Econ 2000 Final

10) The combined market share of the top four firms in a monopolistically competitive industry will typically be in the range of A) Zero to 2 percent. B) Zero to 5 percent. C) 20 to 40 percent. D) 70 to 100 percent.

20-40%

22) Income is measured as A) A flow only. B) A stock only. C) Both a flow and a stock. D) Neither a flow nor a stock.

A flow only

What is a relevant market?

A market in which a particular product or service is sold

In the long run a mono. competitive firm will produce less than its minumum ____________

ATC rate

We call ologopolists with an explicit, formal agreement to fix prices and output shares in a particular market what?

Cartel

In monopolistic competition, a firm's demand curve is tangent to the ATC curve in the long run because A) Barriers to entry are high. B) Entry eliminates economic profit, and exit eliminates losses. C) Advertising is ineffective in differentiating the product. D) Producers are price takers.

Entry eliminates compettion, exit prevents losses

Why do we assign $ values to pollution?

Estimating the value of waste pollution helps to evaluate the cost-benifit of such regulations. EPA says humans = $7.6mil

In terms of the world as a whole, imports must equal exports because A) The United Nations requires it. B) It is part of international law. C) Most countries, other than the United States, have a balanced trade situation. D) Every good exported by one country becomes an import for another country.

Every good exported by one country equals a good imported by another country

When a country engages in international trade, its consumption possibilities always ___________ its production possibilites.

Exceeds

7) In the long run, an oligopolist is most likely to A) Experience economic profits when sufficient barriers to entry are present. B) Experience zero economic profits because barriers to entry do not exist in the long run. C) Produce at the most technically efficient output level due to long-run competition. D) Face a straight demand curve.

Expierience economic profits when sufficient barriers to entry are present

What is trade balance?

Exports - Imports

What are the caracteristics to an oligopoly?

Few firms, high barriers to entry, substantial market power, specialized or differentiated products

What does the comparitive advantage theory state?

That countries should specialize in producing goods that they have comparitive advatage in

What does the Lorenz curve say

The cumulative size distribution of income which contrasts complete equality with the actual distribution of income

2) When firms are interdependent, A) One firm can ignore other companies in the market when making decisions. B) The profit of one firm depends on how its rivals respond to its strategic decisions. C) They can act independently of one another. D) Then the market is perfectly competitive.

The profit of one firm depends on how its rivals respong to its strategic decisions

4) The concentration ratio measures the A) Number of plants owned by an oligopoly. B) Percentage of total profits made by a firm in a specific market. C) Proportion of total output produced by the largest firms in a specific market. D) Relative size of a firm compared to other industries.

The proportion of total output produced by the largest firms in a specific market

12) Firms in a monopolistically competitive market will A) Produce efficiently. B) Make economic profits in the long run. C) Use the profit-maximizing rule MC = MR. D) Produce at the minimum of ATC.

Use profit maximizing rule MC=MR

Incentives to become more green?

User fees Green taxes Pollution fines

A tax elasticity of supply equal to zero indicates that A) Employers will not hire any workers if tax rates increase. B) Employers will hire more workers if tax rates increase. C) Workers will not cut back on the number of hours worked if tax rates increase. D) Workers will not work at all if tax rates increase.

Workers will not cut back on the number of hours worked if tax rates increase

What percentage of pollution is avoidable?

95%

Oligopoly concentration ratio?

>60%

Assume the marginal tax rate is 12 percent for the first $40,000 of income, 28 percent for income between $40,000 and $100,000, and 30 percent for any income over $100,000. If Sarah has taxable income equal to $120,000 for the year, what is her tax bill? A) $27,600. B) $33,600. C) $34,000. D) $36,000.

$27,600

t/f. When a country engages in international trade, its consumption possibilities always exceed its production possibilities

True

17) If the tax on gasoline is increased to provide incentives to curb air pollution, then the tax serves as A) A user fee. B) A command-and-control standard. C) A pollution fine. D) An emission charge.

A user fee

How do you solve the inefficiency in the market where externalities occur?

Alter market incintives, internalize externalities, discurage pollution bypass market incentives with regulations

How does the government redistribute market incomes?

By levying taxes on the rich and prividing transfer payments to the poor

How does progressive tax reduce inequality?

By making the after tax distribution of income more equal than the before tax distribution

When two countries dont trade, what is it called?j

Closed economies

Why do people trade?

Comparitive advantage and economies of scale?

If the area between the diagonal line of absolute equality and the Lorenz curve is greater for the United States than for Japan, we can conclude that the A) Distribution of income in Japan is closer to being equal than in the United States. B) Distribution of income in Japan is as equal as in the United States. C) Distribution of income in Japan is less equal than in the United States. D) Relative distributions of income in the two countries are the same.

Distribution of income in japan is closer to being equal than in the United States

What is a demand curve for a monopolistic competition?

Downward, no kinks

The ratio of the orange are to the area under the absolute equality curve is called the ______ _________.

Gini Coefeccient

9) In monopolistic competition, a firm A) Has no market power. B) Captures significant economies of scale. C) Has a downward-sloping demand curve. D) Has a standardized product that all firms produce

Has a downward sloping demand curve

Goods and services purchased from international sources are A) Exports. B) Imports. C) Net exports. D) Net imports.

Imports

What happens when firms enter a monopolistic competitive market?

Industry cost curves shift right, puching down the market avg price The demand curves facing individual firms shifts left (eliminate economic profits)

How would imported sugar affect the wage of sugar growers?

Instead of importing sugar from foreign countries, foreign workers will migrate to US, flood the job market, and lower existing wages.

What is the game theory?

Is to use mathematical models to analyze the strategies of players who maximize their payoff

A country has a comparative advantage in a good if A) It can produce more of the good than another country. B) It can produce a good at a lower opportunity cost relative to another country. C) It can specialize only in two goods. D) It always has an absolute advantage in the production of the good.

It can produce a good at a lower oppurtunity cost relative to another country

What is a good thing about a trade deficit?

It reflects that the economy is growing, people in their home country are able to buy things from the rest of the world more than the rest of the world is able to buy thing from them

Name the cahracteristics of a perfect competition

Large amount of firms, no barriers to entry, no market power, standardized products

A graphic illustration of the cumulative size distribution of income is known as the A) Size distribution of income. B) Okun curve. C) Lorenz curve. D) Gini coefficient

Lorenz curve

8) Which of the following characterizes monopolistic competition? A) Many interdependent firms sell a homogeneous product. B) A few firms produce a particular type of product. C) Many firms produce a particular type of product, but each maintains some independent control over its own price. D) A few firms produce all of the market supply of a good.

Many firms produce a particular type of product but each maintains some in control over its own price

Name the characteristics of monopolistic competition

Many firms, low barriers to entry, some market power, differentiated products

6) The demand curve will be kinked if rival oligopolists A) Match price increases but not price reductions. B) Match price reductions but not price increases. C) Match both price increase and price reductions. D) Do not match price changes at all.

Match price reductions but not increases

IF the pollution costs are external, the firm will produce __________ of a polluting good than the socially optimal level.

More

The monopolistic competitve firms tend to engage in __________________________.

Non-price competition

3) Which market structure is characterized by a few interdependent firms? A) Monopoly. B) Perfect competition. C) Monopolist competition. D) Oligopoly.

Oligopoly

What are the charecteristics of a monopoly?

One firm, high barrier to entry, substantial market power, unique products

15) External costs occur because A) Private costs do not reflect the full costs to society. B) Government failure increases costs for the firm. C) All costs are absorbed by the firm. D) Firms make a choice other than the most cost-efficient production method.

Private costs do not reflect the full costs to society

If the percentage of income paid in taxes increases as income rises, then the tax system is A) Regressive. B) Progressive. C) Marginal. D) Nominal

Progressive

18) Tradable pollution permits, when compared to command-and-control options, tend to A) Provide the same amount of pollution abatement at a higher cost. B) Provide the same amount of pollution abatement at a lower cost. C) Provide the same amount of pollution abatement at the same cost. D) Be inefficient.

Provide the same amount of pollution abatement at a lower cost

16) A completely successful emission charge would A) Shift the private MC curve until the curve intersects with price at zero output and pollution is completely eliminated. B) Shift the private MC curve to the same position as the social MC curve. C) Shift the social MC curve to the same position as the private MC curve. D) Not shift either the private or social MC curve.

Shift the private MC curve to the same position as the social MC curve

11) The main difference between perfect competition and monopolistic competition is A) The degree of product differentiation. B) The long-run economic profits that are expected. C) The number of firms in the market. D) The ease of entry and exit.

The degree of product differentiation

What is measured with the factor content analysis?

The measure of effect of trade on income distribution

An industrys market structure refers to?

The number and size of firms in the industry

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because A) The opportunity costs for both countries are the same. B) One country has an absolute advantage in the production of both goods, thus providing that country with no incentive for trade. C) One country has a comparative advantage in the production of both goods, thus providing that country with no incentive for trade. D) An intersection of the two lines is not possible, and therefore a trade equilibrium is not possible

The oppurtunity cost for both countries is the same

If the US imports a good from the rest of the world, what does it imply about the relative oppurtunity cost of the good in the US vs other countries?

The oppurtunity cost of product production must be higher in the US than the rest of the world

5) A nationwide concentration ratio is likely to understate market power when A) Firms sell nationally. B) The true markets are local and small. C) There is extensive foreign competition. D) A market is perfectly contestable.

The true markets are local and small

What is the principal advantage of pollution permits?

Their incentive to minimize the cost of pollution control

14) Which of the following is true about a monopolistically competitive industry? A) Marginal cost pricing occurs. B) There is excess capacity. C) Resources are allocated efficiently. D) It produces at the minimum of ATC.

There is excess capacity

T/F. If the pollution costs are external, the firm will produce too much of a polluting good

True

In the short run where do monopolistic compeititve firms produce?

Where MR=MC, determine the price based on the demand curve

When firms enter a monopolisitc competitive market, the deman curves facing the individual firms shifts ___________

to the left