Econ 528 Finals

c. a Bertrand oligopoly.

"Tom and Jack are two local petrol stations. Although they have different constant marginal costs, they both survive continued competition." Tom and Jack do not constitute: Select one: a. a Cournot oligopoly. b. a monopolistically competitive industry. c. a Bertrand oligopoly. d. a Stackelberg oligopoly.

b. 4

(Figure 17.2) Suppose the external marginal cost is constant at $5 per unit. Price (demand) equals social marginal cost at output level: Select one: a. 6 b. 4 c. 3 d. 7

b. I and II

(Figure 17.3) Which of the following statements is (are) TRUE? I. The socially optimal quantity is 3. II. The deadweight loss associated with the perfectly competitive output level is $4.50. III. The external marginal cost is $6. Select one: a. I b. I and II c. I, II, and III d. II and III

b. At 2,000 units of pollution, the marginal benefit exceeds the marginal cost, so there should be more pollution

(Figure 17.7) Which of the following statements is TRUE? Select one: a. The efficient quantity of pollution occurs at or below 6,000 units. b. At 2,000 units of pollution, the marginal benefit exceeds the marginal cost, so there should be more pollution c. At 2,000 units of pollution, the marginal benefit exceeds the marginal cost, so there should be less pollution. d. At 2,000 units of pollution, the marginal benefit is less than the marginal cost, so there should be less pollution.

Scenario C

(Table 10.4) The table shows consumer valuations (maximum willingness to pay per month) for two cable television networks. In which of the scenarios would a cable television company have an increase in producer surplus from using a bundling strategy as opposed to selling channel access separately? Scenario A Scenario B Scenario C Scenario D

b. 3

(Table 17.1) According to the table, what is the socially optimal output level? Select one: a. 4 b. 3 c. 0 d. 7

c. Q3.

1. Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to a. Q1. b. Q2. c. Q3. d. Q4.

b. of the law of diminishing marginal returns.

A firm's demand curve for labor slopes downwards because Select one: a. firms supply less labor as the wage rate rises. b. of the law of diminishing marginal returns. c. workers supply less labor services as the wage rate falls. d. of rising marginal product.

C) a group of firms that enter into a formal agreement to fix prices to maximize joint profits.

A cartel is A) a temporary storage facility for automobiles. B) a group of firms that enter into an informal agreement to fix prices to maximize joint profits. C) a group of firms that enter into a formal agreement to fix prices to maximize joint profits. D) an example of a group of firms that collectively regulate a competitive industry.

B) interdependence of firms.

A characteristic found only in oligopolies is A) break even level of profits. B) interdependence of firms. C) independence of firms. D) products that are slightly different.

E) it has an edge over rivals in attracting customers and coping with competitive forces.

A company achieves competitive advantage whenever A) it has a product offering that is differentiated from the product offerings of rivals. B) its customers exhibit a high degree of loyalty to the company's brand. C) it has more core competences than its rivals. D) it has a better credit rating than rivals. E) it has an edge over rivals in attracting customers and coping with competitive forces.

C) of product differentiation

A monopolistically competitive firm faces a downward-sloping demand curve because A) it is able to control price and quantity demanded. B) there are few substitutes for its product. C) of product differentiation. D) its market decisions are affected by the decisions of its rivals

c. how to compete successfully-its plans for positioning the company in the marketplace, its specific efforts to please customers and improve its competitive strength, and the type of competitive advantage it intends to establish.

A company's competitive strategy deals with Select one: a. the specific actions management plans to take to gain a competitive advantage over rivals b. how it plans to unify its functional and operating strategies into a cohesive effort aimed at successfully taking customers away from rivals. c. how to compete successfully-its plans for positioning the company in the marketplace, its specific efforts to please customers and improve its competitive strength, and the type of competitive advantage it intends to establish. d. the specific actions management intends to take to strongly differentiate its product offering from the offerings of rival companies in the industry. e. its plans for under-pricing rivals and achieving product superiority.

a. buyers are large, have significant power to bargain down prices, use the product in much the same ways, and have common user requirements.

A competitive strategy of striving to be the low-cost provider is particularly attractive when Select one: a. buyers are large, have significant power to bargain down prices, use the product in much the same ways, and have common user requirements. b. most rivals are pursuing best-cost or broad differentiation strategies. c. buyers are not swayed by advertising and are not very brand-loyal. d. most rivals are trying to differentiate their product offering from those of rivals. e. there are many ways to achieve higher product quality that have value to buyers.

c. Entry Barriers to prevent potential entrants

A firm that is threatened by the potential entry of competitors into a market builds excess production capacity. This is an example of Select one: a. Cournot competition b. Bertrand competition c. Entry Barriers to prevent potential entrants d. collusion or cartel

A) the fraction of an industry's sales accounted for by the four largest firms.

A four-firm concentration ratio measures A) the fraction of an industry's sales accounted for by the four largest firms. B) the production of any four firms in an industry. C) how the four largest firms became so concentrated. D) the fraction of employment of the four largest firms in an industry.

D) meaningfully lower overall costs than competitors.

A low-cost leader's basis for competitive advantage is: A) using an everyday low pricing strategy to gain the biggest market share. B) bigger profit margins than rival firms. C) high buyer switching costs because of the company's differentiated product offering. D) meaningfully lower overall costs than competitors. E) a reputation for charging the lowest prices in the industry.

B) agree to a low cartel production level and then produce more than its quota.

A member of a cartel like OPEC has an incentive to A) argue for larger production quotas for each member of the cartel. B) agree to a low cartel production level and then produce more than its quota. C) abide by its individual production quota. D) support equal production quotas for each member.

a. agree to a low cartel production level and then produce more than its quota.

A member of a cartel like OPEC has an incentive to Select one: a. agree to a low cartel production level and then produce more than its quota. b. abide by its individual production quota. c. support equal production quotas for each member. d. argue for larger production quotas for each member of the cartel.

d. have some control over its price because its product is differentiated.

A monopolistically competitive firm will Select one: a. produce an output level that is productively and allocatively efficient. b. charge the same price as its competitors do. c. always produce at the minimum efficient scale of production. d. have some control over its price because its product is differentiated.

C) the marginal social cost of producing a good or service exceeds the private cost.

A negative externality exists if A) there are price controls in a market. B) there are quantity controls in a market. C) the marginal social cost of producing a good or service exceeds the private cost. D) the marginal private cost of producing a good or service exceeds the social cost.

b. Yes, it should continue to produce because it is minimizing its loss.

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run? Select one: a. No, it should shut down because it is making a loss. b. Yes, it should continue to produce because it is minimizing its loss. c. Yes, it should continue to produce because its price exceeds its average fixed cost. d. There is insufficient information to answer the question.

b. upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve.

A perfectly competitive firm's short-run supply curve is Select one: a. perfectly elastic at the market price. b. upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. c. upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. d. horizontal at the minimum average total cost.

C) marginal cost curve above its minimum average variable cost.

A perfectly competitive firm's supply curve is its A) marginal cost curve. B) marginal cost curve above its minimum average total cost. C) marginal cost curve above its minimum average variable cost. D) marginal cost curve above its minimum average fixed cost.

c. The price falls to $12.

A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000. The prevailing market price is $15. What will happen to the market price of wheat in the long run? Select one: a. There is insufficient information to answer the question. b. The price rises above $15. c. The price falls to $12. d. The price remains constant at $15.

D) people who are not directly involved in producing or paying for a good or service benefit from it.

A positive externality results when A) economists are sure that a good or service provides benefits to consumers. B) someone pays for a good or service even though she is not directly affected by the production or consumption of it. C) when people who live in one country benefit from the production of a good or service that occurs in another country. D) people who are not directly involved in producing or paying for a good or service benefit from it.

B) in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that A) each additional unit of labor hired is less efficient than previously hired units. B) in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. C) the extra cost of hiring additional units of labor increases as a firm hires more units of labor. D) the firm's demand curve for the product that uses labor is downward sloping.

c. keep their prices constant

According to the Bertrand model, a firm will assume that rival firms will Select one: a. keep their rates of production constant b. match price increases but not price cuts c. keep their prices constant d. match price cuts but not price increases

D) An increase in the output level will increase profit.

All of the following statements are true of the minimum efficient scale except one. Which one? A) All possible economies of scale have been exhausted. B) The short-run average total cost curve's minimum point is equal to the long run average cost curve's minimum point. C) Any increase in the scale of operation will encounter diseconomies of scale. D) An increase in the output level will increase profit.

C) a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

An externality is A) a benefit realized by the purchaser of a good or service. B) a cost paid for by the producer of a good or service. C) a benefit or cost experienced by someone who is not a producer or consumer of a good or service. D) anything that is external or not relevant to the production of a good or service.

c. The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase.

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles)? Select one: a. The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease. b. The demand for gasoline-powered automobiles would decrease because consumers could afford to buy fewer gasoline-powered automobiles. c. The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase. d. The supply of gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.

a. oligopoly

An industry has a 4-firm concentration ratio of 85. We would call this industry a: Select one: a. oligopoly b. monopoly c. purely competitive industry d. very competitive one

c. oligopoly.

An industry has a 4-firm concentration ratio of 85. We would call this industry a: a. purely competitive industry. b. monopoly. c. oligopoly. d. very competitive one.

c. firms pursuing aggressive business strategies, independent of rivals' strategies.

An oligopolistic industry is characterized by all of the following except Select one: a. the possibility of reaping long run economic profits. b. production of standardized products. c. firms pursuing aggressive business strategies, independent of rivals' strategies. d. existence of entry barriers.

False

Answer whether the following statement is true or false: Economic rent for an input is higher if the input is abundant is supply Select one: True False

False

Answer whether the following statement is true or false: If the marginal revenue product of an input is less than the price of that input, the input is too expensive and the firm should stop using that input and try to find some alternate inputs. Select one: True False

a. restrict firms from engaging in behaviors that make markets less competitive.

Antitrust laws: Select one: a. restrict firms from engaging in behaviors that make markets less competitive. b. cannot be used to prevent the merger of two firms. c. encourage firms to work together on setting prices, market share, and output levels. d. ensure that firms with market power are not penalized for colluding.

A) positive externality.

Article Summary According to a study by the Center for Neighborhood Technology, homes located within one-half mile of frequently-used public transportation held their value much better during the recent housing market downturn than did those without easy access to public transportation, and the greater home values reflect greater demand for neighborhoods in close proximity to public transportation. In addition to higher home values, the study found that close proximity to public transportation offers lower transportation costs, a wider variety of travel options, and access to more employment opportunities. Source: Meg Handley, "Study: Proximity to Public Transit Boosts Home Values," U.S. News & World Report, March 22, 2013. 6) Refer to the Article Summary. Higher home values which result from close proximity to public transportation are an example of a ________ due to the public transportation. A) positive externality. B) negative externality. C) private cost. D) social cost.

b. both the equilibrium price and quantity of MP3 players will increase.

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result Select one: a. the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase. b. both the equilibrium price and quantity of MP3 players will increase. c. the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease. d. the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease.

B) the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the supply curve shifts more than the demand curve. As a result A) both the equilibrium price and quantity of MP3 players will decrease. B) the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase. C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease. D) the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

C) The equilibrium price is likely to decrease and profits are likely to decrease.

Assume the market for organic produce sold at farmers' markets is perfectly competitive. All else equal, as more farmers choose to produce and sell organic produce at farmers' markets, what is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run? A) The equilibrium price is likely to increase and profits are likely to remain unchanged. B) The equilibrium price is likely to remain unchanged and profits are likely to increase. C) The equilibrium price is likely to decrease and profits are likely to decrease. D) The equilibrium price is likely to increase and profits are likely to increase.

b. the supply curve will shift to the left and the equilibrium price will increase.

Assume the market for organically-grown produce is perfectly competitive. All else equal, as farmers find it less profitable to produce and sell organic produce in this market Select one: a. the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. b. the supply curve will shift to the left and the equilibrium price will increase. c. the demand curve will shift to the left and the equilibrium price will decrease. d. the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase.

B) the firm has achieved the lowest possible average cost of production.

At the minimum efficient scale A) all possible economies of scale have not been exhausted. B) the firm has achieved the lowest possible average cost of production. C) any increases in the scale of operation will encounter further economies of scale. D) marginal cost is at its minimum.

C) private production exceeds the economically efficient level

Because producers do not bear the external cost of pollution A) the economically efficient level of production is achieved. B) private production is below the economically efficient level. C) private production exceeds the economically efficient level. D) the market price is too high.

d. Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.

Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits. But some cartels have failed and others are unstable. Which of the following is a reason why cartels often break down? Select one: a. When a cartel is profitable the amount of competition it faces increases. b. Most cartels do not have a dominant strategy. c. Members of a cartel may resent having to share their profits equally. d. Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.

d. a and d

Consider the following characteristics: a. a market structure with barriers to entry b. demand curves that are easily identified c. firm cannot make zero profits in the long run d. firm can reap long run profits. Which of the characteristics in the list above is shared by an oligopolist and a monopolist? Select one: a. a, b, c, and d b. a, c, and d c. a, b, and d d. a and d

b. the price of a factor of production that is fixed in supply.

Economic rent is defined as Select one: a. the revenue received by a factor of production with an upward sloping supply curve. b. the price of a factor of production that is fixed in supply. c. the surplus received by employing a factor of production in its highest valued use. d. what you pay to rent your apartment or house.

d. as a firm expands its production, its profit margin per-unit of output increases.

Economies of scale exist as a firm increases its size in the long run because of all of the following except Select one: a. the firm can afford more sophisticated technology in production. b. as a larger input buyer, the firm can purchase inputs at a lower per unit cost. c. labor and management can specialize even further in their tasks. d. as a firm expands its production, its profit margin per-unit of output increases.

d. the cost of publishing a magazine is lower for book publishers than for other firms.

Economies of scope exist between book publishing and magazine publishing if Select one: a. the cost of publishing a book falls over time as the publisher acquires more experience. b. the cost of publishing a magazine is lower for firms that publish many magazines than for firms that publish only one magazine. c. the cost of a publishing a book is not subject to diminishing marginal returns. d. the cost of publishing a magazine is lower for book publishers than for other firms.

a. produces more than one product.

Economies of scope refers to the decrease in average total cost that can occur when a firm a. produces more than one product. b. has monopoly power in world markets. c. controls the raw materials used as inputs. d. narrows the scope of its regional markets

d. Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes.

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive. Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of well-being? Select one: a. Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. b. Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. c. Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets. d. Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes.

False

Evaluate the Statement; Cost approach is the easier approach to achieve optimal production when the firm is at the start of their production plan Select one: True False

False

Evaluate the Statement; Resource approach is the easier approach to achieve optimal production after the firm has already established a production plan and requires only incremental changes in their plan to achieve the maximum possible profit Select one: True False

b. monopolistic competition

Excess capacity and high advertising expenditures are encountered in Select one: a. non-profit competition b. monopolistic competition c. monopoly d. perfect competition

C) 180.

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. 6) Refer to Figure 12-4. If the market price is $30, the firm's profit-maximizing output level is A) 0. B) 130. C) 180. D) 240.

a. 180.

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. Refer to Figure 12-4. If the market price is $30, the firm's profit-maximizing output level is Select one: a. 180. b. 240. c. 0. d. 130.

b. 1,350 units (MC=MR)

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. Refer to Figure 12-5. If the market price is $20, what is the firm's profit-maximizing output? Select one: a. 1,800 units b. 1,350 units c. 1,100 units d. 750 units

d. the marginal cost curve from b and above

Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. Refer to Figure 12-9. Identify the firm's short-run supply curve. Select one: a. the marginal cost curve from a and above b. the marginal cost curve c. the marginal cost curve from d and above d. the marginal cost curve from b and above

C) P2

Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. 10) Refer to Figure 13-4. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged? A) P0 B) P1 C) P2 D) P3

d. P2

Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. Refer to Figure 13-4. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged? Select one: a. P0 b. P1 c. P3 d. P2

d. Q2

Figure 15-2 above shows the demand and cost curves facing a monopolist. Refer to Figure 15-2. To maximize profit, the firm will produce Select one: a. Q4. b. Q3. c. Q1. d. Q2

C) 940 units

Figure 15-9 shows the demand and cost curves for a monopolist. 2) Refer to Figure 15-9. What is the economically efficient output level? A) 600 units B) 800 units C) 940 units D) 1160 units

a. 3 units

Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 17-1. If the wage rate is $40, how many workers should Dale hire? Select one: a. 3 units b. 4 units c. 6 units d. 5 units

A) $60 [1/2 x (21-18) x 40]

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 10) Refer to Figure 4-3. What is the value of consumer surplus at a price of $18? A) $60 B) $120 C) $180 D) $240

A) $240 [(18-13) x 40] + [1/2 x (13-11) x 40}

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 11) Refer to Figure 4-3. What is the value of producer surplus at a price of $18? A) $240 B) $300 C) $340 D) $720

A) $100 [ 1/2 x (18-13) x 40 ]

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 12) Refer to Figure 4-3. What is the value of the deadweight loss at a price of $18? A) $100 B) $180 C) $660 D) $1,040

A) $0

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 8) Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15? A) $0 B) $40 C) $60 D) $100

a. $160 [1/2 x (15-11) x 80

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. What is the value of producer surplus at the equilibrium price of $15? Select one: a. $160 b. $400 c. $80 d. $240

d. $0

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15? Select one: a. $60 b. $100 c. $40 d. $0

d. $240 [1/2 x (21-15) x 80]

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. What is the value of consumer surplus at the equilibrium price of $15? Select one: a. $180 b. $60 c. $120 d. $240

a. $230,000 The consumer surplus will be the area of the rectangle that is formed at the quantity 200 and price 2000. the area of that rectangle will be (2000 - 1000) x 200 = 200,000. + the area of triangle that is above the rectangle that will be 1/2 (2300 -2000 x 200) = 300 x 200 = 60000 / 2 = 30,000.

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Refer to Figure 4-5. What is the value of consumer surplus after the imposition of the ceiling at $1000 per month? Select one: a. $230,000 b. $270,000 c. $120,000 d. $430,000

a. $40,000 [1/2 x (1000-600) x 200

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling? Select one: a. $40,000 b. $100,000 c. $430,000 d. $300,000

c. $50,000 (1/2 x (2000-1000) x 100

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Refer to Figure 4-5. What is the value of the deadweight loss after the imposition of the Select one: a. $125,000 b. $175,000 c. $50,000 d. $260,000

True

For the Coase theorem to work there must be clear assignment of property rights.

a. through patents causes higher consumer prices but encourages firms to innovate and bring new products to the market.

Government encouragement of monopoly: Select one: a. through patents causes higher consumer prices but encourages firms to innovate and bring new products to the market. b. results in the regulated firm producing beyond the competitive output level. c. usually leads to lower prices and higher consumer surplus. d. reduces the market power of regulated firms.

d. Property rights could provide an incentive for individuals to better manage the public goods.

How could the expansion of property rights be used to address a problem with public goods or common resources? Select one: a. Property rights will place the public good or common resource under the direct control of the government. b. Property rights can never be used to address public good or common resource problems. c. Property rights will make the good non-rival and non-excludable d. Property rights could provide an incentive for individuals to better manage the public goods.

Curve A is Marginal cost. Curve B is Average Total cost. Curve C is Average Variable cost.

Identify the curves in the diagram. A ________ B ________ C ________

d. operating in the short run.

If a producer is not able to expand its plant capacity immediately, it is Select one: a. bankrupt. b. losing money. c. operating in the long run. d. operating in the short run.

d. new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease.

If a typical firm in a perfectly competitive industry is earning profits, then Select one: a. all firms will continue to earn profits. b. the number of firms in the industry will remain constant in the long run. c. new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase. d. new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease.

d) Firms could increase profits by jointly reducing output.

If firms are in Cournot equilibrium: a) Each firm could increase profits by unilaterally increasing output. b) Each firm could increase profits by unilaterally decreasing output. c) Firms could increase profits by jointly increasing output. d) Firms could increase profits by jointly reducing output.

c. collectively undertaken by the industry group.

If identical firms sell an undifferentiated product, advertising is likely to be Select one: a. strategically aimed at deterring entry. b. focused on secret ingredients. c. collectively undertaken by the industry group. d. used to attack the rivals' products.

A) equal to the marginal external cost at the economically efficient level of pollution.

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set A) equal to the marginal external cost at the economically efficient level of pollution. B) equal to the marginal private cost of production at the economically efficient level of pollution. C) equal to the amount of the deadweight loss created in the absence of a pollution tax. D) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.

b. the four largest firms account for 80 percent of total output.

If the 4-firm concentration ratio for industry A is 80: a. the four largest first account for 20 percent of total output. b. the four largest firms account for 80 percent of total output. c. the industry is a monopoly. d. the industry is competitive.

d. more capital should be used and less labor.

If the marginal product of capital is six times as large as the marginal product of labor and the price of capital is three times as large as the price of labor, for costs to be minimized: Select one: a. the price of capital must fall. b. more labor should be used and less capital. c. more labor should be used but the use of capital should remain constant. d. more capital should be used and less labor.

d. None of the above

If the marginal product of labor is 2, the marginal product of capital is 4, the wage rate is $3, the rental price of capital is $6, and the price of output is $1.50, then the firm should Select one: a. Decrease output by reducing the quantity of capital, reducing the number of units of labor, or both b. Increase output by hiring more labor, more capital, or both c. Hold output constant, but hire more labor and less capital d. None of the above

d. None of the above is correct.

If the marginal product of labor is 2, the marginal product of capital is 4, the wage rate is $3, the rental price of capital is $6, and the price of output is $1.50, then the firm should a. Increase output by hiring more labor, more capital, or both. b. Hold output constant, but hire more labor and less capital. c. Decrease output by reducing the quantity of capital, reducing the number of units of labor, or both. d. None of the above is correct.

D) is too low and equilibrium quantity is too high.

If there is pollution in producing a product, then the market equilibrium price A) is too high and equilibrium quantity is too low. B) and equilibrium quantity are too low. C) and equilibrium quantity are too high. D) is too low and equilibrium quantity is too high.

B) economies of scale.

If, when a firm double all its inputs, its average cost of production decreases, then production displays A) diminishing returns. B) economies of scale. C) diseconomies of scale. D) declining fixed costs.

B) the supply curve shifted to the left resulting in an increase in the equilibrium price.

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit A) the supply curve shifted to the right resulting in an increase in the equilibrium price. B) the supply curve shifted to the left resulting in an increase in the equilibrium price. C) the demand curve shifted to the right resulting in an increase in the equilibrium price. D) the demand curve shifted to the left resulting in a decrease in the equilibrium price.

B) will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product.

In a monopolistically competitive market, a successful new restaurant A) can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. B) will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product. C) will face high entry barriers because of health and safety regulations to which all restaurants are subject. D) must obtain a trademark to ensure that it will break even in the long run.

D) one who waits for others to produce a good and then enjoys its benefits without paying for it.

In economics, the term "free rider" refers to A) a person who evades taxes. B) a supervisor who delegates menial time-consuming activities to others. C) one who volunteers her services. D) one who waits for others to produce a good and then enjoys its benefits without paying for it.

a. one who waits for others to produce a good and then enjoys its benefits without paying for it.

In economics, the term "free rider" refers to Select one: a. one who waits for others to produce a good and then enjoys its benefits without paying for it. b. a supervisor who delegates menial time-consuming activities to others. c. a person who evades taxes. d. one who volunteers her services.

C) dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park

In the city of Alvarez, with the exception of guide dogs for blind people, all dogs are banned from its three public parks, regardless of whether the animals are leashed. Many residents are pushing for a change in policy. Canine lover Sara Northridge observed, "There are 800 or more homes here. There are three parks within 10 minutes, and almost everyone has a dog, but we can't take our dogs there." Others fear that allowing dogs would detract from their enjoyment of the parks. Tim Cortis retorted, "We're not preventing dog lovers from enjoying the park, just come without your dog." Which of the following is a way of dealing with the problem by assigning property rights to a particular group? A) impose a two-tier entry fee system - a lower fee for non dog owners and a higher fee for dog owners B) impose a fee only for dog-owners to use the public parks; non dog owners do not pay a fee C) dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park D) allow dog owners to bring their dogs to the park but insist that they keep watch over their dogs

d. dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park

In the city of Alvarez, with the exception of guide dogs for blind people, all dogs are banned from its three public parks, regardless of whether the animals are leashed. Many residents are pushing for a change in policy. Canine lover Sara Northridge observed, "There are 800 or more homes here. There are three parks within 10 minutes, and almost everyone has a dog, but we can't take our dogs there." Others fear that allowing dogs would detract from their enjoyment of the parks. Tim Cortis retorted, "We're not preventing dog lovers from enjoying the park, just come without your dog." Which of the following is a way of dealing with the problem by assigning property rights to a particular group? Select one: a. allow dog owners to bring their dogs to the park but insist that they keep watch over their dogs b. impose a two-tier entry fee system - a lower fee for non dog owners and a higher fee for dog owners c. impose a fee only for dog-owners to use the public parks; non dog owners do not pay a fee d. dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park

b. constant returns to scale because average total cost is constant as output rises.

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits a. diseconomies of scale because total cost is rising as output rises. b. constant returns to scale because average total cost is constant as output rises. c. diseconomies of scale cost is rising as output rises. d. economies of scale because average total cost is falling as output rises.because average total

c. one firm plays a leadership role and its competitor's simply react to the leader's quantity

In the quantity leadership model: Select one: a. each firm takes the quantities produced by its competitors as given b. prices are higher and quantities are slightly less than we would see if the firms colluded to achieve the monopoly outcome c. one firm plays a leadership role and its competitor's simply react to the leader's quantity d. each firm takes the prices charged by its competitors as given

b. All of the above

In which markets are network effects likely? Select one: a. Market for trendy products. b. All of the above c. Hi-tech product markets d. Markets subject to increasing returns

d. oligopolistic industries.

Interdependence of firms is most common in Select one: a. monopolistically competitive and oligopolistic industries. b. monopolistically competitive industries. c. monopolistic industries. d. oligopolistic industries.

False

Over time, more experienced workers will demand higher wage and therefore, will lead to an increased in the cost of production for the producers.

c. It enables Juicy to price its products at a premium and differentiate them from lower priced products.

Juicy Couture has been successful in selling women's clothing using an unusual strategy. According to an article in the Wall Street Journal, the key to the firm's strategy is to "limit distribution to maintain the brand's exclusive cachet, even if that means sacrificing sales, a brand-management technique once used only for high-end luxury brands." In 2006, Juicy clothes were sold in only four department stores: Neiman Marcus, Saks, Bloomingdale's, and Nordstrom. In 2006, its sales have more than quadrupled since 2002. Source: Rachel Dodes, "From Track Suits to Fast Track," Wall Street Journal, September 13, 2006. How does limiting the number of stores in which Juicy's products are sold contribute to its success? Select one: a. It helps establish Juicy's products as luxury items favored by the very wealthy. b. By sacrificing sales, the company was able to focus on producing high quality products. c. It enables Juicy to price its products at a premium and differentiate them from lower priced products. d. Maintaining the exclusivity of a product increases the demand for the product.

d. average variable cost and the cumulative number of units produced

Learning curves represent the relationship between Select one: a. total cost and technology b. average variable cost and the rate of increase in technology c. average variable cost and the number of units produced per time period d. average variable cost and the cumulative number of units produced

B) negative externalities

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents. In this sense, these mandatory helmet laws are reducing ________ of risky behavior. A) positive externalities B) negative externalities C) the private benefit D) the social benefit

d. Max should continue to run the tattoo parlor until his lease runs out.

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. Max's explicit cost amounts to $3,000 per month more than his revenue. Should Max continue operating his business? Select one: a. If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. b. This cannot be determined without information on his revenue. c. Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. d. Max should continue to run the tattoo parlor until his lease runs out.

c. reduce market power in the phone industry.

Mobile phone portability allows consumers to retain their phone number if they change to a different phone network, which will tend to: Select one: a. increase barriers to entry in the phone industry. b. encourage the formation of natural monopolies. c. reduce market power in the phone industry. d. discourage product differentiation and increase switching costs

b. Mr. Fudd to pay Mr. Leghorn between $500 and $900 to continue hunting.

Mr. Leghorn lives next door to Mr. Fudd. During hunting season, Mr. Fudd likes to shoot rabbits in his backyard, which activity he values at $900. The noise from the shooting disturbs Mr. Leghorn and prevents him from taking afternoon naps, which he values at $500. If Mr. Leghorn has the legal right to stop Mr. Fudd from hunting, the socially optimal outcome is for: a. Mr. Fudd to stop hunting. b. Mr. Fudd to pay Mr. Leghorn between $500 and $900 to continue hunting. c. Mr. Leghorn to pay $500 or less to get Mr. Fudd to stop hunting. d. Mr. Fudd to pay Mr. Leghorn less than $500 to continue hunting.

c. Mr. Fudd to pay Mr. Leghorn between $500 and $900 to continue hunting

Mr. Leghorn lives next door to Mr. Fudd. During hunting season, Mr. Fudd likes to shoot rabbits in his backyard, which activity he values at $900. The noise from the shooting disturbs Mr. Leghorn and prevents him from taking afternoon naps, which he values at $500. If Mr. Leghorn has the legal right to stop Mr. Fudd from hunting, the socially optimal outcome is for: Select one: a. Mr. Fudd to stop hunting b. Mr. Fudd to pay Mr. Leghorn less than $500 to continue hunting c. Mr. Fudd to pay Mr. Leghorn between $500 and $900 to continue hunting d. Mr. Leghorn to pay $500 or less to get Mr. Fudd to stop hunting

c. Cournot competition.

Oligopolists that have restrictions on productive capacity divide the market between themselves and charge prices greater than marginal costs. In this case they engage in: Select one: a. Betrand competition. b. price competition. c. Cournot competition. d. quality competition.

b. Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations.

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying. Which of the following is not a response you might offer her? Select one: a. Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment. b. Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations. c. If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand. d. Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences.

c. economies of scale in farming

Over the past twenty years, the number of small family farms has fallen significantly and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend? Select one: a. diminishing returns to labor in farming b. diseconomies of scale in farming c. economies of scale in farming

c. economies of scope.

Producing 200 units of good Y and 100 units of good X in the same factory costs the firm $50,000. In contrast, producing 200 units of good Y in one factory and 100 units of good X in another factory costs the firm $75,000. So if the firm produces the two goods together, it achieves: a. quadratic returns to scale. b. diseconomies of scope. c. economies of scope. d. diseconomies of scale and diseconomies of scope.

B) P3cbP1

Refer to Figure 12-3. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss. A) P2 deP1 B) P3cbP1 C) P3caP0 D) 0P1 bQ1

A) FHE.

Refer to Figure 15-10. The deadweight loss due to a monopoly is represented by the area A) FHE. B) FGE. C) GEH. D) FQ1Q2E.

A) the triangle P0P1F

Refer to Figure 15-10. What is the area that represents consumer surplus under a monopoly? A) the triangle P0P1F B) the triangle P0P2E C) the trapezium P1P2EF D) the rectangle P1P3HF

C) the trapezium 0P1FH

Refer to Figure 15-10. What is the area that represents producer surplus under a monopoly? A) the triangle 0P2E B) the triangle 0P3H C) the trapezium 0P1FH D) the rectangle P1P3HF

c. a gain in producer surplus less than the loss in consumer surplus.

Relative to a perfectly competitive market, a monopoly results in Select one: a. a gain in producer surplus equal to the gain in consumer surplus. b. a gain in producer surplus equal to the loss in consumer surplus. c. a gain in producer surplus less than the loss in consumer surplus. d. greater economic efficiency.

c. third-degree price discrimination

Selling tickets in the orchestra region of the Metropolitan Opera for $55 and selling tickets in the upper balcony for $28 to listen to Luciano Pavoratti describes which type of price discrimination? a. first-degree price discrimination b. bundling c. third-degree price discrimination d. This is not necessarily price discrimination.

E) Both A and D.

Successful differentiation allows a firm to A) gain buyer loyalty to its brand (because some buyers prefer the differentiating features and are thus brand loyal). B) set the industry ceiling on price. C) attract many more buyers by charging a lower price than rivals and thereby take sales and market share away from rivals. D) command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features), and/or. E) Both A and D.

c) a Bertrand oligopoly.

Sue and Jane own two local petrol stations. They have identical constant marginal costs, but earn zero economic profits. Sue and Jane constitute a) a Sweezy oligopoly. b) a Cournot oligopoly. c) a Bertrand oligopoly. d) none of the above.

a. cheat by producing a higher level of output.

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output. Given that firm two commits to this collusive output, it pays firm one to Select one: a. cheat by producing a higher level of output. b. cheat by producing a lower level of output. c. cheat by raising prices. d. none of the above.

a. The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same.

Suppose two firms in a duopoly implicitly collude and charge a high price. How might each firm benefit from advertising that it will match the lowest price offered by its competitor? Select one: a. The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same. b. The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available c. The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion d. The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact

b. when firms sell a differentiated product.

The Bertrand model is a more plausible model of firm behavior than the Cournot model Select one: a. when firms set the quantity to be sold b. when firms sell a differentiated product. c. because the Bertrand model predicts that firms will price at marginal cost. d. because firms that sell a non-differentiated product typically act as price takers.

c. If transaction costs are low, the efficient activity will occur, either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees, or if it is cheaper, fewer train trips per day. The cheapest or most efficient solution will happen, regardless of who is assigned the original property right.

The Coase Theorem works best in places that transaction costs for contracts among people is low. Often in the world of torts and externalities both parties can claim that they have rights to impose on others. One case is that of a railroad that is noisy and scares the cattle and the rancher whose cattle sometimes wander in front of moving trains causing damage to them and the train. What does the Coase say would happen? a.The train should have property right to be safe from wandering cattle, and the rancher should be liable for train damage of rampaging cattle. b. The rancher should have the property right to be safe from noisy trains, and the railroad should be liable for weight loss of cattle from train whistles and rumbling noise. c. If transaction costs are low, the efficient activity will occur, either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees, or if it is cheaper, fewer train trips per day. The cheapest or most efficient solution will happen, regardless of who is assigned the original property right.

c. If transaction costs are low, the efficient activity will occur, either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees, or if it is cheaper, fewer train trips per day. The cheapest or most efficient solution will happen, regardless of who is assigned the original property right

The Coase Theorem works best in places that transaction costs for contracts among people is low. Often in the world of torts and externalities both parties can claim that they have rights to impose on others. One case is that of a railroad that is noisy and scares the cattle and the rancher whose cattle sometimes wander in front of moving trains causing damage to them and the train. What does the Coase say would happen? Select one: a. The rancher should have the property right to be safe from noisy trains, and the railroad should be liable for weight loss of cattle from train whistles and rumbling noise. b. The train should have property right to be safe from wandering cattle, and the rancher should be liable for train damage of rampaging cattle. c. If transaction costs are low, the efficient activity will occur, either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees, or if it is cheaper, fewer train trips per day. The cheapest or most efficient solution will happen, regardless of who is assigned the original property right d. The two party should fight with each other. The winner will be able to establish their right while the loser will can do nothing.

d. wage levels

The antitrust laws regulate all of the following business decisions except ____. Select one: a. mergers b. collusion c. monopolistic practices d. wage levels

d. it is derived from the demand for products that use labor in the production process.

The demand for labor is described as a derived demand because Select one: a. it is derived by workers seeking to earn income to fund the consumption of goods and services. b.it is derived by producers seeking to make profits by starting new businesses. c. it is derived from government institutions which rely on labor markets for the purpose of raising tax revenue. d. it is derived from the demand for products that use labor in the production process.

Computing the four-firm concentration ratio — the top four firms are Sony, Samsung, Zenith, and Panasonic. The total of their sales is equal to $115 million. Total sales in the industry are $197 million. The four-firm ratio is 115/197 = .58, or 58 percent. The correct answer is: 58%

The following table provides hypothetical sales data for 10 firms that comprise the television industry. Ignoring the fact that these companies are from different countries, calculate the four-firm concentration ratio. Then answer the following question. Brand Sales (millions of $s) Zenith 25 Magnavox 15 Sony 38 Mitsubishi 22 Philips 12 RCA 15 Panasonic 24 Samsung 28 Hitachi 10 Motorola 8 The concentration ratio for the four largest firm is: Select one: a. 68% b. 78% c. 58% d. 88%

A) people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.

The free rider problem refers to a situation in which A) people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay. B) the marginal cost of allowing additional consumers to consume a public good is zero. C) high income individuals subsidize the production of goods, such as education, that make society better off. D) markets fail to allocate resources efficiently when benefits outweigh costs.

A) the lowest average cost of producing every level of output in the long run.

The long-run average cost curve shows A) the lowest average cost of producing every level of output in the long run. B) where the most profitable level of output occurs. C) the average cost of producing where diminishing returns are not present. D) the plant size or scale that the firm should build.

a. All of the above

The marginal revenue product of labor for a firm Select one: a. All of the above b. will decrease if the firm hires more labor. c. will increase if the price of the firm's output increases. d. is the firm's demand curve for labor.

d. All of the above are correct.

The marginal revenue product of labor for a firm a. will increase if the price of the firm's output increases. b. is the firm's demand curve for labor. c. will decrease if the firm hires more labor. d. All of the above are correct.

b. level of operation where long-run average costs are lowest.

The minimum efficient scale is Select one: a. the smallest output level where the firm finally reaches productive efficiency. b. level of operation where long-run average costs are lowest. c. the plant size that yields the most profit. d. the level of output where diminishing returns have not set in yet.

A) It is upward-sloping.

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." Based on this quote, what must be true of the plant's average cost of production curve? A) It is upward-sloping. B) It is downward-sloping. C) It is a ray from the origin. D) It is U-shaped.

c. as Toyota expanded its capacity, it experienced diseconomies of scale.

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that Select one: a. Toyota was focused on "churning" out cars for which it did not invest sufficiently in training its workers. b. high demand for Toyota's cars prevented the company from focusing on its strength: auto design. c. as Toyota expanded its capacity, it experienced diseconomies of scale. d. Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with.

A) economic rent.

The price of a factor of production that is in fixed supply is called A) economic rent. B) economic profit. C) a compensating differential. D) opportunity cost.

d. no competitors apparently found the profit level attractive enough to enter the market.

The reason that the Fisherman's Friend restaurant in Stonington, Maine had a monopoly on selling seafood dinners in that town is most likely due to Select one: a. the restaurant owned all the fresh seafood in the state. b. occupational licensing. c. a government-imposed barrier. d. no competitors apparently found the profit level attractive enough to enter the market.

a. products are differentiated.

The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because Select one: a. products are differentiated. b. entry into the market is blocked. c. barriers to entry are very low. d. there are many firms in the market.

B) the demand for a factor of production that is derived from the demand for the good the factor produces.

The term "derived demand" refers to A) the demand for financial products called derivatives. B) the demand for a factor of production that is derived from the demand for the good the factor produces. C) a firm's estimated demand curve derived from sales data. D) a demand curve that derives from the availability of resources.

b. 2138 HHI = sum of the square of the market share of each firm Total sales = 5+10+8+12+10 = 45 million share of each firm:- 5/45 = 11.11% 10/45 = 22.22% 8/45 = 17.78% 12/45 = 26.67% 10/45 = 22.22% Sum of squares = 11.11^2+22.22^2+17.78^2+26.67^2+22.22^2 = 123.4321+493.7284+316.1284+711.2889+493.7284 = 2138.30

There are five firms in an industry with sales at $5 million, $10 million, $8 million, $12 million, and $10 million, respectively. The HHI is Select one: a. 2,014 b. 2,138 c. 1,805 d. 925

b. Both measures indicate that the industry is not perfectly competitive.

There are five firms in an industry with sales at $5 million, $10 million, $8 million, $12 million, and $10 million, respectively. What is the proper conclusion that we can draw from the calculated four-firm concentration ratio and HHI? Select one: a. The four-firm measure suggests the industry is relatively uncompetitive, while the HHI suggests the industry is highly competitive b. Both measures indicate that the industry is not perfectly competitive. c. The four-firm measure suggests the industry is highly competitive, while the HHI suggests the industry is relatively uncompetitive. d. Both measures indicate the industry is served by a monopoly

d. study buyers" needs and behavior very carefully to learn what they consider important, what they think has value, and what they are willing to pay for

To be successful with a differentiation strategy, a company has to Select one: a. Concentrate on differentiating its product on the basis of superior product quality or personalized customer service. b. incorporate more differentiating features into its product/service offering than rivals and also charge a price no higher than the prices charged by rivals. c. outspend rivals on R&D in order to have differentiating attributes that rivals don't have. d. study buyers" needs and behavior very carefully to learn what they consider important, what they think has value, and what they are willing to pay for e. have a state-of-the-art value chain and concentrate on providing buyers with a technologically superior product

d. 12M

Use the following information for the next two problems. Suppose that you know the following information about the potential buyers in the markets for two types of software for which your firm is a monopolist. You cost for producing the software is 0. If you bundle the items, how much profit can you make? Select one: a. 10M b. 6M c. 13M d. 12M

a. 10M

Use the following information for this problem. Suppose that you know the following information about the potential buyers in the markets for two types of software for which your firm is a monopolist. You cost for producing the software is 0. If you sell the items separately, how much total profit can you make? Select one: a. 10M b. 6M c. 13M d. 12M

a. Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases.

What is the difference between "diminishing marginal returns" and "diseconomies of scale"? Select one: a. Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. b. Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. c. Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. d. Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.

B) to be able to earn larger profits than if it was not part of the cartel

What is the incentive for a firm to join a cartel? A) to be able to earn profits in the long run but not in the short run B) to be able to earn larger profits than if it was not part of the cartel C) to completely insulate itself from competition D) to produce a larger amount of output than if it was not part of the cartel

c. convince customers that its card has greater value than those offered by rival firms.

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to Select one: a. shift the demand curve for competing firms to the right. b. create a barrier to entry for competing firms. c. convince customers that its card has greater value than those offered by rival firms. d. create a perfectly competitive market in which to sell its credit card.

c. diminishing marginal product.

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing a. diminishing labor. b. diminishing output. c. diminishing marginal product. d. negative marginal product.

c. The good is typically under supplied in a market where the free-rider problem occurs

When the free-rider problem occurs in a market for a good, what is true of the quantity of the good supplied relative to the efficient quantity of the good? Select one: a. The good is typically efficiently supplied in a market where the free-rider problem occurs. b. When the free-rider problem occurs, the good can be provided completely free of charge. c. The good is typically under supplied in a market where the free-rider problem occurs d. The good is typically oversupplied in a market where the free-rider problem occurs

False

When you produce more, average cost of production increases.

D) keeping a junked car parked on your front lawn

Which of the following activities create a negative externality? A) cleaning up the sidewalk on your block B) graduating from college C) repainting the house you live in to improve its appearance D) keeping a junked car parked on your front lawn

c. keeping a junked car parked on your front lawn

Which of the following activities create a negative externality? Select one: a. repainting the house you live in to improve its appearance b. graduating from college c. keeping a junked car parked on your front lawn d. cleaning up the sidewalk on your block

a. I, II, and III

Which of the following are sources of market power? I. government-issued patents and copyrights II. a Minnesota law requiring all new funeral homes to have an embalming room, which costs upward of $30,000, whether or not it is functional or will be used III. a Portland, Oregon, law that makes it a crime for limousine companies to charge less than $50 per ride Select one: a. I, II, and III b. II c. I d. III

d. People can sometimes enjoy common goods without contributing to them

Which of the following best describes the free-rider problem? Select one: a. A person who receives welfare from the government thereby loses the incentive to work b. Everyone would be better off if everyone refrained from pursuing self-interest c. Industrious people always attract others who try to capitalize on their success d. People can sometimes enjoy common goods without contributing to them

B) Entry barriers into the industry are low.

Which of the following characteristics is common to monopolistic competition and perfect competition? A) Firms produce identical products. B) Entry barriers into the industry are low. C) Each firm faces a downward -sloping demand curve. D) Firms take market prices as given.

b. Is the intervention program economically efficient?

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified? Select one: a. Does the intervention program reduce pollution to zero using the least costly method? b. Is the intervention program economically efficient? c. Does the intervention program make the amount of economic surplus as large as possible? d. Is the damage to the environment from government intervention as small as possible?

d. gains from specialization of inputs

Which of the following explains why long-run average cost at first decreases as output increases? a. diseconomies of scale b. less-efficient use of inputs c. fixed costs becoming spread out over more units of output d. gains from specialization of inputs

d. I, II, and III

Which of the following is (are) examples of moral hazard? I. An unemployed worker reduced his effort to find a job after he became eligible for unemployment insurance. II. Banks make exceptionally risky investments because they expect government bailouts if their investments fail. III. After a university made the morning-after pill available on campus, more students became sexually promiscuous. Select one: a. I b. II c. I and II d. I, II, and III

b. Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost.

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly? Select one: a. Each sets a price for its product that will maximize its revenue. b. Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. c. Each must lower its price to sell more output. d. Each maximizes profits by producing a quantity for which price equals marginal cost.

C) As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants.

Which of the following is a reason why a firm would experience diseconomies of scale? A) To finance an increase in the size of its plant a firm must borrow more money or sell more shares of stock. B) As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. C) As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants. D) As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs.

a. As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants.

Which of the following is a reason why a firm would experience diseconomies of scale? Select one: a. As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants. b. As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs. c. As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. d. To finance an increase in the size of its plant a firm must borrow more money or sell more shares of stock.

C) incomplete property rights or inability to enforce property rights

Which of the following is a source of market failure? A) unforeseen circumstances which leads to the bankruptcy of many firms B) a lack of government intervention in a market C) incomplete property rights or inability to enforce property rights D) an inequitable income distribution

a. incomplete property rights or inability to enforce property rights

Which of the following is a source of market failure? Select one: a. incomplete property rights or inability to enforce property rights b. unforeseen circumstances which leads to the bankruptcy of many firms c. an inequitable income distribution d. a lack of government intervention in a market

D) Wal-Mart builds another Supercenter.

Which of the following is an example of a long run adjustment? A) Your university offers Saturday morning classes next fall. B) Ford Motor Company lays off 2,000 assembly line workers. C) A soybean farmer turns on the irrigation system after a month long dry spell. D) Wal-Mart builds another Supercenter.

C) A $95 ticket to the Magic Kingdom gives you entrance to the park and free access to all the rides.

Which of the following is an example of bundling? A) A shoe store doesn't sell shoes for just one foot; it sells shoes for the left foot and right foot packaged together. B) An automobile manufacturer includes Michelin tires on its new cars. C) A $95 ticket to the Magic Kingdom gives you entrance to the park and free access to all the rides. D) HP includes a toner cartridge with the purchase of a new laser printer.

a. A $95 ticket to the Magic Kingdom gives you entrance to the park and free access to all the rides

Which of the following is an example of bundling? Select one: a. A $95 ticket to the Magic Kingdom gives you entrance to the park and free access to all the rides b. HP includes a toner cartridge with the purchase of a new laser printer c. A shoe store doesn't sell shoes for just one foot; it sells shoes for the left foot and right foot packaged together d. An automobile manufacturer includes Michelin tires on its new cars

d. All of the above are examples of strategic behavior.

Which of the following is an example of strategic behavior that we see in oligopoly? a. a. A firm builds excess capacity to discourage the entry of competitors. b. A firm adopts the pricing behavior of a dominant firm under the assumption that other firms will do likewise. c. Firms in an industry increase advertising expenditures to avoid losing market share. d. All of the above are examples of strategic behavior.

c. As output increases, the managers can begin to have difficulty coordinating the operations of their firms.

Which of the following is not a reason why firms experience economies of scale? Select one: a. Workers and managers can become more specialized, enabling them to be more productive. b. Technology can make it possible to increase production with a smaller increase in at least one input. c. As output increases, the managers can begin to have difficulty coordinating the operations of their firms. d. Larger firms may be able to purchase inputs at lower costs than smaller competitors.

D) independently setting a product's price without consideration of its rivals' pricing policies

Which of the following is not part of an oligopolist's business strategy? A) deciding on how to manage relations with suppliers B) choosing what new technologies to adopt C) selecting which new markets to enter D) independently setting a product's price without consideration of its rivals' pricing policies

B) Your local Wal-Mart hires two more associates.

Which of the following is the best example of a short run adjustment? A) A local bakery purchases another commercial oven as part of its capacity expansion. B) Your local Wal-Mart hires two more associates. C) Smith University completed negotiations to acquire a large piece of land to build its new library. D) Toyota builds a new assembly plant in Texas.

B) Public restrooms.

Which of the following markets is most likely to have a free-rider problem? A) International air travel. B) Public restrooms. C) Hotel rooms. D) Sushi.

a. I, II, and III

Which of the following practices mitigates moral hazard? I. A health insurance company's policy requires a $500 deductible and a 20% coinsurance rate. II. Progressive Insurance offers drivers a discount for using a black box that records miles driven and the number of sudden stops. III. Homeowner insurance does not cover claims arising from backyard trampolines. Select one: a. I, II, and III b. I c. II and III d. III

a. all of the above

Which of the following public policies has (have) the effect of restricting competition? Select one: a. all of the above b. patents c. licensing d. copyrights

b. I and II

Which of the following statements is (are) TRUE? I. In the face of a positive externality, a perfectly competitive market produces less than the socially optimal quantity of output. II. If vaccinations generate an external marginal benefit, their marginal social benefit will always exceed their private marginal benefit. III. In unregulated markets, the presence of negative externalities—but not positive externalities—causes deadweight losses. Select one: a. III b. I and II c. I, II, and III d. I and III

a. I

Which of the following statements is (are) TRUE? I. Public goods tend to be under provided. II. One person's consumption of a public good diminishes its use to another person. III. The marginal cost of providing a public good to another consumer is infinite. Select one: a. I b. II and III c. I and III d. I, II, and III

c. I

Which of the following statements is (are) TRUE? I. Public goods tend to be underprovided. II. One person's consumption of a public good diminishes its use to another person. III. The marginal cost of providing a public good to another consumer is infinite. Select one: a. I and III b. II and III c. I d. I, II, and III

c. I

Which of the following statements is (are) TRUE? I. Public goods tend to be underprovided. II. One person's consumption of a public good diminishes its use to another person. III. The marginal cost of providing a public good to another consumer is infinite. a. I and III b. II and III c. I d. I, II, and III

b. Advertising could make the monopolistic competitor's demand more inelastic, but advertising has no effect on a perfect competitor's demand.

Which of the following statements is true about advertising by a monopolistically competitive firm? Select one: a. Since the monopolistic competitor, like the perfect competitor, makes zero profit in the long run, it is a waste of resources to advertise its products. b. Advertising could make the monopolistic competitor's demand more inelastic, but advertising has no effect on a perfect competitor's demand. c. Monopolistically competitive firms tend to shun advertising because advertising draws attention to the variety of differentiated products available in the industry. d. Advertising will be more beneficial if a monopolistic competitor colludes with other firms to advertise the products of the industry as a whole rather than an individual firm's product.

b. Governments should supply the efficient quantity where the marginal cost is equal to the marginal social benefit.

Which of the following statements is true if a government decides that it must provide a public good, other things constant? Select one: a. Governments should minimize average total cost when providing a public good. b. Governments should supply the efficient quantity where the marginal cost is equal to the marginal social benefit. c. Governments should provide the most profitable public goods d. Governments should supply an unlimited amount of public goods free of charge.

B) an increase in supply

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon? A) a decrease in demand and an increase in supply B) an increase in supply C) an increase in supply and an increase in demand greater than the increase in supply D) a decrease in demand and a decrease in supply

C) an increase in supply and an increase in demand greater than the increase in supply

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons? A) an increase in demand and an increase in supply B) an increase in supply C) an increase in supply and an increase in demand greater than the increase in supply D) a decrease in demand and an increase in supply

b. an increase in supply and an increase in demand greater than the increase in supply

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons? Select one: a. an increase in demand and an increase in supply b. an increase in supply and an increase in demand greater than the increase in supply c. an increase in supply d. a decrease in demand and an increase in supply

A) an increase in consumer income

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase? A) an increase in consumer income B) a drought that sharply reduces cotton output C) a decrease in consumer income D) unusually good weather that results in a bumper crop of cotton

b. Those with high wages which result from them possessing the innate ability to develop some skill to a very high level

Which type of workers is most likely to enjoy substantial economic rent? Select one: a. Those with low wages which result from no need to have a period of training. b. Those with high wages which result from them possessing the innate ability to develop some skill to a very high level c. Those with high wages which compensate them for unpleasant aspects of their jobs. d. Those with low wages which can be paid because their jobs have other very pleasant aspects.

b. No

Would you expect economies of scope to occur in the following situation; Producing two goods that are complementary to each for the buyer such as coffee and sugar. Select one: a. Yes b. No c. Cannot be determined based on the provided information d. I do not know

a. Yes

Would you expect economies of scope to occur in the following situation; Producing two goods that use the same resource Select one: a. Yes b. I cannot answer based on the available information c. No d. I do not know.