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