right things.

As interest rates​ ________, a firm would have to pay more now to purchase the same number of future dollars. A. rise B. fall C. remain unchanged D. Interest rates have no bearing on the payment for future dollars.

B. fall

You lend a friend​ $10,000 for a year. At the end of the year your friend agrees to pay you​ $10,700. The interest rate on this loan is A. 0.07%. B. ​7.00% C. 107%. D. indeterminate from this information.

B. ​7.00%

You borrow​ $40,000 at an interest rate of​ 5% to open Organic​ Foods, an​ all-natural food store. You will earn an economic profit if the return on your investment is A. 10% or greater. B. greater than​ 5%. C. between 0 and​ 5%. D. 5%.

B. greater than​ 5%.

Do you agree or disagree with each of the following​ statements? Explain your reasoning. For a​ monopoly, price is equal to marginal revenue because a monopoly has the power to control price. This statement is A. incorrect because price always equals marginal revenue regardless of market power. B. incorrect because price is greater than marginal revenue. C. incorrect because price instead is set equal to marginal cost. D. incorrect because price equals marginal revenue due to demand constraints. E. correct. Because a monopoly is the only firm in an​ industry, it can charge virtually any price for its product. The statement is A. incorrect because a monopoly is not necessarily the only firm in an industry. B. incorrect because a monopoly is constrained by barriers to entry. C. incorrect because a monopoly is constrained by consumer demand. D. incorrect because new firms may enter a​ monopoly's industry. E. correct It is always true that when demand elasticity is equal to −​1, marginal revenue is equal to 0. This is A. incorrect because when demand elasticity is equal to −​1, marginal revenue is positive. B. incorrect because when demand elasticity is equal to −​1, marginal revenue increases. C. incorrect because when demand elasticity is equal to −​1, marginal revenue is at its maximum. D. incorrect because when demand elasticity is equal to −​1, total revenue is equal to 0. E. correct.

B. incorrect because price is greater than marginal revenue. C. incorrect because a monopoly is constrained by consumer demand. E. correct.

The Antitrust Division of the Justice Department A. can issue​ cease-and-desist orders to offenders. B. initiates action against those who violate antitrust laws and decides which cases to prosecute. C. has established a set of trade regulations that make clear what practices it deems unfair and subject to action. D. is composed of five members appointed by the president and confirmed by the Senate for terms of 7 years.

B. initiates action against those who violate antitrust laws and decides which cases to prosecute.

Compared to a monopolistically competitive firm having the same cost​ curves, a perfectly competitive firm produces​ ________ output and charges a​ ________ price. A. more; higher B. more; lower C. ​less; higher D. ​less; lower

B. more; lower

Public goods are A. nonrival in consumption and their benefits are excludable. B. nonrival in consumption and their benefits are nonexcludable. C. rival in consumption and their benefits are nonexcludable. D. rival in consumption and their benefits are excludable.

B. nonrival in consumption and their benefits are nonexcludable.

A clothing manufacturer produced​ 5,000 sweaters, but sold only​ 4,000 of them. The remaining​ 1,000 sweaters would be classified as A. a factor of production. B. part of the​ firm's tangible capital. C. a loss to the firm. D. part of the​ firm's intangible capital.

B. part of the​ firm's tangible capital.

Examining the equilibrium conditions of individual markets and for households and firms separately is referred to as A. comparative statics. B. partial equilibrium analysis. C. general equilibrium analysis. D. efficiency analysis.

B. partial equilibrium analysis.

Market power refers to a​ firm's ability to A. charge any price it likes. B. raise price without losing all sales of its product. C. sell any amount of output it desires at the​ market-determined price. D. monopolize a market completely.

B. raise price without losing all sales of its product.

Imperfect information on the part of buyers and sellers A. cannot persist in a market economy. B. remains a barrier to achieving market​ efficiency, at least in some industries. C. is no longer a problem because​ the "truth-in-advertising" regulations have been instituted. D. will not stop the economy from achieving market​ efficiency, assuming the other conditions for market efficiency hold.

B. remains a barrier to achieving market​ efficiency, at least in some industries.

The result of this game is a​ prisoners' dilemma. In which of the following cases is it most likely that the firms will be able to overcome the​ prisoners' dilemma? A. government intervention B. repeated play C. when both firms follow a maximin strategy D. a single interaction

B. repeated play

There are two sectors in the​ economy, X and Y​, and both are in​ long-run, zero-profit equilibrium at the intersections of S0 and D0. Assume consumer preference changes toward X and away from Y. Ceteris paribus​, sector X will likely see​ ________ and sector Y will likely see​ ________. A. no entry or exit of​ firms; the exit of existing firms B. the entrance of new​ firms; the exit of existing firms C. the entrance of new​ firms; no entry or exit of firms D. the exit of existing​ firms; the entrance of new firms

B. the entrance of new​ firms; the exit of existing firms When change occurs in taste where the common public now prefers product X over product Y, firms will exit the industry of product Y while more firms will enter the production of product X. Vice versa.

As cities​ go, Las Vegas is about as "​over-the-top" as is imaginable. Where else in the world can you find a​ 350-foot tall glass​ pyramid, a​ half-scale replica of the Eiffel​ Tower, a​ fire-spewing volcano, and patrons being serenaded in Italian while riding in authentic Venetian​ gondolas, and all of this along one​ street, Las Vegas​ Blvd? Despite the​ city's numerous​ excesses, the four largest casino companies in the United​ States, all based in Las​ Vegas, have each spent millions of dollars on environmental sustainability​ programs, with the earliest program dating back to 2007. Some negative effects of engaging in such programs are​ _________ . Please check all that apply. A. these programs force casino companies to use fewer flashing lights and other​ high-profile advertising on the outside of their casinos B. the potential higher costs of implementing and engaging in these policies C. the costs of promoting such policies to the public D. these programs promote an image of responsibility instead of the fun and exciting image Las Vegas is famous for All four companies have chosen to implement these environmental programs anyway because​ _________. A. they want to create less light pollution in Los Vegas B. the costs of implementing the programs are negligible C. they can get numerous tax breaks D. they want to enjoy potential energy cost savings

B. the potential higher costs of implementing and engaging in these policies C. the costs of promoting such policies to the public D. they want to enjoy potential energy cost savings

Do you agree or disagree with each of the following​ statements? Explain your answer. Nutritional food is a public good and should be produced by the public sector because private markets will fail to produce it efficiently. A. Disagree: Public goods should not be produced by the public sector. B. ​Disagree: Nutritional food is not a public good since it does not bestow collective benefits on members of society. C. Agree: The private sector cannot produce efficient quantities of nutritional food. D. Agree: Nutritional foods should not be produced by the private sector. Imperfect markets are inefficient because as​ price-makers, firms in these markets can guarantee that price will always be less than marginal cost. A. Disagree: Under imperfect​ competition, an efficient mix of output is not guaranteed. B. Agree: Under imperfect​ competition, an efficient mix of output is guaranteed. C. Disagree: Under imperfect​ competition, price will equal marginal cost. D. Agree: Under imperfect​ competition, the price will always be less than marginal cost. Financial planning service is an example of a potentially inefficient market because consumers do not have perfect information about the service. A Disagree: Imperfect information does not result in inefficiencies. B. Agree: It is difficult for consumers to evaluate the skills of a financial planner. C. Agree: Financial planners are not to be trusted. D. ​Disagree: Consumers have perfect information about financial planning services.

B. ​Disagree: Nutritional food is not a public good since it does not bestow collective benefits on members of society. A. Disagree: Under imperfect​ competition, an efficient mix of output is not guaranteed. B. Agree: It is difficult for consumers to evaluate the skills of a financial planner.

​[Related to the Economics in Practice​] Between 2008 and​ 2014, dozens of lawsuits were brought or reinstated against U.S. firms for conspiracy to fix prices of things as diverse as​ pharmaceuticals, baby​ products, digital​ music, and eggs. ​Price-fixing is a violation of the​ ____________. Part 3 A. ​Sarbanes-Oxley Act. B. Sherman Act. Your answer is correct. C. Americans with Disabilities Act. D. Landrum-Griffin Act. E. Family and Medical Leave Act. Part 4 ​Price-fixing is unjustified because​ ____________. A. higher prices lead to pricing below marginal cost. B. higher prices reduce consumer surplus. Your answer is correct. C. higher prices increase output above the level that is optimal for society. D. higher prices reduce producer surplus. E. lower prices reduce market efficiency.

B.Sherman Act. B.higher prices reduce consumer surplus.

You value your economics textbook at​ $10. Someone else values it at​ $25, and that person is willing to pay you​ $20 for your textbook. Would selling your textbook to this person for​ $20 be Pareto​ efficient? A. No, because you did not receive the maximum amount the other person would have been willing to pay for the textbook. B.​ Yes, because both of you are better off as a result of the trade. C. Yes, because even though you gain from the trade and he​ loses, there is the potential for you to compensate him for his loss. D. No, the person paid you​ $20 for the book so his net benefit was only​ $5, whereas your net benefit was​ $10. For this change to be Pareto​ efficient, each of you should have the same net benefit.

B.​ Yes, because both of you are better off as a result of the trade.

The field of environmental economics is concerned with​ ________. A. public goods B. economies of scale C. externalities D. government inefficiency

C. externalities

The case for advertising includes the fact that A. it wastes​ society's scarce resources. B. firms spend large sums of money to create meaningless differences among products. C. it provides consumers with valuable information about product​ availability, quality, and price. Your answer is correct. D. it creates wants that otherwise would not have existed.

C. it provides consumers with valuable information about product​ availability, quality, and price.

Compared to a perfectly competitive​ firm, the demand schedule of a monopolistically competitive firm faces is A. perfectly price inelastic. B. more price elastic. C. less price elastic. Your answer is correct. D. perfectly price elastic.

C. less price elastic.

The restaurant industry is an example of​ a(n) ________ industry. A. perfectly competitive B. oligopolistic C. monopolistically competitive Your answer is correct. D. monopolistic

C. monopolistically competitive

________ must approve consent​ decrees, that​ is, formal agreements on remedies between all parties to an antitrust case. A. The Commerce Department B. Congress C. Courts. D. The FTC

C. Courts.

You spend​ $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives​ $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true​? A. If you took into consideration the benefits your neighbor​ derived, the efficient level of lawn maintenance would be less than​ $300 a month. B. You are spending too much on your​ yard, because your neighbor derives only​ $50 worth of benefits. C. If you took into consideration the benefits your neighbor​ derived, the efficient level of lawn maintenance would be greater than​ $300 a month. Your answer is correct. D. You should refuse to spend anything on your yard unless your neighbor pays you​ $50 a month.

C. If you took into consideration the benefits your neighbor​ derived, the efficient level of lawn maintenance would be greater than​ $300 a month.

Society will produce the efficient mix of output if all firms equate price and marginal cost. True False

True

A monopolistic industry has A. either a standardized product or differentiated products. B. a homogeneous product and easy entry. C. a​ single, unique product and blocked entry. D. many differentiated products and easy entry.

C. a​ single, unique product and blocked entry.

Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an​ industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is​ imposed, each company views pollution as being free. Suppose that instead of a​ tax, the government uses standards to achieve the emission​ reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the situation under the​ tax, Alpha would​ ________ and Beta would​ ________. A. be able to increase​ emissions; be able to increase emissions B. have to further reduce​ emissions; have to further reduce emissions C. be able to increase​ emissions; have to further reduce emissions D. have to further reduce​ emissions; be able to increase emissions

C. be able to increase​ emissions; have to further reduce emissions

Refer to the information provided in the table at right to answer the question that follows. Firm​ A's optimal strategy is Part 2 A. to raise the price of its product. B. to not raise the price of its product. C. dependent on what Firm B does. Your answer is correct. D. indeterminate from this​ information, as no information is provided on Firm​ A's risk preference.

C. dependent on what Firm B does.

Monopolies can​ ________ in the long run while monopolistically competitive firms​ ________ due to barriers to entry in monopoly but not in monopolistic competition. A. break​ even; cannot B. can never shut​ down; can C. earn positive economic​ profits; cannot Your answer is correct. D. only break​ even; can only earn positive economic profits

C. earn positive economic​ profits; cannot

In 2000 Microsoft was A. punished for violating the U.S. antitrust laws by a fine exceeding one million dollars. B. required to make its​ patents, trademarks, and trade secrets available to competitors. C. found guilty of violating U.S. antitrust laws. D. ordered to dispose of all of its subsidiary companies.

C. found guilty of violating U.S. antitrust laws.

The share of​ ________ by the top firms is known as the concentration ratio. Part 2 A. outstanding shares of stock issued B. the labor force employed C. industry output in sales or employment accounted for Your answer is correct. D. resources used in production

C. industry output in sales or employment accounted for

Society will benefit from less of a good being produced when the price of a good is A. more than the marginal cost to produce that good. B. more than the marginal benefit of producing that good. C. less than the marginal cost to produce that good. D. less than the marginal benefit of producing that good.

C. less than the marginal cost to produce that good.

Society will benefit from less of a good being produced when the price of a good is A. less than the marginal benefit of producing that good. B. more than the marginal cost to produce that good. C. less than the marginal cost to produce that good. D. more than the marginal benefit of producing that good.

C. less than the marginal cost to produce that good.

Esmerelda's Egg Emporium is a monopolistically competitive firm. Its marginal revenue curve​ ________ its demand​ curve, intersecting the quantity axis​ ________ the point at which the demand curve intersects it. Part 2 A. lies​ above; twice as far out as B. is the same​ as; exactly at C. lies​ below; midway between the origin and Your answer is correct. D. lies​ above; midway between the origin and

C. lies​ below; midway between the origin and

Price is a limited decision variable in which of the following market​ organizations? Part 2 A. oligopoly B. perfect competition C. monopolistic competition Your answer is correct. D. monopoly

C. monopolistic competition

Monopolistic competition differs from perfect competition primarily because in A. perfect​ competition, firms can differentiate their products. B. monopolistic​ competition, there are relatively few barriers to entry. C. monopolistic​ competition, firms can differentiate their products. Your answer is correct. D. monopolistic​ competition, entry into the industry is blocked.

C. monopolistic​ competition, firms can differentiate their products.

If firms in a monopolistically competitive industry are earning economic​ profits, then in the long run A. these firms can continue earning economic profits because entry into the industry is blocked. B. new firms producing the exact same product will enter the industry and this entry will continue until economic profits are eliminated. C. new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated. Your answer is correct. D. the government will most likely regulate firms in this industry to reduce these economic profits.

C. new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated.

The Coase theorem implies that we never need to worry about regulating externalities because the private individuals involved will reach the efficient outcome through negotiations. Is that statement true or​ false? Justify your answer and use examples. This statement is A. not correct because Coase bargaining is not necessarily feasible when the parties are able to bargain openly. B. not correct because Coase bargaining is only feasible when a large number of people are involved. C. not correct because Coase bargaining is not necessarily feasible when bargaining is costly. D. not correct because Coase bargaining is only feasible when the drop-in-the-bucket problem is present. E. correct.

C. not correct because Coase bargaining is not necessarily feasible when bargaining is costly.

Related to Economics in Practice​: An Economist Makes Tea If you look at the prices listed in the Economics in​ Practice, you will see that the more​ well-known brands are being sold for a lower price than the less​ well-known brands. Is this pattern always​ true? Explain your answer. Well-known brands Part 2 A. always sell for less due to vertical differentiation. B. can sell for more because behavioral economics suggests variety always raises prices. C. can sell for more because brand loyalty reduces market power. D. can sell for more through advertising that increases product differentiation. Your answer is correct. E. always sell for less due to horizontal differentiation.

D. can sell for more through advertising that increases product differentiation.

For each of the​ following, state whether you agree or disagree. Explain your answer. Part 2 Monopolistically competitive firms produce their economic profits protected by barriers to entry. Part 3 This statement is Part 4 A. not correct because monopolistically competitive industries have no market power and therefore have no profits in the long run. B. not correct because monopolistically competitive industries benefit from economies of scale and therefore earn economic profits in the long run. C. not correct because monopolistically competitive industries have easy entry and exit and therefore have no profits in the long run. Your answer is correct. D. not correct because monopolistically competitive industries have barriers to entry and therefore have no profits in the long run. E. correct. Part 5 Monopolistically competitive firms are efficient because in the long​ run, price falls to equal marginal cost. This statement is A. not correct because monopolistically competitive firms produce where price is greater than marginal cost and therefore are inefficient. Your answer is correct. B. not correct because monopolistically competitive firms produce at lowest average cost and therefore are inefficient. C. not correct because monopolistically competitive firms produce where price equals marginal revenue and therefore are inefficient. D. not correct because monopolistically competitive firms produce where marginal revenue equals marginal cost and therefore are efficient. E. correct.

C. not correct because monopolistically competitive industries have easy entry and exit and therefore have no profits in the long run. A. not correct because monopolistically competitive firms produce where price is greater than marginal cost and therefore are inefficient.

In cases where a common resource is shared by many and technology is well​ developed, A. the resource becomes excludable. B. overuse is rarely problematic. C. overuse is more likely. D. the resource becomes nonrival in consumption.

C. overuse is more likely.

A central concern about common resources is A. high production costs. B. overproduction due to negative externalities. C. overuse. Your answer is correct. D. lack of profitability.

C. overuse.

Entry to and exit from a​ ________ market are​ ________. Part 2 A. perfectly​ competitive; difficult B. ​oligopolistic; easy C. perfectly​ contestable; easy Your answer is correct. D. perfectly​ contestable; difficult

C. perfectly​ contestable; easy

For a purely competitive ​firm, A. marginal revenue is less than the price because the firm must lower the price for each additional unit it wants to sell. B. price is equal to marginal revenue because the firm must lower the price for each additional unit it wants to sell. C. price is equal to marginal revenue because the firm can sell as much output as it chooses at the market price. Your answer is correct. D. marginal revenue is less than the price because the firm can sell as much output as it chooses at the market price.

C. price is equal to marginal revenue because the firm can sell as much output as it chooses at the market price

The payoff matrix in the figure to the right shows the payoffs for a pricing game. Part 2 If you were firm​ A, which strategy would you​ choose? Part 3 Firm A should Part 4 A. price high because this is their dominant strategy. B. price high because this is their maximin strategy. C. price low because this is their dominant strategy. Your answer is correct. D. price low because this maximizes profits of both firms. E. price low because this is their​ tit-for-tat strategy. Part 5 Firm​ B's dominant strategy is to price low. Part 6 If this game were repeated a large number of times and you were firm A and you could change your​ strategy, what might you​ do? Firm A should A. use a​ tit-for-tat strategy by selecting a price that minimizes firm​ B's profits. B. use a​ tit-for-tat strategy by responding in kind to firm​ B's play. Your answer is correct. C. use a maximin strategy by maximizing the minimum gain that can be earned. D. use a​ tit-for-tat strategy by minimizing the maximum gain that can be earned. E. use a maximin strategy by by responding in kind to firm​ B's play

C. price low because this is their dominant strategy. low B. use a​ tit-for-tat strategy by responding in kind to firm​ B's play.

Which of the following is the best example of an oligopolistic​ industry? Part 2 A. book publishing B. public utilities C. smartphone manufacturing Your answer is correct. D. convenience stores

C. smartphone manufacturing

Monopolistically competitive firms have​ ________ market power due to producing differentiated products. A. no B. unlimited C. some D. complete

C. some

Suppose two firms plan a merger that will increase the​ Herfindahl-Hirschman index from​ 1,300 to 1,350. In this​ case, Part 2 A. the industry is considered to be unconcentrated. B. the industry is considered to be concentrated. C. the Justice Department will not challenge the merger. Your answer is correct. D. the Justice Department will challenge the merger.

C. the Justice Department will not challenge the merger.

The​ ________ amount of cars is 35. A. break−even B. subsidized C. unregulated D. efficient

C. unregulated

Which of the following is not an example of price​ discrimination? A. Airlines charging lower prices to travelers who stay over a Saturday night B. Discounted coffee for senior citizens at restaurants C. ​ Back-to-school sales D. Student discounts at movie theaters

C. ​ Back-to-school sales

The monopoly profit−maximizing number of subscribers and price are​ ________ and​ ________, respectively. A. ​2,200 $13. B. ​800; $15. C. ​1,000; $16. D. ​2,500; $12.

C. ​1,000; $16.

The existence of public goods is an example of potential market failure and suggests that a government or public sector can improve the outcome of completely free markets. Indicate whether you agree or disagree that the following statement does NOT improve the outcome of completely free markets as much as we might anticipate. Problems of social choice: It is impossible to choose collectively in a rational way that satisfies voters/consumers of public goods. A. ​Disagree: Representative democracy is rarely involved in debates over public goods and social choice. B. ​Disagree: Representative democracy is guaranteed to produce the socially optimal mix of public goods. C. ​Agree: Representative democracy is not guaranteed to produce the socially optimal mix of public goods. D.Agree: Voters divided by consumers are not rational.

C. ​Agree: Representative democracy is not guaranteed to produce the socially optimal mix of public goods.

From​ society's point of​ view, the​ ________ level is 25 haircuts. A. monopoly output B. minimum output C. shut down D. efficient output

D. efficient output

Do you agree or disagree with each of the following​ statements? The government should be involved in providing health care for all citizens because health care is a​ "public good." A. ​Disagree, because health care is a public good that generates a negative externality. B. ​Disagree, because health care is a private good that is nonrival and nonexcludable. C. ​Disagree, because health care is a mixed or private good. Your answer is correct. D. ​Agree, because health care is a public good that generates a positive externality in consumption. From the standpoint of economic​ efficiency, an unregulated market economy tends to underproduce public goods. A. ​Disagree, an unregulated market economy only underproduces public goods when they are also mixed goods. B. ​Agree, as an unregulated market tends to underproduce public goods because they are nonrival and nonexcludable. Your answer is correct. C. ​Agree, because an unregulated market economy tends to underproduce public goods because they are rival. D. ​Disagree, because unregulated market economies only overproduce public goods because they are rival.

C. ​Disagree, because health care is a mixed or private good. B. ​Agree, as an unregulated market tends to underproduce public goods because they are nonrival and nonexcludable.

To force this firm to produce the​ ________ level of​ output, the government should​ ________ of​ $5.00 per bag of fertilizer. A. ​efficient; issue a subsidy B. ​market; issue a subsidy C. ​efficient; impose a tax D. ​market; impose a tax

C. ​efficient; impose a tax

Tit−for−tat is a​ ________ game strategy in which a player​ ________ an​ opponent's play. Part 2 A. ​single; ignores B. ​single; responds in kind to C. ​repeated; responds in kind to Your answer is correct. D. ​repeated; ignores

C. ​repeated; responds in kind to

The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is P​=55−0.01Q​, where Q is the number of households that would subscribe to the cable service and P is the monthly fee charged to the subscribers. The associated marginal revenue curve is MR​=55−0.02Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheria. It has a constant average and marginal cost of​ $5 for providing cable service to each household. If Fun Cable Company were to be awarded the exclusive right to provide cable service in​ Stratospheria, what price would it charge per household per​ month? A. $5.00 B. $27.50 C. $30.00 D. $55.00

C. $30.00

You agree to lend​ ________ to a friend for a year at an annual interest rate of​ 10%. At the end of the year your friend pays you​ $500 in interest. A.​ $50 B.​ $550 C. $5,000 D. $5,500

C. $5,000

Refer to the information provided in the figure to answer the question that follows. If the market rate of interest is​ 10%, this​ firm's investment will total A. ​$0. B. $15,000. C. $5,000. D. $7,000.

C. $5,000.

Refer to the information provided in the figure at right to answer the question that follows. The​ profit-maximizing level of output for the Memory Company is​ _____ high school yearbooks. A. 0 B. 300 C. 200 D. 350

C. 200

Do you agree or disagree with each of the following​ statements? Explain your answer. Nutritional food is a public good and should be produced by the public sector because private markets will fail to produce it efficiently. A. Disagree: Public goods should not be produced by the public sector. B. Agree: The private sector cannot produce efficient quantities of nutritional food. C. Disagree: Nutritional food is not a public good since it does not bestow collective benefits on members of society. D. ​Agree: Nutritional foods should not be produced by the private sector. Imperfect markets are inefficient because as​ price-makers, firms in these markets can guarantee that price will always be less than marginal cost. A. Agree: Under imperfect​ competition, an efficient mix of output is guaranteed. B. Disagree: Under imperfect​ competition, an efficient mix of output is not guaranteed. C. Agree: Under imperfect​ competition, the price will always be less than marginal cost. D. Disagree: Under imperfect​ competition, price will equal marginal cost. Financial planning service is an example of a potentially inefficient market because consumers do not have perfect information about the service. A. Disagree: Consumers have perfect information about financial planning services. B. Agree: Financial planners are not to be trusted. C. ​Disagree: Imperfect information does not result in inefficiencies. D. Agree: It is difficult for consumers to evaluate the skills of a financial planner.

C. Disagree: Nutritional food is not a public good since it does not bestow collective benefits on members of society. B. Disagree: Under imperfect​ competition, an efficient mix of output is not guaranteed. D. Agree: It is difficult for consumers to evaluate the skills of a financial planner.

Emerald Island has a climate that is not suited to banana production and yields 616 pounds per acre. Tropical Springs has a climate that is suited for bananas and yields only 844 pounds per acre. Emerald Island has a climate that is suited for mango production and yields 221 pounds per acre. Tropical Springs has a climate that is not suited for mangoes and yields 184 pounds per acre. In​ 2015, there was no trade between Emerald Island and Tropical Springs because of high tariffs and both countries together produced huge quantities of bananas and mangoes. In​ 2016, tariffs were eliminated because of a new trade agreement. What is likely to​ happen? A. Emerald Island will produce only bananas and Tropical Springs will produce only mangoes. B. Emerald Island will produce more of both goods and Tropical Springs will produce less of both goods. C. Emerald Island will produce only mangoes and Tropical Springs will produce only bananas. D. Both countries will produce more of both goods. E. The countries will not change their behavior. Can you justify the trade agreement on the basis of Pareto​ efficiency? A. No, because Tropical Springs will produce less mangoes. B. ​No, because Emerald Island will produce less bananas. C. Yes, because more can be produced at the same cost. D. No, because both countries can produce more bananas than mangoes. E. Both A and B are correct.

C. Emerald Island will produce only mangoes and Tropical Springs will produce only bananas. C. Yes, because more can be produced at the same cost.

Refer to the information provided in the figure at right to answer the question that follows. The amount of consumer surplus under monopoly is equal to area Part 2 A. BEC. B. AFC. C. GAB. D. AFE.

C. GAB. The consumer surplus of a monopoly is the triangle above the profit box.

If firms have to account for external costs of​ production, then marginal social cost A. is less than marginal cost. B. is greater than marginal cost. C. is zero. D. equals marginal cost.

D. equals marginal cost.

Which of the following are examples of​ Pareto-efficient changes? Explain your answers. The Hooterville Police Department implements​ cost-saving programs without having to sacrifice the quality of their services. A. Not Pareto​ efficient, because services provided by a government agency are public goods. B. Pareto​ efficient, because services are provided at a lower cost regardless of the quality of the service. C. Pareto​ efficient, because services are provided at a lower cost without making any members of society worse off. D. Not Pareto​ efficient, because service quality does not increase with the​ cost-saving programs. Competition is introduced into the satellite television​ industry, and monthly rates drop. A study shows that benefits to consumers are larger than the lost monopoly profits. A. Not Pareto​ efficient, because only consumers who want to buy satellite televisions are better off. B. Pareto​ efficient, because competition increases. C. Potentially​ efficient, because the gains exceed the losses. D. Pareto​ efficient, because consumers are better off. James trades his​ Harley-Davidson motorcycle to Lola for her John Deere tractor. A. Not Pareto​ efficient, because the tractor is worth less than the motorcycle. B. Not Pareto​ efficient, because a motorcycle is worth less than a tractor. C. Pareto​ efficient, because Lola will be better off more than James will be worse off. D. Pareto​ efficient, because James and Lola agree to exchange voluntarily. The government eliminates an international transportation tax on airline tickets when airlines complain that the tax was costing them business. A. Potentially efficient if we assume the gains for consumers and firms exceed the losses. B. Pareto​ efficient, because airlines sell more tickets at a lower cost. C. Pareto​ efficient, because consumers are better off. D. Not Pareto​ efficient, because only consumers who purchase airline tickets are better off

C. Pareto​ efficient, because services are provided at a lower cost without making any members of society worse off. C. Potentially​ efficient, because the gains exceed the losses. D. Pareto​ efficient, because James and Lola agree to exchange voluntarily. A. Potentially efficient if we assume the gains for consumers and firms exceed the losses.

Which of the following statements regarding perfect price discrimination is​ FALSE? A. Perfect price discrimination can eliminate the deadweight loss to society of a monopoly. B. Perfect price discrimination is charging different prices to different buyers. C. Perfect price discrimination yields the same market price and output result as perfect competition. D. Perfect price discrimination is an attempt by monopolists to capture consumer surplus as profit.

C. Perfect price discrimination yields the same market price and output result as perfect competition.

Each instance that follows is an example of one of the four types of market failure discussed in this chapter. In each​ case, identify the type of market failure and defend your choice briefly. Everyone in town would benefit from the acquisition of two new fire​ engines, but the town does not have the money to pay for them and no one is willing to purchase and donate them to the town. A. Imperfect​ information, because no one knows the entire neighborhood would benefit from two new fire engines. B. Private​ good, because the fire engines would be owned by the donor. C. Public​ good, because new fire engines would bestow collective benefits to society. D. Negative​ externality, because the collective benefits that the fire engines would bestow on society are not provided. The only three gas stations in a small town all agree to raise their prices. A. Imperfect​ competition, because the gas stations are not acting like​ price-takers. B. Negative​ externality, because drivers will be paying higher prices. C. Imperfect​ information, because the government does not know about the agreement. D. Imperfect​ competition, because individuals outside the transaction are harmed by the agreement. Your electrician convinces you that you need to replace your entire breaker box when all you really need is a new breaker switch. A. Public​ good, because the repair bestows collective benefits on members of society. B. Imperfect​ competition, because the electrician is dishonest. C. Negative​ externality, because you are paying for something that you​ don't need. D. Imperfect​ information, because you lack information about electrical repairs to know which repair is unnecessary. Your neighbor refuses to vaccinate his children for measles. A. Negative​ externality, because individuals outside the transaction are negatively affected. B. Imperfect​ information, because your neighbor lacks the information needed to obtain the measles vaccine. C. Imperfect​ information, because you failed to communicate how important the measles vaccine is for children. D. Positive​ externality, because individuals outside the transaction are positively affected.

C. Public​ good, because new fire engines would bestow collective benefits to society. A. Imperfect​ competition, because the gas stations are not acting like​ price-takers. D. Imperfect​ competition, because individuals outside the transaction are harmed by the agreement. A. Negative​ externality, because individuals outside the transaction are negatively affected.

You and nine of your softball teammates are offered the chance to buy a pool hall. Each partner would put up ​$50,000. The revenues from the operation of the pool hall have been steady at ​$150,000 per year for several years and are projected to remain steady into the future. The costs​ (not including opportunity​ costs) of operating the pool hall​ (including maintenance and​ repair, depreciation, and​ salaries) have also been steady at ​$50,000 per year.​ Currently, 5-year Treasury bills are yielding 3.5 percent interest. Would you go in on the​ deal? Explain your answer. A. No, you could make more by investing your money in Treasury bills. B. Yes, revenues exceed operating costs. C. Yes, the expected rate of return exceeds that of the opportunity cost of your money. D. No, operating costs exceed revenues.

C. Yes, the expected rate of return exceeds that of the opportunity cost of your money.

Polar​ Water, a company that delivers bottled​ water, is considering three investment opportunities. The expected returns for each of the projects are as​ follows: buying a new delivery​ van, 12%; computer training for its office​ staff, 9%; and defensive driving training for its​ drivers, 8%. If the current interest rate is​ 7%, the firm should invest in A. only the purchase of a new delivery van. B. the purchase of a new delivery van and computer training for its office staff. C. all of the projects. D. none of the projects.

C. all of the projects.

A​ firm's ________ is measured as a stock while​ ________ is measured as a flow. A. current labor​ force; current inventory B. planned​ inventory; current inventory C. capital; investment in new capital D. investment in new​ capital; capital

C. capital; investment in new capital

In the oligopoly market​ structure, the behavior of any given firm​ ________ the behavior of the other firms in the industry. A. must be different from B. is independent of C. depends on D. must be the same as

C. depends on

Payments made to shareholders of a corporation are called A. retained earnings. B. common stock. C. dividends. D. corporate bonds.

C. dividends.

This competitive firm is currently at Point A on the ATC curve. The​ firm's move toward an output where ATC will be at point B will make the economy A. less stable. B. more fair and the distribution of outcome more equitable. C. less efficient. D. more stable.

C. less efficient.

The Clayton Act A. banned the use of barriers to entry to prevent monopolization. B. declared monopoly and trade restraints illegal. C. made tying contracts illegal and banned price discrimination. D. called for the establishment of the Federal Trade Commission.

C. made tying contracts illegal and banned price discrimination.

A household will buy a good as long as the A. good's use value is less than the price being charged for the good. B. good still provides the consumer with average utility. C. marginal utility from its consumption is greater than or equal to its market price. D.​ good's price is greater than the maximum a consumer would be willing to pay for it.

C. marginal utility from its consumption is greater than or equal to its market price.

Assume that the marginal cost of producing steel does not include the cost of the damage to the environment as a result of pollution. By producing where P​ = MC​, the firm will be producing A. less than the efficient amount of steel. B. a zero quantity of steel. C. more than the efficient amount of steel. D. the efficient amount of steel.

C. more than the efficient amount of steel.

Which of the following markets are likely to be perfectly​ contestable? Explain your answers. The market for coal mining is likely A. not perfectly contestable because the industry has no price leadership. B. not perfectly contestable due to no economies of scale. C. not perfectly contestable because the market requires a high investment of land and capital. D. perfectly contestable because there are virtually no entry barriers to new firms entering. E. perfectly contestable because the industry has a dominant strategy. The market for insurance is likely A. not perfectly contestable because only a few firms have access to a key input. B. perfectly contestable because the industry has a dominant strategy. C. not perfectly contestable because only a few firms have the technology to produce the output. D. perfectly contestable because it is easy to move this service to a new location. E. not perfectly contestable because the industry has no price leadership. The market for wind farms is likely A. not perfectly contestable because only existing firms have access to a key input. B. not perfectly contestable because the government limits entry with regulations. C. perfectly contestable because the industry is an oligopoly. D. perfectly contestable because the industry has a low concentration ratio. E. not perfectly contestable because the market requires a high investment of land and capital. The market for landscaping is likely A. perfectly contestable because there are low entry barriers. B. perfectly contestable because the industry is an oligopoly. C. not perfectly contestable due to economies of scale. D. not perfectly contestable because the government limits entry with regulations. E. not perfectly contestable because only existing firms have access to a key input. The market for advertising is likely A. perfectly contestable because the industry has a dominant strategy. B. not perfectly contestable due to high fixed costs. C. perfectly contestable because it is easy to move this service to a new location. D. not perfectly contestable because only a few firms have access to key inputs. E. not perfectly contestable because only a few firms have the technology to produce the output.

C. not perfectly contestable because the market requires a high investment of land and capital. D. perfectly contestable because it is easy to move this service to a new location. E. not perfectly contestable because the market requires a high investment of land and capital. A. perfectly contestable because there are low entry barriers. C. perfectly contestable because it is easy to move this service to a new location.

In 1890 the United States Congress A. passed the Rule of Reason Act. B. created the Interstate Commerce Commission. C. passed the Sherman Antitrust Act.. D. created the Federal Trade Commission.

C. passed the Sherman Antitrust Act..

The payoff matrix in the figure to the right shows the payoffs for a pricing game. If you were firm​ A, which strategy would you​ choose? Firm A should A. price low because this is their​ tit-for-tat strategy. B. price high because this is their maximin strategy. C. price low because this is their dominant strategy. D. price low because this maximizes profits of both firms. E. price high because this is their dominant strategy. Firm​ B's dominant strategy is to price _____. If this game were repeated a large number of times and you were firm A and you could change your​ strategy, what might you​ do? Firm A should A. use a​ tit-for-tat strategy by maximizing the minimum gain that can be earned. B. use a maximin strategy by by responding in kind to firm​ B's play. C. use a​ tit-for-tat strategy by responding in kind to firm​ B's play. D. use a maximin strategy by maximizing the minimum gain that can be earned. E. use a​ tit-for-tat strategy by selecting a price that minimizes firm​ B's profits.

C. price low because this is their dominant strategy. Firm​ B's dominant strategy is to price low. C. use a​ tit-for-tat strategy by responding in kind to firm​ B's play. You find out the dominant strategy by finding out where each firm make more than its competitor.

Households' ________ limits​ firms' ability to invest in capital. A. supply of land B. investment in stock C. savings decisions D. tax liability

C. savings decisions

Suppose there is a permanent shift of consumer preferences away from pretzels and toward potato chips. The most likely result would be A. in the short run economic losses in the potato chip market. B. in the short run a rise in the price of pretzels. C. short-run profits in the potato chip market increase. D. in the long run a fall in the supply of potato chips.

C. short-run profits in the potato chip market increase.

​Infrastructure, such as public works and public​ services, is also referred to as A. tangible capital. B. intangible capital. C. social capital. D. human capital.

C. social capital.

Some contend that the outcome of any free market is ultimately​ inequitable, because A. public goods will be underprovided by the government. B. periods of unemployment and inflation still occur. C. some people become rich while others remain very poor. D. firms are not forced to take external costs into account.

C. some people become rich while others remain very poor.

A patent is a barrier to entry A. that grants exclusive use of an invented product or process to the government. B. that allows use of an invented product or process by everyone. C. that grants exclusive use of an invented product or process to the inventor. Your answer is correct. D. that only allows use of an invented product or process to other companies within the industry.

C. that grants exclusive use of an invented product or process to the inventor. Your answer is correct.

Public goods are generally produced by A. perfectly competitive industries. B. monopolies. C. the government. D. freely functioning markets.

C. the government.

Price Quantity 4 2,000 3.5 2,400 3 2,800 2.5 3,200 2 3,600 1.5 4,400 1 4,400 If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of​ $1 per unit of providing the​ product, what is the most the monopoly would expend in​ rent-seeking activity? A. ​$5,600 B. $4,800 C. ​$6,000 D. $8,400

C. ​$6,000

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. If Hi Phi​ Unlimited's total revenue from installing 20 sound systems is​ $30,000 and its total revenue from installing 21 sound systems is​ $30,800, what is the marginal revenue of the twenty−first sound​ system? A. −​$1,500 B. −​$700 C. ​$800 D. $1,467

C. ​$800

Which of the following industries would you classify as an​ oligopoly? Explain your answer. The industry for motorcycles is​ ____________. A. monopolistically competitive because there are many firms that produce a homogeneous product. B. monopolistically competitive because there are a few firms selling a differentiated product. C. an oligopoly because there are a few firms that face the limited entry of new firms. D. monopolistically competitive because there are many firms with no market power. E. an oligopoly because there are a few firms that are price takers. The industry for hotels is​ ____________. A. an oligopoly because there are a few firms that are price takers. B. monopolistically competitive because there are many firms facing the limited entry of new firms. C. monopolistically competitive because there are many firms selling a differentiated product. D. an oligopoly because firms produce differentiated products and are price makers. E. monopolistically competitive or an oligopoly depending on the number of​ firms, market​ power, and potential entry. The industry for cruise lines is​ ____________. A. monopolistically competitive because there are many firms facing the limited entry of new firms. B. an oligopoly because the firms have no market power. C. monopolistically competitive because there are many firms producing a homogeneous product. D. an oligopoly because there are a few firms that are price takers. E. an oligopoly because there are only a few firms that engage in strategic behavior. Part 6 The industry for firearms is​ ____________. A. an oligopoly because there are a few firms that are price takers. B. monopolistically competitive because there are many firms facing the limited entry of new firms. C. monopolistically competitive because firms that produce firearms face a perfectly elastic demand curve. D. monopolistically competitive because there are many firms selling a differentiated product. E. an oligopoly because firms produce differentiated products and are price makers. The industry for furniture is​ ____________. A. an oligopoly because the firms have no market power. B. an oligopoly because firms produce a differentiated product and are price makers. C. monopolistically competitive because there are many firms selling a differentiated product. Your answer is correct. D. an oligopoly because there are a few firms that are price takers. E. monopolistically competitive because there are many firms facing the limited entry of new firms.

C.an oligopoly because there are a few firms that face the limited entry of new firms. C. monopolistically competitive because there are many firms selling a differentiated product. E.an oligopoly because there are only a few firms that engage in strategic behavior. E.an oligopoly because firms produce differentiated products and are price makers. C.monopolistically competitive because there are many firms selling a differentiated product.

When the government taxes a firm that generates external​ costs, the firm will produce A. the same number of units of output as before the tax was imposed to continue maximizing profits. B. either more or fewer units of output than before the tax was imposed depending upon what happens to the profit maximizing level of output. C. more units of output than before the tax was imposed in order to continue maximizing profits. D. fewer units of output than before the tax was imposed in order to continue maximizing profits.

D. fewer units of output than before the tax was imposed in order to continue maximizing profits.

The matrix to the right shows payoffs​ (profits in​ millions) based on the strategies chosen by two firms. If they collude and hold prices at ​$1.25​, then each firm will earn profits of ​$20 million. If firm A cheats on the​ agreement, lowering its​ price, but firm B does​ not, then firm A will get 75 percent of the business and earn profits of ​$32 million and firm B will lose ​$8 million. ​ Similarly, if firm B cheats and firm A does​ not, then firm B will earn ​$32 million and firm A will lose ​$8 million. If both firms cut​ prices, then they will end up with ​$8 million each in profits. Part 2 Which strategy minimizes the maximum potential loss for firm A and for firm​ B? Part 3 The maximin strategy for both firms is to cheat. Part 4 If you were firm​ A, which strategy would you​ choose? Firm A should A. cheat because this maximizes profits of both firms. B. stand by the agreement because this is their​ tit-for-tat strategy. C. cheat because this is their dominant strategy. Your answer is correct. D. stand by the agreement because this is their maximin strategy. E. stand by the agreement because this is their dominant strategy. Part 5 If firm A​ cheats, then firm B will cheat​, and if firm B​ cheats, then firm A will cheat. Part 6 What is the most likely outcome of such a​ game? ​ Explain? A. Firm A and firm B will both stand by their agreement because doing so maximizes combined profits. B. Firm A and firm B will both stand by their agreement because doing so is each​ firm's dominant strategy. C. Firm A will cheat and firm B will stand by the agreement because these are their dominant strategies. D. Firm A will stand by the agreement and firm B will cheat because these are their maximin strategies. E. Firm A and firm B will both cheat because doing so is each​ firm's dominant strategy.

C.cheat because this is their dominant strategy. Cheat,Cheat E.Firm A and firm B will both cheat because doing so is each​ firm's dominant strategy.

To conduct a general equilibrium analysis of a change in consumer preferences away from beef and toward​ chicken, you must consider A. changes in the amount of resources allocated to the production of beef and chicken. B. changes in the equilibrium prices and quantities of beef and chicken. C. changes in the price of resources allocated to the production of beef and chicken. D. All of the above

D. All of the above

Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an​ industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is​ imposed, each company views pollution as being free. Before any tax on pollution is​ imposed, Alpha Chemicals is emitting​ ________ tons of pollution. A. 25 B. 50 C. 75 D. 100

D. 100

​________ is an example of tangible capital. A. Knowledge of how to operate a forklift B. The goodwill a firm has established through charitable giving C. An idea for a new business D. A pet​ store's unsold, unopened bags of dog food

D. A pet​ store's unsold, unopened bags of dog food

The payoff matrix in the figure to the right shows the payoffs for a game of chicken. Part 2 What is​ Ann's dominant​ strategy? Part 3 A. ​Ann's dominant strategy is to not swerve because this is best no matter what Bob does. B. ​Ann's dominant strategy is to swerve because this maximizes the minimum gain that can be earned. C. ​Ann's dominant strategy is to swerve because this is best no matter what Bob does. D. Ann does not have a dominant strategy because what is best depends on what Bob does. Your answer is correct. E. ​Ann's dominant strategy is to swerve because this maximizes the combined payoffs for both players. Part 4 Bob does not have a dominant strategy. Part 5 Which strategy would you play and​ why? You should A. use a maximin strategy by maximizing the minimum gain that can be earned. Your answer is correct. B. use a​ tit-for-tat strategy by minimizing the maximum gain that can be earned. C. use a​ tit-for-tat strategy by selecting a strategy that minimizes the other​ player's payoff D. use a maximin strategy by by responding in kind to your​ opponent's strategy. E. use a​ tit-for-tat strategy by responding in kind to your​ opponent's strategy.

D. Ann does not have a dominant strategy because what is best depends on what Bob does. does not have A. use a maximin strategy by maximizing the minimum gain that can be earned.

There are​ 1,000 families in a neighborhood that is affected by noise pollution from a local factory. The noise level is within legal​ limits, but could be reduced further if the company spent​ $5,000 on technological improvements. The company agrees to make these improvements if the affected families contribute the​ $5,000. A committee starts to collect donations to pay for the improvements. Which of the following is most likely to​ occur? A. The courts will force the firm to spend the​ $5,000 regardless of whether or not the families contribute the money. B. Even if the families raise the​ $5,000, the firm will not reduce its noise pollution because it is within legal limits. C. Because there are relatively few families involved and the individual contribution is so​ small, all families will voluntarily contribute. D. Because each individual contribution is so small and individuals will benefit from the reduction in noise whether they contribute or​ not, most people will not contribute and the firm will not make the improvements.

D. Because each individual contribution is so small and individuals will benefit from the reduction in noise whether they contribute or​ not, most people will not contribute and the firm will not make the improvements.

Question content area Part 1 A duopoly is Part 2 A. An​ illegal, price−fixing cartel. B. a two−firm monopoly. C. an identical pair of perfectly competitive industries. D. a two−firm oligopoly.

D. a two−firm oligopoly.

The feature that distinguishes monopolistic competition from perfect competition is that monopolistically competitive firms are A. large relative to the market. B. able to block the entry of other firms. C. price takers. D. able to differentiate their products.

D. able to differentiate their products.

Instruments that can be used to control overuse of a common resource include A. taxes. B. standards. C. privatizing the resource. D. all of the above

D. all of the above

Price will increase and output will decrease once government makes a firm A. externalize a positive externality. B. internalize a positive externality. C. externalize a negative externality. D. internalize a negative externality.

D. internalize a negative externality.

In the short​ run, this company is​ ________, and in the long​ run, it should expect to​ ________. A. suffering a​ loss; shut down B. breaking​ even; break even C. suffering a​ loss; break even D. making a​ profit; break even

D. making a​ profit; break even

When monopolistically competitive firms earn​ ________ profits, other firms​ ________ the industry in the long run. Part 2 A. ​normal; exit B. positive​ economic; exit C. ​normal; enter D. negative​ economic; exit

D. negative​ economic; exit

A common resource is A. excludable and nonrival in consumption. B. excludable and rival in consumption. C. nonexcludable and nonrival in consumption. D. nonexcludable and rival in consumption.

D. nonexcludable and rival in consumption.

Public goods are A. rival in consumption and their benefits are nonexcludable. B. rival in consumption and their benefits are excludable. C. nonrival in consumption and their benefits are excludable. D. nonrival in consumption and their benefits are nonexcludable.

D. nonrival in consumption and their benefits are nonexcludable.

It has been argued that the following are examples of​ "mixed goods." They are essentially private but partly public. For each​ example, describe the private and public components. Public housing is a private good because​ ___________. A. anyone who wants to live in public housing can obtain it. Public housing is a public good because it is available for free. B. anyone who wants to live in public housing can obtain it. Public housing is a public good because it provides a substantial public benefit by keeping people from living on the streets. C. not all those who desire to live in public housing have the ability to do so. Public housing is a public good because it is provided by the government. D. not all those who desire to live in public housing have the ability to do so. Public housing is a public good because it provides a substantial public benefit when it keeps people from living on the streets. Your answer is correct. Public transportation is a private good because​ ____________. A. there is rivalry as shown by the limited number of seats available. Public transportation is a public good because it is free. B. there is rivalry as shown by the limited number of seats available and it is also excludable if passengers are charged for using the service. Public transportation is a public good because it is a visible asset for people to use. C. there is rivalry as shown by the limited number of seats available and it is also excludable if passengers are charged for using the service. Public transportation is a public good as competing firms would not be able to provide this service effectively and there are also substantial benefits to the public with the reduction of traffic and pollution. Your answer is correct. D. there is rivalry as shown by the limited number of seats available and it is also excludable if passengers are charged for using the service. Public transportation is a public good because it operates on public roads. Trash collection is a private good because​ ____________. A. trash collection is privately managed. Trash collection is a public good because it is a free service. B. it is a service provided to individuals. Trash collection is a public good because service can be refused. C. the service is excludable for those who​ don't pay for it. Trash collection is a public good for the substantial public benefits of cleaner and healthier cities. Your answer is correct. D. trash is protected by privacy. Trash collection is a public good because trash is dumped in landfills. Fire protection is a private good because​ ___________. A. there is rivalry due to the limited resources available for fire protection. Fire protection is a public good because fire stations are public buildings. B. there is rivalry due to the limited resources available for fire protection. Fire protection is a public good because it only protects one house at a time. C. fire protection is only provided to those who pay. Fire protection is a public good because fire stations are public buildings. D. there is rivalry due to the limited resources available for fire protection. Fire protection is a public good because there are substantial safety benefits to the public at large and in most municipalities the service is nonexcludable.

D. not all those who desire to live in public housing have the ability to do so. Public housing is a public good because it provides a substantial public benefit when it keeps people from living on the streets. C. there is rivalry as shown by the limited number of seats available and it is also excludable if passengers are charged for using the service. Public transportation is a public good as competing firms would not be able to provide this service effectively and there are also substantial benefits to the public with the reduction of traffic and pollution. C. the service is excludable for those who​ don't pay for it. Trash collection is a public good for the substantial public benefits of cleaner and healthier cities. D. there is rivalry due to the limited resources available for fire protection. Fire protection is a public good because there are substantial safety benefits to the public at large and in most municipalities the service is nonexcludable.

When it comes to public​ goods, it is important to remember A. the​ free-rider problem is difficult to​ overcome, but the​ drop-in-the-bucket problem is not. B. all goods provided by the government are public goods. C. that government intervention necessarily solves the market failure. D. only one level of output can be realized and consumers are willing to pay different amounts for that level.

D. only one level of output can be realized and consumers are willing to pay different amounts for that level.

​DeBeers' diamond monopoly results from A. economies of scale. B. a government franchise. C. a patent. D. ownership of a scarce factor of production.

D. ownership of a scarce factor of production.

If no one can be excluded from consuming its benefits and there is no rivalry in​ consumption, then the good is a​ ________ good. A. Pareto B. private C. free D. public

D. public

Market failure results in Part 2 A. budget deficits. B. Pareto optimality. C. inflation. D. waste.

D. waste.

You use​ $45,000 of your own money to start an espresso stand. During the first year you earn a​ 10% return on that investment. If the current interest rate is​ 8%, you earn an economic profit of A. −​$900. B. ​ $100. C. ​ $500. D. ​ $900.

D. ​ $900.

Refer to the information provided in the figure at right to answer the question that follows. In the figure are cost curves for​ Dom's Barber​ Shop, a monopolistically competitive firm. If​ Dom's Barber Shop is maximizing​ profit, it is earning a profit of A. ​$0. B. ​$320. C. ​$120. D. ​$80.

D. ​$80.

Firms will​ ________ a monopolistically competitive market until​ ________ are eliminated. A. ​ enter; losses B. ​ exit; long run profits C. ​ exit; short run profits D. ​ enter; profits

D. ​enter; profits

When it comes to​ ________ goods, it is important to remember only one level of output can be realized and consumers are​ ________ for that level. A. ​public; only willing to pay the same amount B. ​private; willing to pay different amounts C. ​private; only willing to pay the same amount D. ​public; willing to pay different amounts

D. ​public; willing to pay different amounts

You agree to lend a friend​ $20,000 for a year at an annual interest rate of​ 45%. At the end of the year your friend must pay you​ ________ in interest. A. $133 B. $750 C. $1,900 D. $9,000

D. $9,000 20000*.45

Antitrust cases against​ ________ resulted in the​ firm(s) being found not guilty of unreasonable conduct under the Sherman Act. A. International Harvester B. United States Steel C. Eastman Kodak D. All of the above are correct.

D. All of the above are correct.

Related to the Economics in Practice on page​ 294: In the​ price-fixing case against the Taiwanese firm AU​ Optronics, the DOJ claimed that the price fixing resulted in​ ________ paying more for products with LCD screens. A. government agencies B. consumers C. businesses D. All of the above are correct.

D. All of the above are correct.

Velma, a book editor for a local publishing​ company, and​ Daphne, an opera singer in a local opera​ company, share a townhouse in Miami. Velma enjoys reading and editing books at​ home, and Daphne enjoys rehearsing her arias at home. Daphne is willing to pay Velma​ $200 per week if she will find another place to read and edit books. Velma offers Daphne​ $240 per week to find someplace else to rehearse. If Daphne has the right to rehearse in her​ home, explain why the townhouse will be free of aria rehearsals. If Velma has the right to read and edit books in her​ home, explain why the townhouse will​ still be free of aria rehearsals. If Velma has the right to silence​, ​____________. A. Daphne will offer $180 and the offer is likely to be accepted because that is the best offer Velma will get. B. she has to learn to enjoy opera music. C. Daphne will offer $240 and the offer is likely to be accepted because Velma values silence at $240. D. Daphne will offer $200 but the offer is likely to be refused because Velma values silence at $240.

D. Daphne will offer $200 but the offer is likely to be refused because Velma values silence at $240.

Three golf courses in the same resort town hire groundskeepers with the same skills. Ocean Oaks pays its workers​ $12 per​ hour, Luxury Links pays​ $11 per​ hour, and Pacific Paradise pays​ $14 per hour. Each golf course hires the​ profit-maximizing number of workers. Is the allocation of labor between these three golf courses​ efficient? Explain why or why not. A. No, since the groundskeepers at these three golf courses apply their labor voluntarily. B. Yes, these three golf courses maximize profits by producing where the MRPL equals the corresponding wage. C. Yes, all three golf courses maximize profits by producing where the MRPL is greater than the corresponding wage. D. No, because not all three golf courses are maximizing their profits.

D. No, because not all three golf courses are maximizing their profits.

A condition in which no change is possible that will make some members of society better off without making some other members of society worse off is called A. general equilibrium. B. partial equilibrium. C. market failure. D. Pareto optimality.

D. Pareto optimality.

________ are generally produced by the government. A. Externalities B. Private goods C. Market failures D. Public goods

D. Public goods

A new technology is developed for producing solar panels that reduces production costs by​ 40%. Which of the following is true​? A. If firms do not adopt this new​ technology, then the economy will remain in general​ equilibrium, because firms will not change their price and output decisions. B. Firms will continue to operate efficiently as long as no firm adopts this new technology. C. For the economy to remain​ efficient, product produced with this new technology must be equitably distributed to all consumers. D. This new technology will affect​ efficiency, and will change the equilibrium price and quantity for this industry.

D. This new technology will affect​ efficiency, and will change the equilibrium price and quantity for this industry.

Explain why the marginal revenue curve facing a competitive firm differs from the marginal revenue curve facing a monopolist. Unlike for perfectly competitive​ firms, whose marginal revenue curves are the same as their individual demand​ curves, a​ monopolist's marginal revenue curve differs from its demand curve because A. a monopoly can sell all the output it wants without having any impact on market price. B. the demand curve for a monopoly has twice the slope of the market demand curve. C. a​ monopoly's demand curve is vertical. D. a monopoly must lower the price on all units to sell one more unit of output. E. a monopoly has no market power.

D. a monopoly must lower the price on all units to sell one more unit of output.

A​ well-maintained house and yard is an example of Part 2 A. logrolling. B. a negative externality. C. a public good. D. a positive externality.

D. a positive externality.

The amount of​ ________ under monopoly equals area GAB. A. social gain B. welfare loss C. producer surplus D. consumer surplus

D. consumer surplus

Bill sells Mary a worthless coin that Bill deviously told Mary​ "belonged to an ancient Persian king and is of enormous value to coin​ collectors". Economists would call this an A. efficient​ exchange, as any type of voluntary exchange promotes efficiency. B. inefficient exchange because there were externalities involved. C. efficient​ exchange, assuming Bill was not intentionally trying to trick Mary. D. inefficient​ exchange, as at least one party used false market information.

D. inefficient​ exchange, as at least one party used false market information.

"Goodwill" is an example of A. a public service industry. B. physical capital. C. financial capital. D. intangible capital.

D. intangible capital.

If Armstrong Cable​ ________, it will incur a loss of​ $1,250. A. charges any price below the profit−maximizing price B. charges a price of​ $16 per subscriber C. shuts down D. is forced to sell the efficient level output

D. is forced to sell the efficient level output

When the interest rate​ ________, the farmer will investment in all four projects. A. is greater than​ 30% B. is less than​ 30% C. is greater than​ 10% D. is less than​ 10%

D. is less than​ 10%

As the inventory of a firm rises A. its social capital decreases. B. there is no change in its capital. C. its intangible capital increases. D. its tangible capital increases.

D. its tangible capital increases.

The demand for Ben​ & Jerry's ice cream will likely be ​ ________ the demand for dessert. A. equally price elastic as B. indeterminate from the given information. C. less price elastic than D. more price elastic than

D. more price elastic than

All of the following industry types have market power except A. monopolistic competition. B. oligopoly. C. monopoly. D. perfect competition.

D. perfect competition.

There is a bill pending before the Kansas State Legislature that would prohibit private companies from selling health insurance and would make the state the single payer of health care bills. Private health insurance companies that have made above normal profits have spent large sums of money trying to​ ________. This is an example of rent−seeking behavior. A. fund the state for its single−payer system B. pass an even more restrictive bill C. get this bill made into law D. prevent this bill from being passed into law

D. prevent this bill from being passed into law

For a purely competitive ​firm, A. price is equal to marginal revenue because the firm must lower the price for each additional unit it wants to sell. B. marginal revenue is less than the price because the firm can sell as much output as it chooses at the market price. C. marginal revenue is less than the price because the firm must lower the price for each additional unit it wants to sell. D. price is equal to marginal revenue because the firm can sell as much output as it chooses at the

D. price is equal to marginal revenue because the firm can sell as much output as it chooses at the

If at the current output of X the PX​ < MCX​, then society gains by A. producing more X. B. lowering the price of X. C. increasing the cost of producing X. D. producing less X.

D. producing less X.

The​ ________ level of output for this monopolist is 22 units of output. A. break−even B. loss−minimizing C. shutdown D. profit−maximizing

D. profit−maximizing

In imperfectly competitive​ markets, A. some competition may exist but only in other ways and not on price. B. there is no competition in the markets. C. some competition may exist but only on price and not in other ways. D. some competition may exist in the markets.

D. some competition may exist in the markets.

There are two sectors in the​ economy, X and Y​, and both are in​ long-run, zero-profit equilibrium at the intersections of S0 and D0. Assume consumer preference changes toward X and away from Y. Ceteris paribus​, the likely change in capital flow in sector X will cause the​ industry's short-run​ ________ curve to shift to the​ ________. A. supply; left B. demand; right C. demand; left D. supply; right

D. supply; right

The demand for shoes will likely be price​ ________ while the demand for Sketchers Go Walk walking shoes will likely be price​ ________. A. elastic; elastic B. inelastic; inelastic C. elastic; inelastic D. ​inelastic; elastic

D. ​inelastic; elastic

The oligopolistic model in which firms produce exactly the same results as would exist if a monopolist controlled the entire industry is called the​ ________ model. Question content area bottom Part 1 A. Cournot B. price leadership C. maximin strategy D. collusion

D.collusion

The Economics in Practice in this chapter describes the adjustment of the corn and wheat market in the United States to federal mandate requiring refiners to use​ corn-based ethanol in the production of fuel. Up until January​ 2012, refiners were given a subsidy of​ $0.45 for every gallon of ethanol they blended into their fuel. This subsidy drove up the prices of other agricultural products such as wheat and substantially raised the value of farmland. Assuming the subsidy was still in​ place, what would happen to the prices of these other agricultural goods and to the value of farmland if oil prices were to fall extensively at the same​ time? Trace these changes in the economy using supply and demand curves. Assume a given ethanol production subsidy. Assume for the purposes of this exercise that oil and ethanol are substitutes. Show how the market for corn would be affected​ (given the ethanol production​ subsidy) if oil prices were to fall. ​1.) Using the line drawing tool​, draw either a new market supply curve ​(S2​) or new market demand curve ​(D2​). Properly label your curve. ​2.) Using the point drawing tool​, indicate the new market equilibrium​ (Equilibrium). Properly label your point. ​Note: Carefully follow the instructions above and only draw the required objects. At the same​ time, if oil prices fall​, then the demand for land will ____________, _________ land prices. Further, if oil prices fall​, then the wheat ____________ curve will shift to the ____________. This will ____________ wheat prices.

Demand shifts to the right as this would increase the equilibrium price of corn. decrease; decreasing supply; right decrease; wheat prices

Which of the following are​ capital, and which are​ not? Lifeguard training and certification from the Red Cross A. Not a form of capital B. Tangible capital C. Social capital D. Venture capital E. Human capital The Ben and​ Jerry's Waterbury, Vermont ice cream factory A. Not a form of capital B. Physical capital C. Social capital D. Human capital E. Intangible capital The Texas Giant roller coaster at Six Flags Over Texas A. Human capital B. Infrastructure C. Intangible capital D. Physical capital E. Not a form of capital An individual retirement account​ (IRA) at Wells Fargo Bank A. Human capital B. Not a form of capital C. Physical capital D. Intangible capital E. Infrastructure The Smithsonian National Air and Space Museum A. Social capital B. Intangible capital C. Tangible capital D. Not a form of capital E. Human capital 40 shares of Apple stock A. Human capital B. Intangible capital C. Not a form of capital D. Tangible capital E. Social capital An​ all-terrain vehicle used by park rangers at Yellowstone National Park A. Physical capital B. Intangible capital C. Social capital D. Not a form of capital E. Human capital Cans of paint at Home Depot A. Human capital B. Social capital C. Intangible capital D. Tangible capital E. Not a form of capital A roll of 20 Kennedy half dollar coins A. Human capital B. Physical capital C. Intangible capital D. Infrastructure E. Not a form of capital Wrigley​ Field, home of the Chicago Cubs A. Tangible capital B. Intangible capital C. Not a form of capital D. Social capital E. Human capital

E. Human capital B. Physical capital D. Physical capital B. Not a form of capital A. Social capital C. Not a form of capital C. Social capital E. Not a form of capital E. Not a form of capital A. Tangible capital

Which of the following markets are likely to be perfectly​ contestable? Explain your answers. The market for coal mining is likely A. not perfectly contestable because the industry has no price leadership. B. not perfectly contestable due to no economies of scale. C. perfectly contestable because the industry has a dominant strategy. D. perfectly contestable because there are virtually no entry barriers to new firms entering. E. not perfectly contestable because the market requires a high investment of land and capital. Your answer is correct. The market for insurance is likely A. not perfectly contestable because only a few firms have access to a key input. B. not perfectly contestable because only a few firms have the technology to produce the output. C. perfectly contestable because the industry has a dominant strategy. D. perfectly contestable because it is easy to move this service to a new location. Your answer is correct. E. not perfectly contestable because the industry has no price leadership. The market for wind farms is likely A. not perfectly contestable because the government limits entry with regulations. B. not perfectly contestable because only existing firms have access to a key input. C. perfectly contestable because the industry is an oligopoly. D. perfectly contestable because the industry has a low concentration ratio. E. not perfectly contestable because the market requires a high investment of land and capital. Your answer is correct. The market for landscaping is likely A. not perfectly contestable due to economies of scale. B. not perfectly contestable because the government limits entry with regulations. C. perfectly contestable because there are low entry barriers. Your answer is correct. D. not perfectly contestable because only existing firms have access to a key input. E. perfectly contestable because the industry is an oligopoly. The market for advertising is likely A. not perfectly contestable because only a few firms have the technology to produce the output. B. not perfectly contestable due to high fixed costs. C. not perfectly contestable because only a few firms have access to key inputs. D. perfectly contestable because it is easy to move this service to a new location. Your answer is correct. E. perfectly contestable because the industry has a dominant strat

E.not perfectly contestable because the market requires a high investment of land and capital. D.perfectly contestable because it is easy to move this service to a new location. E.not perfectly contestable because the market requires a high investment of land and capital. C.perfectly contestable because there are low entry barriers. D.perfectly contestable because it is easy to move this service to a new location.

Public goods are goods that we all agree are useful and therefore are all willing to pay for. This implies that there is no efficiency problem in the production of public goods. True False

False

Refer to the information provided in the table at right to answer the question that follows. Firm​ A's dominant strategy is to not advertise. Part 2 True False

False

Ronald Coase argued that property rights should never be assigned to the party that is generating a negative externality. True False

False

The airline industry is a good example of a monopolistically competitive industry. True False

False

The long−run equilibrium for a monopolistically competitive firm is efficient because its produces where MR​ = MC. True False

False

The more significant are economies of scale in an​ industry, the more product variety will be observed. True False

False

The board of directors of the Estelar Company in Brazil was presented with the following list of investment projects for implementation in​ 2016: Using the graph on the​ right, sketch total investment as a function of the interest rate ​(with the interest rate on the​ y-axis). ​1.) Using the line drawing tool​, graph the investment function. The investment function will be comprised of six line segments ​(D1​, D2​, D3​, D4​, D5​, and D6​). Draw each of the line​ segments, labeling each with the provided labels. ​Note: Carefully follow the instructions above and only draw the required objects. Currently, the interest rate in Brazil is 13.50 percent. You would recommend that Estelar should invest ​$_____ million. ​(Enter your response as an integer.​)

I don't know how to explain the graph other than if you know, then you know. 14 million To find how much they should invest, add up the total cost that has a rate of return higher than the interest rate.

Society is made up of two​ individuals, Bert and​ Ernie, whose demands for public good A are given in the figure on the right. ​Bert's demand​ is: QBA=50−2.0PA ​Ernie's demand​ is: QEA=50−1.0PA Assume that the public good can be produced at a constant marginal cost of ​$4. The optimal level of output is 4747 units. ​(Round your response to the nearest integer.​) You would charge Bert ​$22 per unit and Ernie ​$33 per unit. ​(Round your responses to the nearest integer.​)

I don't know lol. 47 2,3

For the​ following, what is likely to happen in labor and capital markets using the model of the whole economy that we developed over the course of the previous​ chapters? After several years of a sluggish economy, home values have begun to rapidly rise in response to a large increase in demand in the housing market. Capital supply​ (savings) will likely ___________. This will ___________ interest rates and ___________ capital demand​ (investment). Labor demand will ultimately___________.

Increase; decrease; increase; increase

Assume that you are in the business of providing medical malpractice insurance. You have analyzed the market​ carefully, and you know that at a price of ​$120,000 per​ year, you will sell 400 insurance policies per year. In​ addition, you know that at any price above ​$120,000​, no one will buy your insurance policies because the government provides​ equal-quality policies to anyone who wants one at ​$120,000. You also know that for every ​$10,000 you lower your​ price, you will be able to sell an additional 100 units. For​ example, at a price of ​$110,000​, you can sell 500 ​policies; at a price of ​$100,000​, you can sell 600 ​policies; and so on. Sketch the demand curve that your firm faces. Then sketch the effective marginal revenue curve that your firm faces. Hint​: Your marginal revenue curve will start off as a horizontal line and then will become​ downward-sloping, beginning at the green point indicated on the graph. ​1.) Using the multipoint curved line drawing tool​, draw the demand curve. Label your curve​ 'D'. ​2.) Using the multipoint curved line drawing tool​, draw the marginal revenue curve. Label your curve​ 'MR'. ​Note: Carefully follow the instructions above and only draw the required objects. If the marginal cost of providing an insurance policy is​ $110,000, you will sell _________ policies and charge a price of ​$_________. ​(Enter your responses as integers.​) If the marginal cost of providing an insurance policy is ​$90,000​, you will sell _________ policies and charge a price of ​$_________. ​(Enter your responses as integers.​)

Just be careful making the graph. Both lines should start horizontally at P = 120. The D curve should decrease by $10,000 for every 100 units it decreases. The MR curve should be horizontal at P = 120 until the green point then will make a vertical line down to the green point. from there just set the last point at (8,000,0) or half the x-intercept of curve D. 400; $120000 400; $120000

Between 1996 and​ 2006, technological advances lowered the cost of producing cellular phones. The graph at right shows marginal cost and​ long-run average cost curves for 1996 and 2006. Using the line drawing​ tool, draw a horizontal line to indicate the 2006 price of cellular phones assuming that this is a competitive industry. Properly label this line. ​Note: Carefully follow the instructions above and only draw the required object.

Literally draw a horizontal line where MR=LRAC at the year asked.

Assume that the craft beer industry in Hawaii in​ 2014 was competitively structured and in​ long-run competitive​ equilibrium; firms were earning a normal rate of return. In​ 2015, a young entrepreneur quietly bought up all the breweries​ and began operations as a monopoly called​ "Tropical Suds." To operate​ efficiently, Tropical Suds hired a management consulting​ firm, which estimated​ long-run costs and demand. The average cost ​(AC​) curve is found to be​ U-shaped while the demand ​(D​) curve and marginal revenue ​(MR​) curve are found to be downward sloping. ​(MC = ΣiMCi=the horizontal sum of the marginal cost curves of the individual​ branches/firms.) In 2014 when the market was competitive the equilibrium output ​(QC​) was found at the intersection of _________ and the equilibrium price (PC​)was found where _________. In 2015 when the market was a monopoly the equilibrium output (QM​) was found at the intersection of _________ and the equilibrium price (PM​) was found _________. The​ monopoly's economic profit after the consolidation is the area of a rectangle with a height of _________ at an output of QM​, and a width of _________ .

MC and D; MC=D MR and MC; along D at an output of QM PM-AC; QM - 0

For a monopoly the​ profit-maximizing output ​(QM​) is found at the intersection of _________ and the​ profit-maximizing price (PM​) is found _________. The​ monopoly's economic​ profit/loss is the area of a rectangle with a height of ___________ at an output of QM​, and a width of ___________. That​ is, the​ profit-maximizing quantity is _____ units and the​ profit-maximizing price is $_______ (Enter your responses as ​integers.) Further, revenue is $_________ the total cost of production is $__________, and the firm therefore has profit of $_________

MR and MC; along D at an output of QM PM-AC; QM-0 100; $250 $25000; $37500; -$12500

Suppose a monopoly faces downward sloping demand​ (D) and marginal revenue​ (MR) curves along with horizontal marginal cost​ (MC) and average total cost​ (ATC) curves in an industry with no economies or diseconomies of scale and no fixed costs. In the short and long​ run, MC=ATC. The monopoly output ​(QM​) is found on the graph where _________ and monopoly price (PM​) is found ______________. Monopoly profits can be represented on the graph as a rectangle with a height equal to the difference between ______________ and a width equal to the difference between ____________. The​ "excess burden" or​ "welfare costs" of the monopoly can be represented on the graph as a triangle with a height equal to the difference between __________________ and a base equal to the difference between ______________. The monopoly creates excess burden because A. it produces where price equals marginal cost. B. it produces an inefficiently large amount of output. C. it charges a price that is too low. D. it produces where price is above marginal cost. E. it produces where marginal cost is positive.

MR=MC; on the demand curve at output QM PM and the ATC; QM and the y-axis PM and the MC; where MC=D and QM D. it produces where price is above marginal cost.

The following diagram shows the cost structure of a monopoly firm as well as market demand. ​1.) Using the point drawing tool​, identify the​ profit-maximizing output level and price​ (Profit-maximizing). Attach the appropriate label. ​2.) Using the rectangle drawing tool​, shade in total profit or loss​ (Profit or​ Loss). Attach the appropriate provided label. ​Note: Carefully follow the instructions above and only draw the required objects. That​ is, the​ profit-maximizing quantity is _____ units and the​ profit-maximizing price is $_________. ​Further, revenue is $__________, the total cost of production is $___________, and the firm therefore has profit of $___________.

Make a box where MR = ATC for a monopolistic firm and make sure the 2 for the corners are touching the MC curve and the D curve. 125; $275 $34,375; $40,625; -$6250

The following diagram illustrates the demand curve facing a monopoly in an industry with no economies or diseconomies of scale and no fixed costs. In the short and long​ run, MC=ATC. ​1.) Using the point drawing tool​, indicate the monopoly output and monopoly price​ (Monopoly) in the figure to the right. Attach the appropriate provided label. ​2.) Using the rectangle drawing tool​, shade in monopoly profits​ (Profit). Attach the appropriate provided label. ​3.) Using the triangle drawing tool​, shade in the​ "excess burden" or​ "welfare costs" of the monopoly​ (Excess burden). Attach the appropriate provided label. ​Note: Carefully follow the instructions above and only draw the required objects. The monopoly creates excess burden because A. it produces where marginal cost is positive. B. it produces where price is above marginal cost. C. it produces an inefficiently large amount of output. D. it charges a price that is too low. E. it produces where price equals marginal cost.

Place a point where MR = MC for a monopolistic firm. The profit box is the box it creates to the left of the point and the excess burden triangle is the triangle it creates to the right of the point. B. it produces where price is above marginal cost.

The following diagram illustrates the demand curve facing a monopoly in an industry with no economies or diseconomies of scale and no fixed costs. In the short and long​ run, MC=ATC. ​1.) Using the point drawing tool​, indicate the monopoly output and monopoly price​ (Monopoly) in the figure to the right. Attach the appropriate provided label. ​2.) Using the rectangle drawing tool​, shade in monopoly profits​ (Profit). Attach the appropriate provided label. ​3.) Using the triangle drawing tool​, shade in the​ "excess burden" or​ "welfare costs" of the monopoly​ (Excess burden). Attach the appropriate provided label. Note: Carefully follow the instructions above and only draw the required objects. The monopoly creates excess burden because A. it produces where price equals marginal cost. B. it produces where marginal cost is positive. C. it produces where price is above marginal cost. D. it charges a price that is too low. E. it produces an inefficiently large amount of output.

Plot the point on curve D where MR=MC. The square it creates to the left of the point is the profit and the triangle it creates to the right of the point is excess burden, You'll know what I mean since it literally creates the shapes for you if you plot the Monopoly point properly. C. it produces where price is above marginal cost.

Market failures may be corrected through government intervention. True False

True

Assume that you are in the business of providing medical malpractice insurance. You have analyzed the market​ carefully, and you know that at a price of ​$120,000 per​ year, you will sell 400 insurance policies per year. In​ addition, you know that at any price above ​$120,000​, no one will buy your insurance policies because the government provides​ equal-quality policies to anyone who wants one at ​$120,000. You also know that for every ​$10,000 you lower your​ price, you will be able to sell an additional 100 units. For​ example, at a price of ​$110,000​, you can sell 500 ​policies; at a price of ​$100,000​, you can sell 600 ​policies; and so on. Part 2 Fill in the table below that describes the demand for policies at a variety if price levels. Your marginal revenue curve will start off as a horizontal line and then will become​ downward-sloping, beginning at (400, 80,000). At output levels beyond this point the marginal revenue curve will have twice the slope as the demand curve and will intersect the​ x-axis at a quantity of 800 policies per year. Part 3 If the marginal cost of providing an insurance policy is​ $110,000, you will sell 400 policies and charge a price of ​$120000. ​(Enter your responses as integers.​) Part 4 If the marginal cost of providing an insurance policy is ​$90,000​, you will sell 400 policies and charge a price of ​$120000. ​(Enter your responses as integers.​)

Table: 1600,1400,1200,1000,800,600,400 800 policies per year 400 , 120,000$ 400, 120,000$

The following table shows a single​ firm's investment. Fill in the missing values. ​(Enter your responses as integers.​) When capital assets wear out physically and become​ obsolete, it is called ___________.

To find investment add up all values except stocks and bonds and savings and checking's as these do not contribute to investment. To find net investment, minus the value of investment by the value of deprecation. deprecation.

A risk premium is the added return an investor needs to compensate for the risks of future payments. True False

True

Advertising can create a barrier to entry of new firms into an industry and therefore reduce competition. True False

True

An oligopoly with a dominant price leader will produce a level of output between that which would prevail under competition and that which a monopolist would choose in the same industry. Part 2 True False

True

Both economists and mathematicians have shown there exists at least one set of prices that will clear all markets in a system​ simultaneously, known as equilibrium price. True False

True

Even when faced with a relatively powerful​ seller, some buyers can still exert bargaining power. Part 2 True Your answer is correct. False

True

Farmers lobbying the government for agricultural price supports are engaging in​ rent-seeking behavior. True False

True

Government involvement in a market may generate more inefficiency than it cures. True False

True

Horizontal differentiation makes products better for some consumers and worse for others. True False

True

If a common area is turned into a private​ resource, the owner will have incentives for using that resource efficiently. True False

True

If a monopolist is able to practice perfect price​ discrimination, there will be no consumer surplus. True False

True

In a monopolistically competitive​ industry, good product substitutes are available whereas in a monopoly they are not available. True False

True

Market failure occurs when resources are misallocated. True False

True

The board of directors of the Estelar Company in Brazil was presented with the following list of investment projects for implementation in​ 2016: Consider the graph of total investment as a function of the interest rate ​(with the interest rate on the​ y-axis). The investment function will be comprised of six line segments ​(D1​, D2​, D3​, D4​, D5​, and D6​). Using information from the table​ above, the line segments will each be _________. Determine the total investment level for each interest rate range where these line segments would be located by completing the table​ below: ​Currently, the interest rate in Brazil is 11.50 percent. You would recommend that Estelar should invest ​$_____ million.

Vertical; 51

For the​ following, what is likely to happen in labor and capital markets using the model of the whole economy that we developed over the course of the previous​ chapters? As the baby boomers age, the demand for medical care is rapidly increasing. Health care costs, including the cost of prescription drugs, are also significantly increasing. At the same time, the health care industry is experiencing rapid

decrease;increase;decrease;decrease

The table below shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its output that it expects it can sell at a fixed price of ​$7 per unit. Part 2 Advertising Expenditures​ (Millions) Quantity Sold At P=​$7​/In Million Units ​$1.00 10.00 ​$1.40 10.50 ​$1.80 10.70 ​$2.20 10.80 ​$2.60 10.85 Part 3 In economic​ terms, why might the relationship between advertising and sales look the way it​ does? Part 4 The marginal effect of advertising is decreasing due to diminishing marginal returns. Part 5 Assume that the marginal cost of producing this product​ (not including the advertising​ costs) is a constant ​$5 per unit. How much advertising should this firm be​ doing? This firm should spend ​$1.801.80 million on advertising. ​(Enter your response rounded to two decimal​ places.) Part 6 What economic principle are you using to make this​ decision? Set advertising such that A. marginal benefit from advertising is greater than the marginal cost of advertising. B. advertising costs are minimized. C. the total cost of advertising equals​ advertising's marginal cost. D. marginal benefit from advertising equals the marginal cost of advertising. Your answer is correct. E. sales due to advertising are maximized.

decreasing, diminishing marginal returns 1.80 D. marginal benefit from advertising equals the marginal cost of advertising.

For the​ following, what is likely to happen in labor and capital markets using the model of the whole economy that we developed over the course of the previous​ chapters? After several years of a sluggish economy, home values have begun to rapidly rise in response to a large increase in demand in the housing market. Capital supply​ (savings) will likely __________. This will __________ interest rates and __________ capital demand (investment). Labor demand will ultimately __________.

increase; decrease; increase; increase

For a​ monopolist, if total revenue increases as output​ decreases, then marginal revenue is A. equal to price. B. zero. C. positive. D. negative.

negative

If you have traveled to other​ countries, you may have​ first-hand knowledge about​ McDonald's menu items that are available only in foreign​ markets, but​ McDonald's menus also contain regional variations in the United States. A few of these regional menu offerings include breakfast platters with Spam and rice in​ Hawaii, the McLobster sandwich in​ Maine, a crab cake sandwich in parts of the​ Mid-Atlantic, and biscuits and gravy in the deep south. In addition to these regional​ items, McDonald's also offers some menu items on a​ limited-time basis, such as the McRib​ sandwich, the Cherry Berry​ Chiller, and the Angus Chipotle BBQ Burger. ​McDonald's offers menu items that are​ region-specific because they want to capitalize on differing tastes in different parts of the country . Part 2 ​McDonald's also offers menu items that are available only for a limited time because it allows them to better differentiate themselves from their competitors.

want to capitalize on differing tastes in different parts of the country. it allows them to better differentiate themselves from their competitors.

If you have travelled to other​ countries, you may have​ first-hand knowledge about​ McDonald's menu items that are available only in foreign​ markets, but​ McDonald's menus also contain regional variations in the United States. A few of these regional menu offerings include breakfast platters with Spam and rice in​ Hawaii, the McLobster sandwich in​ Maine, a crab cake sandwich in parts of the​ Mid-Atlantic, and biscuits and gravy in the deep south. In addition to these regional​ items, McDonald's also offers some menu items on a​ limited-time basis, such as the McRib​ sandwich, the Cherry Berry​ Chiller, and the Angus Chipotle BBQ Burger. ​McDonald's offers menu items that are​ region-specific because they __________________________________________________________________. McDonald's also offers menu items that are available only for a limited time because ________________________________________________________.

want to capitalize on differing tastes in different parts of the country. it may attract new customers.

You are asked to lend a friend​ $20,000 for a year. At the end of the year your friend agrees to pay you​ $21,000. The interest rate on this loan is A. ​ 4.50% B. ​ 5.00%. C. ​ 5.50%. D. indeterminate from this information.

​ 5.00%.

Related to the Economics in Practice on page​ 320: A successful celebrity endorsement of a product will likely shift the demand curve for the product to the​ ________, resulting in​ ________ in the equilibrium price of the item. A. ​left; a decrease B. ​right; a decrease C. ​right; an increase Your answer is correct. D. ​left; an increase

​C. right; an increase

Refer to the information provided in the table at right to answer the question that follows. The result of this game is known as a Part 2 A. ​tit-for-tat outcome. B. ​prisoner's dilemma. Your answer is correct. C. repeated strategy. D. collusive outcome.

​prisoner's dilemma.