econ exam 4 practice quiz

Battle of the Sexes:

Battle of the Sexes: Similar to pure coordination, except that one response is better for one player and another for the other.

How does marginal revenue compare to price for a seller with market power?

Beyond the first unit sold, marginal revenue is below price.

Assurance game

Similar to pure coordination, except one standard is better than the other.

pure coordination

both players want to choose the same payoff, but it doesn't matter which one.

if Penelope, a monopolist, is producing a quantity where MC < MR, then profit:

can be increased by increasing production.

Mr. Parker sells 10 bottles of wine per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity effect of the sale of an additional bottle would be _____, whereas the price effect of the sale of an additional bottle would be _____.

$45; -$50

theorems and statistical analysis vs computer encryptions and books

A numerical theorem can be used by anyone without causing there to be less available for anyone else. It would also be difficult to try to prevent anyone from accessing the information.Statistical analysis follows the same pattern. This sort of fundamental knowledge, the result of basic research, is a public good. Computer encryption algorithms can be claimed by individuals, who can prevent others from using the good if they so choose. The overall amount available is determined by the owner of the rights to the good. This means that there may be rivalry in using the item. A book about Shakespeare's plays has the same characteristics, so they are both private goods.

What is the net effect of a negative externality?

It decreases both producer and consumer surpluses.

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personal computers as well as all university-owned computers. Why would the university pay for the protection of the personal computers of students, faculty, and staff?

It reduces the number of viruses on university-owned computers by reducing the probability that viruses will spread through files transferred from personal computers to university-owned computers and systems.

The efficient rate of emissions occurs when:

MSB = MSC .

what is marginal revenue not equal to for a firm with market power

Marginal Revenue is not equal to Demand for firm with Market Power

If a firm faces a downward-sloping demand curve:

P > MR.

What is the prisoner's dilemma?

The Prisoner's Dilemma yields a failure to cooperate and an equilibrium outcome that is suboptimal for the parties involved.

what is the demand curve

The demand curve is the marginal benefit curve.

example of the anti-coordination game

The multiple Nash equilibria occur when The Beehive and The Old Familiar take opposite actions. This is an example of an anti-coordination game.

Chicken:

There can only be one winner, but the question is who will leave the market first.

how to determine profit maximizing price

You need to find the profit-maximizing quantity (found where marginal revenue = marginal cost) first, then look up to the demand curve to find the profit-maximizing price.

Compared with no regulation, regulation with marketable permits decreases firms' costs.

false

Pollution taxes are more effective at reducing pollution than marketable permits

false

For repeated games where there is a known, finite repetition, businesses use something called backward ______________.

induction

perfect competition

least mp, many competitors, identical product

what the efficient result consider

social cost

The demand curve for a monopoly is:

above the MR curve.

One of the main problems with the Coase theorem is that:

bargaining costs are generally not low (or zero).

prisoners dilemma

both players have an incentive to defect, but the best overall payout occurs with cooperation

By using this strategy, the resulting play is always for the businesses to __________.

defect

imperfect competition (opologies)

few competitors, some have differentiated products, some market power

Companies release alternative versions of the same product to

generate hurdles and market segmentation

Grim Trigger:

if you defect, we'll defect next round and forever after that.

imperfect competition (monopolistic competition)

many competitors, differentiated product, some market power

can you go above the marginal cost in a perfectly competitive market

no

monopoly

no competition, unique product, most market power

common good

non-excludable but rival

club good

non-rival but excludable

public good

nonexcludable and nonrival

In a perfectly competitive market, a company's marginal revenue equals _____. For a company with market power, marginal revenue is _____.

price; less than price

private good

rival and excludable

For a good to be efficiently provided by the private market, it must be:

rival in consumption and excludable.

From a community perspective, the marginal cost that matters is the marginal _____ cost.

social

Perfect price discrimination leads to _____market output

socially efficient

The marginal revenue curve of a firm with market power will always lie below its demand curve because of

the output effect and the discount effect. When a firm with market power lowers its price, it will attract new customers; this is the output effect. However, when it lowers its price, it receives this lower the price on all units sold; this is the discount effect. Because the price charged for all units falls, the marginal revenue received from selling an additional unit will be less than the price of the good.

Marketable permits provide their owners with the right to pollute a specified amount

true

Marketable permits typically achieve pollution reduction at a lower cost than command‑and‑control regulation.

true

The term "cap and trade" describes regulation by marketable permits.

true

One of the market failures caused by market power is

underproduction.

Tit-for-tat:

we will play what you played the previous round.

What is WTP (willingness to pay)?

willingness to pay is private information that people have an incentive to keep hidden

If Penelope, a monopolist, is producing a quantity where MC = P, then profit:

can be increased by decreasing production.

If Penelope, a monopolist, is producing a quantity where MC > MR, then profit:

can be increased by decreasing production.

If a monopolist produces a quantity that generates MC < MR, then profit:

can be increased by increasing output.

If a monopolist produces a quantity that generates MC > MR, then profit:

can be increased by increasing price.

A good that is excludable but nonrival in consumption is known as a _____ good.

club