EXAM 3 MICROECO - Assignment Essays

question

Public goods create a free-rider problem because

answer

people can enjoy the good or service no matter whether or not they pay for it.

question

If there are positive externalities in the production of a good and firms do not have to account for these external benefits, then firms will produce an amount that:

answer

Is below society's wealth maximizing quantity

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Under a tradable permit system,

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The government allows a certain level of pollution and issues permits for this amount, after which any interested party can buy or sell these permits

question

The Coasian solution to dealing with externalities is feasible when:

answer

The pollution is being generated by a large number of polluters

question

External benefits cause the market to:

answer

underallocate resources.

question

One method of correcting for ____ externalities is to create a ____ to make sure the market accounts for all costs and benefits.

answer

negative; tax

question

Which of the following is an example of a negative externality?

answer

John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary.

question

People will tend to "internalize externalities" when

answer

responsibility for the consequences of actions is more clearly assigned to the actors.

question

The primary reason buffalos were hunted to extinction in 19th century America is because:

answer

No one owned buffalos and buffalos were worth a lot of money

question

Which of the following is an example of the free-rider problem?

answer

Mathur figures that he does not have to work so hard for his biology group project because his three other teammates will do a substantive share of the work

question

Which of the following is typically a non-excludable resource?

answer

Iron ore in a mine

question

Which of the following is an example of a pure public good?

answer

An army.

question

A free rider is someone who

answer

can obtain a desired good without paying for it and therefore has no incentive to contribute to the costs of making it available.

question

What is meant by a command and control approach to public policy?

answer

It is a policy in which to foster socially desirable behavior, the government simply mandates behavior in law and imposes a penalty for violation of that law

question

Which of the following is not a problem associated with command and control policies?

answer

Command and control policies cannot be used to reduce pollution where there are a large number of polluters, such as pollution from automobiles

question

Which of the following characterizes a Pigouvian tax?

answer

It is tax levied on a good that creates the negative externality such that the tax equals the value of the harm created by the good

question

The problem of "free riders" arises in a society when goods

answer

can't be provided exclusively to the people who pay for them.

question

To increase its profit, a perfectly competitive firm will produce more output when

answer

price is greater than marginal cost.

question

The above figure illustrates a perfectly competitive firm. Curve A represents the

answer

MR curve.

question

Under which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short run?

answer

when the price is less than its minimum average variable cost

question

If perfectly competitive lawn care firms are making an economic profit, then

answer

new firms will enter the industry.

question

The above figure shows a perfectly competitive firm. If the market price is $10, the firm

answer

is making zero economic profit.

question

Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic ________ equals ________.

answer

profit; $480 per week

question

The cranberry market is perfectly competitive. Reports that consuming cranberries can lead to improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries. As time passes, the price of cranberries ________ and the initial firms' economic ________.

answer

falls; profit will be eliminated

question

If a firm increases output when MR > MC, then:

answer

profit will increase.

question

If, at the point where MR = MC, the firm incurs losses, in the short run the firm should:

answer

continue at its current output if P > AVC.

question

If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue is:

answer

$10.

question

In the figure, the firm will not produce when the price is between:

answer

zero and P2.

question

In the figure, if the price of the firm's product is $20 per unit, the firm will produce:

answer

60 units per day.

question

In perfect competition, a firm maximizes profit by setting output such that price:

answer

Equals marginal cost

question

In the long run, why would a firm in perfect competition exit the market?

answer

Because its sales revenue does not cover total cost

question

A necessary condition for "perfect competition" is

answer

price takers.

question

An example of a horizontal merger would be a merger between firms

answer

selling approximately the same products.

question

monopoly has two key features, which are

answer

barriers to entry and no close substitutes.

question

The marginal revenue curve for a single-price monopoly

answer

lies below the market demand curve.

question

If the demand for its product is elastic, a monopoly's

answer

marginal revenue is positive.

question

Monopolies can make an economic profit in the long run because of

answer

barriers to enter the monopoly's market.

question

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

answer

4 units per year and the price will be $6.

question

A price searcher will earn economic profits as long as his price exceeds:

answer

average total cost.

question

A monopolist can earn an economic profit only when:

answer

average total cost is less than price.

question

The profit-maximizing output level for a price searcher is where the:

answer

MR = MC.

question

When the price searcher is maximizing total profit in the figure, the average total cost of producing that output level is:

answer

$8.

question

According to the information provided in the figure, if the Rudd Ice Company was a Price Searcher and is currently charging a price of $6, what would you advise Rudd to do?

answer

Increase price and decrease output.

question

In the figure, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:

answer

negative.

question

For a monopolist to practice price discrimination, one necessary condition is that the product offered for sale must be:

answer

impossible or difficult to resell.

question

A monopolist currently sells 5 units of a good. If marginal revenue on the fifth unit of the good is $20, what must be true about the price of the good?

answer

Price must be more than $20

question

For a monopoly, the marginal revenue curve:

answer

Is below the demand curve and has a steeper slope

question

Utility companies that sell water must build a network of water pipes to every home in the community. Once the network has been built, the marginal cost of providing water is relatively low and constant. What is the source of monopoly power here?

answer

Enormous fixed/sunk cost

question

Which of the following is NOT necessary for a firm to engage in price discrimination?

answer

The firm must produce output for different buyers at different costs.

1 of 49

question

Public goods create a free-rider problem because

answer

people can enjoy the good or service no matter whether or not they pay for it.

question

If there are positive externalities in the production of a good and firms do not have to account for these external benefits, then firms will produce an amount that:

answer

Is below society's wealth maximizing quantity

question

Under a tradable permit system,

answer

The government allows a certain level of pollution and issues permits for this amount, after which any interested party can buy or sell these permits

question

The Coasian solution to dealing with externalities is feasible when:

answer

The pollution is being generated by a large number of polluters

question

External benefits cause the market to:

answer

underallocate resources.

question

One method of correcting for ____ externalities is to create a ____ to make sure the market accounts for all costs and benefits.

answer

negative; tax

question

Which of the following is an example of a negative externality?

answer

John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary.

question

People will tend to "internalize externalities" when

answer

responsibility for the consequences of actions is more clearly assigned to the actors.

question

The primary reason buffalos were hunted to extinction in 19th century America is because:

answer

No one owned buffalos and buffalos were worth a lot of money

question

Which of the following is an example of the free-rider problem?

answer

Mathur figures that he does not have to work so hard for his biology group project because his three other teammates will do a substantive share of the work

question

Which of the following is typically a non-excludable resource?

answer

Iron ore in a mine

question

Which of the following is an example of a pure public good?

answer

An army.

question

A free rider is someone who

answer

can obtain a desired good without paying for it and therefore has no incentive to contribute to the costs of making it available.

question

What is meant by a command and control approach to public policy?

answer

It is a policy in which to foster socially desirable behavior, the government simply mandates behavior in law and imposes a penalty for violation of that law

question

Which of the following is not a problem associated with command and control policies?

answer

Command and control policies cannot be used to reduce pollution where there are a large number of polluters, such as pollution from automobiles

question

Which of the following characterizes a Pigouvian tax?

answer

It is tax levied on a good that creates the negative externality such that the tax equals the value of the harm created by the good

question

The problem of "free riders" arises in a society when goods

answer

can't be provided exclusively to the people who pay for them.

question

To increase its profit, a perfectly competitive firm will produce more output when

answer

price is greater than marginal cost.

question

The above figure illustrates a perfectly competitive firm. Curve A represents the

answer

MR curve.

question

Under which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short run?

answer

when the price is less than its minimum average variable cost

question

If perfectly competitive lawn care firms are making an economic profit, then

answer

new firms will enter the industry.

question

The above figure shows a perfectly competitive firm. If the market price is $10, the firm

answer

is making zero economic profit.

question

answer

profit; $480 per week

question

answer

falls; profit will be eliminated

question

If a firm increases output when MR > MC, then:

answer

profit will increase.

question

If, at the point where MR = MC, the firm incurs losses, in the short run the firm should:

answer

continue at its current output if P > AVC.

question

If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue is:

answer

$10.

question

In the figure, the firm will not produce when the price is between:

answer

zero and P2.

question

In the figure, if the price of the firm's product is $20 per unit, the firm will produce:

answer

60 units per day.

question

In perfect competition, a firm maximizes profit by setting output such that price:

answer

Equals marginal cost

question

In the long run, why would a firm in perfect competition exit the market?

answer

Because its sales revenue does not cover total cost

question

A necessary condition for "perfect competition" is

answer

price takers.

question

An example of a horizontal merger would be a merger between firms

answer

selling approximately the same products.

question

monopoly has two key features, which are

answer

barriers to entry and no close substitutes.

question

The marginal revenue curve for a single-price monopoly

answer

lies below the market demand curve.

question

If the demand for its product is elastic, a monopoly's

answer

marginal revenue is positive.

question

Monopolies can make an economic profit in the long run because of

answer

barriers to enter the monopoly's market.

question

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

answer

4 units per year and the price will be $6.

question

A price searcher will earn economic profits as long as his price exceeds:

answer

average total cost.

question

A monopolist can earn an economic profit only when:

answer

average total cost is less than price.

question

The profit-maximizing output level for a price searcher is where the:

answer

MR = MC.

question

When the price searcher is maximizing total profit in the figure, the average total cost of producing that output level is:

answer

$8.

question

According to the information provided in the figure, if the Rudd Ice Company was a Price Searcher and is currently charging a price of $6, what would you advise Rudd to do?

answer

Increase price and decrease output.

question

In the figure, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:

answer

negative.

question

For a monopolist to practice price discrimination, one necessary condition is that the product offered for sale must be:

answer

impossible or difficult to resell.

question

A monopolist currently sells 5 units of a good. If marginal revenue on the fifth unit of the good is $20, what must be true about the price of the good?

answer

Price must be more than $20

question

For a monopoly, the marginal revenue curve:

answer

Is below the demand curve and has a steeper slope

question

answer

Enormous fixed/sunk cost

question

Which of the following is NOT necessary for a firm to engage in price discrimination?

answer

The firm must produce output for different buyers at different costs.

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