ABM 1041 final exam

monopoly

A market in which there are many buyers but only one seller. differentiated product, barriers to entry

Which has the comparative advantage in cars?

Country A

The Coase theroem states that

If transaction costs are low, private barganining will lead to an efficient solution to externalities

what is the difference between a change in quantity supplied and a change in supply

a change in the market price affects the quantity supplied not the supply

what is a network good

a good whose value to one consumer increases the more that other consumers use the good

perfect competition

a market structure in which a large number of firms all produce the same product

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

natural monopoly

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

What is Nash Equilibrium?

a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen

Oligopoly

a state of limited competition, in which a market is shared by a small number of producers or sellers.

Which factor would increase elasticity the most

an increase in the number of tablet brands being offered

the market for will sweaters: what will make lower prices and higher consumption of sweaters

apparel manufacturers develop a more efficient way of processing wool fabrics

Which has a comparative advantage in trucks?

country B

Th reason monopolistic competitive firms have difficulty maintaining profits in the long run is because

ease of entry into the market encourages new firms to enter and force down the price

Unlike positive externalities of physical goods, network externalities affect

existing and potential users

Many entrepreneurs are moving into the food truck industry in major cities. The movement into the industry suggests that existing firms are earning normal profits

false

When negative externalities exist an regulated market will produce too little of the good and the price will be too high when compared to the socially optimal production

false

an increase in price will cause a decrease in demand. this is the law of demand.

false

product differentiation gives a firm control over prices except when there is competition

false

overtime interconnection in network industries creates a _________ environment that leads firms to _________

more competitive; lower costs

Market for new cars: what will increase prices and increase consumption

new government regulations make it more difficult to for cars more than 8 years old to pass safety tests

Market for new cars: what will lower prices and increase the number of cars bought

new technology improves the production efficiency of automobile manufacturers

The reason economists often consider monopolies socially undesirable is because the monopolist

produces less than the socially efficient amount

Wheat is the main input in the production of flour if the price of wheat increases, all else equal, we would expect the

supply of flour to decrease

if a market is NOT at equilibrium

the price will change and in response market participants will move along the existing supply and demand curves until the market reaches equilibrium

A decrease in price will cause a decrease in quantity supplied. This is the law of supply

true

A firm should (at least temporarily) shut down its production facility if variable costs are greater than revenues.

true

According to the coase theorem if transaction costs are negligible, the outcome is efficient, regardless of the distribution of property rights

true

Economies of scale in an industry can be so large that demand is able to support only one firm

true

The social cost curve lies above the private supply curve for the producer in cases of negative externalities

true

Universities engage in price discrimination by charging different levels of tuition for out of state students versus in state

true

if price exceeds marginal cost at a competitive firms current level of output then the firm can increase profit if it increases the quantity it produces and sells

true

price discrimination is more likely in the case of services that in the case of goods because it is more difficult to prevent the reselling of goods

true

the speed at which a network can enter the virtuous or vicious cycle is generally faster than that of a non network good

true

Some of the mangoes from your neighbors mango tree fall into your yard. The fallen mangos make lawn care harder for you. Your neighbor values his tree at 300 dollars you cost of dealing with it is 500 dollars. You neighbor has the legal right to keep the tree what would be the efficient outcome according to the coase theorem

you pay your neighbor 400 dollars to cut the tree down