ECON 12-17

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit the marginal revenue for the 10th unit is:

$20

To be called an oligopoly an industry must have:

A small number of interdependent firms

When perfect competition prevails which characteristic of firms are we likely to observe?

All firms are price takers

Which example illustrates and environmental policy based on tradable emission permits

Allowing companies to buy and sell the right to certain level of emissions

A perfectly competitive industry is said to be efficient because:

Average total cost of production of the industry's output is minimized in the long run

In the classic prisoners' dilemma with two accomplices in crime, the dominant strategy for each individual is to:

Confess

Which scenario is MOST likely to cause firms to exit a perfectly competitive industry

Consumer income falls

Diamond rings are relatively scarce because:

Diamond producers limit the quantity supplied to the market

A strategy is the same regardless of the action of the other player in a game, is a ____ strategy

Dominant

The purpose of the trusts established in the United States in the late 1800s was to:

Engage in monopoly pricing

Which is not an example of a competitive market?

Firms have some degree of control over prices

In which situation does over collusion take place?

Firms in an industry agree openly on price and output and they jointly make other decisions aimed at achieving monopoly profits

The marginal social benefit recieved from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation

Firms in the market produce the socially optimal level of pollution

If a perfectly competitive firm is producing a quantity where P> MC then the firm can increase profit by

Increasing production

The GoSports Company is a profit-maximizing firm with a monopoly in the production of school teams pennants. The firm sells its pennants for $10 each. We can conclude that GoSports is producing a level of output at which:

Marginal cost equals marginal benefit

____ occurs if Coke hires Lebron James to make commercial and Pepsi follows by hiring Peyton Manning for its commercial

Nonprice competition

If drivers decide to make phone call without considering the costs imposed on others, the:

Number of phone calls made while driving will be more than the socially optimal quantity

If there are two gas stations in a very small town, then the gas station business there is probably best characterized as:

Oligopolistic

Two players in a game both have an incentive to cheat no matter what the other player does. Furhtermore, if both players cheat in this manner both players will be worse off. This is a:

Prisoners' Dilemma

According to the Coase theorem when negative externalities are present a market will:

Reach an efficient solution if transaction costs are low and property rights are well defined

Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment

The Coase theorem

Perfect competition is characterized by

The inability of any one firm to influence price

If the price is below average total cost then in the short run a perfectly competitive firm should:

There is not enough information given to answer this question

If the several companies in the tobacco industry produce similar products but have very different marginal costs

They are less likely to engage in tacit collusion than firms with similar costs

You own a lemonade stand in a competitive market, and as such you are a price-taking firm. Which even would MOST likely increase your market power?

You acquire exclusive right to harvest lemons from all domestic citrus orchids

Network externalities are often:

a reason for natural monopolies

The demand curve for a monopoly is:

above the MR curve

The deman curve for a monopoly is

also the industry demand curve

A good is subject to a network externality when:

an increases in the number of other people using the good increases its value to an individual

Both emissions taxes and tradable emissions permits:

are efficient cost-minimizing methods of pollution reduction

Two Identical Firms. If one firm decides to cheat, the cheating firm will: Two identical firms make up an industry in which the market demand curve is represented by Q = 5,000 - 4P, where Q is the quantity demanded and P is price per unit. The marginal cost of producing the good in this industry is constant and equal to $650. Fixed cost is zero.

be able to increase its profits initially.

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run a perfectly competitive firm will:

continue to produce at an economic loss

Large barriers to entry are one reason that monopoly

earns an economic profit in th long run

For the same amount of pollution emitted an emissions tax is said to be more efficient than is an environmental standard because all polluters:

emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax

If firms are taking economic losses in the short run, then in the long run, firms will leave the industry, industry output will ____, and economic loses will ____.

fall; decrease

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is

greater than total average cost

Price discrimination leads to a ___ price for consumers with a ____demand.

higher; less elastic

External benefits are associated with the production of batteries. Without government regulation, the market will:

price batteries at less than the marginal social benefit

The perfectly competitive model does NOT assume

that firms attempt to maximize their total revenue

The Efficient rate of emissions occurs when:

the change in social benefits and change in social costs from a n additional unit of emissions are equal

Suppose a monopoly can separate it customers into two groups. If the monopoly practices price discriminations, it will charge the lower price to the group with:

the higher price elasticity of demand

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution the optimal level of pollution in a society is:

the level at which the marginal social cost is equal to the marginal social benefit

Price discrimination can occur if:

the market structure is monopolistic competition