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
