Term
Compared to a firm in perfectly competitive market, the monopolistic competitive firm tends to...
A. produce less and charge a higher price
B. produce less and charge a lower price
C. produce more and charge a lower price
D. produce more and charge a higher price |
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Definition
| A. Produce less and charge a higher price |
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Term
Monopolistically competitive markets are common in..
A.retail selling.
B.farming.
C. basic manufacturing.
D. electric power generation. |
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Definition
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Term
Which of the following is a true statement?
A. A perfectly competitive firm can sell additional units of output without having to lower its price, while a monopolistically competitive firm must lower its price in order to sell additional units.
B. A monopolistically competitive firm can sell additional units of output without having to lower its price, while a perfectly competitive firm must lower its price in order to sell additional units.
C. Both monopolistically competitive firms and perfectly competitive firms can sell additional units of output without having to lower their price.
D. Both monopolistically competitive firms and perfectly competitive firms must lower their price in order to sell additional units of output. |
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Definition
| A. A perfectly competitive firm can sell additional units of output without having to lower its price, while a monopolistically competitive firm must lower its price in order to sell additional units. |
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Term
As new firms enter a monopolistically competitive market, profits of existing firms..
A. rise and product diversity in the market increases.
B. rise and product diversity in the market decreases.
C. decline and product diversity in the market increases.
D. decline and product diversity in the market decreases. |
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Definition
| C. decline and product diversity in the market increases. |
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Term
Long-run equilibrium in a monopolistically competitive market requires that...
A. the demand curve intersect the average cost curve.
B. the demand curve be tangent to the average cost curve.
C. price be equal to marginal cost.
D. quantity produced be at the point where average cost is at a minimum. |
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Definition
| B. the demand curve be tangent to the average cost curve. |
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Term
Which of the following is true of a monopolistically competitive firm when the market is in a long-run equilibrium?
A. MR < MC < price
B. MR < MC = price
C. MR = MC < price
D. MR = MC = price |
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Definition
| C. firms do not produce the output rate that would minimize their average total costs. |
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Term
For the monopolistically competitive firm,...
A. price will exceed marginal cost at the profit-maximizing level of output.
B. price will equal average total cost in the long run.
C. economic profit will be driven to zero in the long run by the entry and exit of firms.
D. all of the above are correct. |
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Definition
| D. all of the above are correct. |
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Term
[image]
Given the cost and demand conditions depicted in Figure 10 for the monopolistically competitive firm, what is the price that the firm should charge if it wants to maximize its profit?
A.20
B.30
C.40
D.50 |
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Definition
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[image]
What is the maximum economic profit this firm depicted in Figure 9 will be able to earn?
A. zero profit
B. $200 profit
C. $400 profit
D. $600 profit |
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Definition
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Term
Oligopolistic agreements on price tend to be unstable because...
A. although the monopoly price is the best price for all firms, oligopolists are unaware of this and thus charge prices that are lower than the price that could be charged by a monopolists, therefore, decreasing social welfare.
B. although the monopoly price maximizes the joint profits of the firms, a secret price cut by any individual firm will increase the profits of that firm; hence, collusive agreements tend to break down.
C. the demand for the products of oligopolistic industries is inherently unstable relative to the demand for the products of non-oligopolistic industries because demand for products in oligopolistic industries are dependent on changes in consumer tastes and preferences.
D. firms in oligopolistic industries have more concern for consumers than do firms in competitive industries. |
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Definition
| B. although the monopoly price maximizes the joint profits of the firms, a secret price cut by any individual firm will increase the profits of that firm; hence, collusive agreements tend to break down. |
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Term
It is difficult to predict the behavior of oligopolistic firms because...
A. there are few real-world examples of oligopolies for economists to study.
B. oligopolists make decisions independently of each other.
C. firms in oligopolistic industries react to each other's behavior in many ways.
D. economists have paid little attention to the topic in recent years and so have not yet applied to it the techniques of modern economic theory. |
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Definition
| C. firms in oligopolistic industries react to each other's behavior in many ways. |
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Term
Which of the following industries most closely approximates the conditions of the oligopoly model?
A. restaurants
B. retail clothing
C. home construction
D. airlines |
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Definition
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Term
In markets characterized by oligopoly..
A. the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
B. collusive agreements will always prevail.
C. collective profits are always lower with cartel arrangements than they are without cartel arrangements.
D. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. |
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Definition
| A. the oligopolists earn the highest profit when they cooperate and behave like a monopolist. |
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Term
When barriers to entry are high, a monopolist (or cartel) will often be able to increase their profits by..
A. expanding their output so they can increase their price.
B. reducing their output so they can raise their price.
C. expanding their output so they can lower their price.
D. reducing their output so they can lower their price. |
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Definition
| B. reducing their output so they can raise their price. |
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Term
If oligopolists compete hard against each other...
A. they end up acting very much like imperfect competitors.
B. costs for all are driven up.
C. zero profits result for all.
D. they end up acting very much like monopolistic competitors. |
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Definition
| C. zero profits result for all. |
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Term
In the framework of an oligopoly, what strategy can work like a silent form of cooperation?
A. always match other cartel firms' price cuts, but don’t match price increases
B. always match other cartel firms' price increases, but don’t match price cuts
C. immediately match price increases
D. legally enforceable agreements |
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Definition
| A. always match other cartel firms' price cuts, but don’t match price increases |
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Term
Collusion...
A. is exactly the same thing as competition.
B. involves cooperative actions by sellers at the expense of buyers.
C. requires competitive actions by sellers to win customers from rival firms.
D. can only be achieved in price-taker markets. |
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Definition
| B. involves cooperative actions by sellers at the expense of buyers. |
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Term
The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is...
A. oligopoly collusion.
B. prisoner’s dilemma.
C. game theory.
D. collusion theory. |
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Definition
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Term
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to..
A. match price increases, but not price cuts.
B. stand at opposite ends of the competition spectrum.
C. match price cuts, but not price increases.
D. stand at the high point of the competition spectrum. |
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Definition
| C. match price cuts, but not price increases. |
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Term
The term _____ refers to a market exchange that affects a third party who is outside or external to the exchange.
A. social costs
B. spillover
C. market failure
D. private costs |
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Definition
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Term
_____ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
A. Negative externality
B. Positive externality
C. A spillover
D. A market failure |
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Definition
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Term
________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
A. Social costs
B. Private costs
C. Market costs
D. External costs |
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Definition
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Term
A pollution charge is a form of tax imposed on...
A. the quantity of pollution that a firm emits.
B. pollution control technologies.
C. every economy in the world.
D. low-income market-orientated industries. |
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Definition
| A. the quantity of pollution that a firm emits. |
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Term
Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output?
A. the European Union
B. China
C. Ohio
D. command economies |
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Definition
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Term
If pollutants are emitted into the air and water, what costs might be incurred as a result?
A. compromised recreation possibilities
B. decreased property values
C. loss from destruction of wildlife habitat
D. health injuries and all of the above |
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Definition
| D. health injuries and all of the above |
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Term
If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes...
A. its supply curve will be based on perceived benefits of maximizing utility.
B. it is factoring in the social costs of the pollution it generates.
C. its demand curve will be based on production choices relating to marginal costs.
D. all of the above. |
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Definition
| B. it is factoring in the social costs of the pollution it generates. |
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Term
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be...
A. each would create less pollution
B. each would lower production to decrease pollution levels
C. their supply curves will represent all of those social costs
D. the price of goods will rise and a and b above |
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Definition
| D. the price of goods will rise and a and b above |
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Term
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is...
A. the cost of the bee hives to the beekeeper.
B. the possibility of the bees stinging the students at the school.
C. the bees helping to pollinate the orchard, leading to more fruit.
D. the honey the bees produce. |
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Definition
| B. the possibility of the bees stinging the students at the school. |
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Term
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is...
A. the cost of the bee hives to the beekeeper.
B. the possibility of the bees stinging the students at the school.
C. the bees helping to pollinate the orchard, leading to more fruit.
D. the honey the bees produce. |
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Definition
| C. the bees helping to pollinate the orchard, leading to more fruit. |
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Term
[image]The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below.
The equilibrium price and quantity when only private costs are taken into account are...
A. Price = $55, Quantity = 30
B. Price = $40, Quantity = 55
C. Price = $30, Quantity = 20
D. Price = $30, Quantity = 80 |
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Definition
| D. Price = $30, Quantity = 80 |
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Term
The[image] supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below.
The equilibrium price and quantity when social costs are taken into account are...
A. Price = $55, Quantity = 30
B. Price = $40, Quantity = 55
C. Price = $30, Quantity = 20
D. Price = $30, Quantity = 80 |
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Definition
| A. Price = $55, Quantity = 30 |
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Term
Four[image] companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. In the table below, the first row of shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on.
The total cost of requiring each firm to reduce its emission by one third is...
A. $167
B. $137
C. $187
D. $127 |
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Definition
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Term
[image]Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner’s dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below.
From the table, we know that the outcome of this game will be...
A. neither state choosing to protect the lake
B. Wisconsin choosing to not protect the lake, Michigan choosing to protect the lake
C. Wisconsin choosing to protect the lake, Michigan choosing to not protect the lake
D. both states choosing to protect the lake |
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Definition
| A. neither state choosing to protect the lake |
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Term
[image]A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts.
What level of toxic waste should the country reduce to?
A. 30 million tons
B. 20 million tons
C. 10 million tons
D. 0 tons |
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Definition
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Term
If no externalities of pollution exist in a particular industry, the interaction of demand and supply ____.
A. is based on benefits individuals perceive while maximizing utility
B. is based on choices about production relative to total average costs
C. will coordinate social costs and benefits
D. shifts so supply has no relation to social costs |
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Definition
| C. will coordinate social costs and benefits |
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Term
To be effective, U.S. command-and-control environmental regulation required...
A. social costs of industrial pollution to become unavoidable business costs.
B. firms to take the social costs of pollution into account.
C. firms to increase their costs by installing specified anti-pollution equipment.
D. the EPA to oversee environmental laws and all of the above. |
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Definition
| D. the EPA to oversee environmental laws and all of the above. |
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Term
The arguments presented by economists regarding U.S. environmental command-and-control regulations generally...
A. accept the goal of reducing pollution.
B. question the regulations as being the best policy tools for meeting reduction goals.
C. lack flexibility
D. all of the above. |
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Definition
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Term
A market transaction causes an externality if someone...
A. directly involved in the transaction receives uncompensated benefits or costs from it.
B. not directly involved in the transaction receives uncompensated benefits or costs from it.
C. directly involved in the transaction seeks legal assistance to ensure that the transaction is carried out.
D. not directly involved in the transaction interferes in it by imposing regulations or product standards. |
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Definition
| B. not directly involved in the transaction receives uncompensated benefits or costs from it. |
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Term
Markets fail to allocate resources efficiently when...
A. prices fluctuate.
B. people who have property rights abuse their privileges.
C. property rights are poorly enforced or not well established.
D. the government refuses to intervene in private markets. |
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Definition
| C. property rights are poorly enforced or not well established. |
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