g202 test 2

Assume a perfectly competitive market with an upward sloping supply schedule and a downward sloping demand schedule where production generates pollution that imposes external costs on society. There is no pollution tax or environmental regulation of production. Which of the following statements is TRUE in this market? The demand schedule underestimates the marginal cost of production to society. The supply schedule underestimates the marginal cost of production to society. The supply schedule underestimates the marginal benefit of output to society. The demand schedule underestimates the marginal benefit of output to society.

The supply schedule underestimates the marginal cost of production to society.

Assume that production produces pollution that imposes external costs on society. Below is the marginal benefit (MB) to consumers, marginal private cost (MPC) of production to producers, and the marginal external cost (MEC) of production to society at different quantities (Q) of output in a perfectly competitive market: Q = 10, MB = $480, MPC = $180, MEC = $180 Q = 20, MB = $440, MPC = $200, MEC = $240 Q = 30, MB = $400, MPC = $220, MEC = $300 Q = 40, MB = $360, MPC = $240, MEC = $360 Q = 50, MB = $320, MPC = $260, MEC = $420 Q = 60, MB = $280, MPC = $280, MEC = $480 Q = 70, MB = $240, MPC = $260, MEC = $540 At what level should the government set the pollution tax per unit of output? $180 $480 $360 $240

$240

A firm with market power can sell the following units of output Q at the given price P: At Q = 1, P = $120 At Q = 2, P = $100 At Q = 3, P = $80 At Q = 4, P = $60 At Q = 5, P = $40 At Q = 6, P = $20 Marginal cost of production is a constant $80 and fixed costs are zero for the firm. How much profit does the firm earn? $40 $240 $0 $120

$40

A firm with market power can sell the following units of output Q at the given price P and incur the given total cost of production C: At Q = 0, P = $45 and C = $10 At Q = 1, P = $40 and C = $30 At Q = 2, P = $35 and C = $50 At Q = 3, P = $30 and C = $70 At Q = 4, P = $25 and C = $90 At Q = 5, P = $20 and C = $110 At Q = 6, P = $15 and C = $130 1. The profit maximizing price is $30 and the socially efficient price is $20. 2. The profit maximizing price is $20 and the socially efficient price is $20. 3. The profit-maximizing price is $40 and the socially efficient price is $30. 4. The profit maximizing price is $30 and the socially efficient price is $30.

1. The profit maximizing price is $30 and the socially efficient price is $20.

Firms A and B sell similar but differentiated products. They simultaneously choose one of three price points. Firm A chooses between $24.95, $29.95, and $39.95. Firm B chooses between $14.95, $19.95, and $24.95. Firm A and Firm B each earn the following profits (in millions of dollars) under each combination of prices where the first number is Firm A's profit and the second number is Firm B's profit: Assuming collusion is not possible, what is the expected outcome? A charges $24.95, B charges $14.95 A charges $24.95, B charges $19.95 A charges $29.95, B charges $24.95 A charges $39.95, B charges $24.9

A charges $24.95, B charges $19.95

Firms A and B sell similar but differentiated products. They simultaneously choose to produce and bring to market different quantities of their product. Firm A chooses either to produce and sell 2000 or 3000 units of its product. Firm B chooses either to produce and sell 2750 or 4000 units of its product. Firm A and Firm B each earn the following profits (in millions of dollars) under each combination of quantities where the first number is Firm A's profit and the second number is Firm B's profit: Firm A is fearful of bankruptcy and follows a secure strategy. Firm B is not fearful of bankruptcy and makes choices that maximize expected payoff. Assuming collusion is not possible, what is the expected outcome? A produces 3000 units, B produces 2750 units A produces 2000 units, B produces 2750 units A produces 3000 units, B produces 4000 units A produces 2000 units, B produces 4000 units

A produces 2000 units, B produces 4000 units

Which of the following did Levi Strauss NOT do to advance the Screened Chemistry Program as an industry standard? A. agree to pay the screening costs for chemical companies if profits were too low B. subsidize the research and development of safer chemical substitutes C. suggest not framing Screen Chemistry as a Levi Strauss program D. leverage the GreenScreen and EPA Safer Choice assessment methodologies

B. subsidize the research and development of safer chemical substitutes

Firms A and B sell similar but differentiated products. They simultaneously choose one of two price points. Interaction between Firm A and Firm B is repeated and neither knows when interaction will end. Both Firm A and Firm B choose between $19.95 and $29.95. Firm A and Firm B each earn the following profits (in millions of dollars) under each combination of prices where the first number is Firm A's profit and the second number is Firm B's profit: Firm A and Firm B agree to collude and both charge $29.95. The market interest rate is 2/5. Which of the following is a true statement? Both firms charging $29.95 is the Nash equilibrium and collusion is stable. Both firms charging $29.95 is the Nash equilibrium and collusion is unstable. Both firms charging $19.95 is the Nash equilibrium and collusion is unstable. Both firms charging $29.95 is the Nash equilibrium and collusion is stable.

Both firms charging $29.95 is the Nash equilibrium and collusion is stable.

Which of the following was not an early impact of the USLP through 2013? A Higher rev B Higher NI C Higher employee turnover D GHG impact per consumer

C Higher employee turnover

When did it make sense for De Beers to flood the market with an extraordinary quantity of diamonds from the stockpile that it carefully managed over time? A. when the global economy expanded and the demand for diamonds increased B. when the global economy contracted and the demand for diamonds decreased C. when producers defected from the cartel and leaked diamonds to the market D. when producers complied with the cartel and sold diamonds to De Beers

C. when producers defected from the cartel and leaked diamonds to the market

Which of the following is a true statement about imperfect price discrimination? Consumer surplus is zero and production is socially inefficient. Consumer surplus is greater than zero and production is socially efficient. Consumer surplus is zero and production is socially efficient. Consumer surplus is greater than zero and production is socially inefficient.

Consumer surplus is greater than zero and production is socially inefficient.

Which of the following is a FALSE statement? A Unilever charged a price greater than MC and imposed a SWL with its market power. B A brand based upon sustainability imposes a higher FC than more traditional brand strategies. C Market growth under the USLP strategy allowed Unilever to raise prices, increase PS, and reduce CS. D An emphasis on short-term operational efficiency and lowest cost inputs defined Unilever's brand and drove the early success of the USLP.

D An emphasis on short-term operational efficiency and lowest cost inputs defined Unilever's brand and drove the early success of the USLP.

2. Which of the following was NOT a reason for De Beers to promote its own unique differentiated global brand? A. Russian, Angolan, and Australian producers were stealing more market share. B. De Beers only spent 1% of revenue on marketing. C. The market value of the company's diamond stockpile was $4.8 billion. D. De Beers had not been successfully prosecuted by the U.S. Justice Department

D. De Beers had not been successfully prosecuted by the U.S. Justice Department

Which chemical management strategy achieved the highest level of environmental risk reduction in garment manufacturing? A. maintaining restricted chemicals in garment products below safety thresholds B. banning or restricting use of certain chemicals in the manufacturing process C. directly compensating individuals who file a claim of damage from pollution D. designing products that only incorporate use of environmentally safe chemicals

D. designing products that only incorporate use of environmentally safe chemicals

Firms A and B sell similar but differentiated products. Firm A chooses its price first and Firm B chooses its price second. Firm A chooses between $59.95 and $64.95. Firm B chooses between $24.95 and $29.95. Firm A and Firm B each earn the following profits (in millions of dollars) under each combination of prices where the first number is Firm A's profit and the second number is Firm B's profit: Firm A charges $59.95, then Firm B charges $24.95: ($17m, $6m) Firm A charges $59.95, then Firm B charges $29.95: ($28m, $2m) Firm A charges $64.95, then Firm B charges $24.95: ($14m, $8m) Firm A charges $64.95, then Firm B charges $29.95: ($26m, $4m) What is the expected outcome? Firm A charges $59.95, then Firm B charges $24.95 Firm A charges $64.95, then Firm B charges $29.95 Firm A charges $64.95, then Firm B charges $24.95 Firm A charges $59.95, then Firm B charges $29.95

Firm A charges $59.95, then Firm B charges $24.95

3. The best way for a firm under perfect competition to increase profit?

Invest in process innovation to reduce marginal cost

Which of the following statements is TRUE about the impact of a pollution tax imposed upon production that was not previously subject to any environmental regulation in a perfectly competitive market with an upward sloping supply schedule and a downward sloping demand schedule? Producer surplus rises and consumer surplus falls. Producer surplus falls and consumer surplus rises. Producer surplus rises and consumer surplus rises. Producer surplus falls and consumer surplus falls.

Producer surplus falls and consumer surplus falls.

Assume that production produces pollution that imposes external costs on society. Below is the marginal benefit (MB) to consumers, marginal social cost (MSC) of production to society, and the marginal external cost (MEC) of production to society at different quantities (Q) of output in a perfectly competitive market: Q = 25, MB = $270, MSC = $70, MEC = $40 Q = 50, MB = $240, MSC = $90, MEC = $50 Q = 75, MB = $210, MSC = $110, MEC = $60 Q = 100, MB = $180, MSC = $130, MEC = $70 Q = 125, MB = $150, MSC = $150, MEC = $80 Q = 150, MB = $120, MSC = $170, MEC = $90 Q = 175, MB = $90, MSC = $190, MEC = $100 In the absence of any government regulation of pollution, what quantity of output will the market deliver? Q = 175 Q = 100 Q = 150 Q = 125

Q = 175

Assume a perfectly competitive market with an upward sloping supply schedule and a downward sloping demand schedule where production generates pollution that imposes external costs on society. The marginal external cost imposed upon society from pollution rises as the quantity of output increases. In the absence of any government regulation of pollution, the market generates output of 20,000 units, a price of $350, and a marginal external cost to society from pollution of $130. Which of the following is a TRUE statement? The government should set a pollution tax greater than $130 and the rise in market price will be greater than the tax. The government should set a pollution tax greater than $350 and the rise in market price will be less than the tax. The government should set a pollution tax less than $130 and the rise in market price will be less than the tax. The government should set a pollution tax equal to $130 and the rise in market price will be less than the tax.

The government should set a pollution tax less than $130 and the rise in market price will be less than the tax.

Firms A and B sell similar but differentiated products. They simultaneously choose one of two price points. Interaction between Firm A and Firm B is repeated and neither knows when interaction will end. Firm A chooses between $29.99 and $39.99. Firm B chooses between $59.99 and $69.99. Firm A and Firm B each earn the following profits (in millions of dollars) under each combination of prices where the first number is Firm A's profit and the second number is Firm B's profit: Firm A offers to charge $39.99 if Firm B cooperates and charges $69.99. Firm A indicates it will charge $29.99 in all future periods if B charges $59.99. Which interest rate range identifies all interest rates under which Firm B will cooperate? interest rates less than 3/4 interest rates less than 1/2 Firm B will not cooperate at any interest rate equal to zero or higher. interest rates less than 4/3

interest rates less than 3/4

Which of the following both generate a socially efficient outcome? perfect competition and perfect price discrimination perfect competition and imperfect price discrimination imperfect competition and perfect price discrimination imperfect competition and imperfect price discrimination

perfect competition and perfect price discrimination