eco module quiz
If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to
$0. Correct. When a monopoly firm perfectly price discriminates, there is no deadweight loss.
If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to
$2,000.Which of the following statements is correct?
The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?
A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.
Which of the following statements is correct?
A monopolist produces where P > MR = MC.
The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Thanks to the tolls, the Turnpike is uncongested and motorists can travel without traffic. What type of good would the Turnpike be classified as in this case?
Club good
Which of the following statements is correct?
If 325 units of plastics are produced and consumed, then the market equilibrium has been reached.
Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?
Mary pays Cathy $16 so that Mary can smoke.
Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects?
The amount of pollution emitted by each firm must be the same.
Suppose that flu shots create a positive externality equal to $12 per shot. Further suppose that the government offers a $15 per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?
The equilibrium quantity is greater than the socially optimal quantity.
Which of the following statements is correct?
When an industry is a natural monopoly, it is characterized by economies of scale.
What is the shape of the monopolist's marginal revenue curve?
a downward-sloping line that lies below the demand curve
The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?
common resources
Corrective taxes differ from most taxes in that corrective taxes
enhance economic efficiency.
If people can be prevented from using a certain good, then that good is called
excludable
On the graph, Q represents the quantity of plastics and P represents the price of plastics. In order to reach the social optimum, the government could
impose a tax of $8 per unit on plastics.
A positive externality will cause a private market to produce
less than is socially desirable.
If a road is congested, then use of that road by an additional person would lead to a
negative externality.
When a good is rival in consumption,
one person's use of the good diminishes another person's ability to use it.
The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that
over time, the aquifer is likely to be overused.
Without government intervention, common resources tend to be
overconsumed and public goods tend to be underproduced.
When a monopolist is able to sell its product at different prices, it is engaging in
price discrimination.
Goods that are excludable include both
private goods and club goods.
The deadweight loss associated with a monopoly occurs because the monopolist
produces an output level less than the socially optimal level.
The Tragedy of the Commons results when a good is
rival in consumption and not excludable.
Producers have little incentive to produce a public good because
there is a free-rider problem.
The Coase theorem suggests that private solutions to an externality problem
will usually allocate resources efficiently if private parties can bargain without cost.
