involves resources paid to politicians to enhance one group at the expense of another results in less monopoly power results in externalities none of the statements associated with this question are correct Which of the following pieces of legislations is aimed at curbing the negative effects of externalities Question 1 1 Rent seeking Answer 1 points Question 2 1 Answer 1 points Question 3 1 Answer Robison Patman Act Clean Air Act Lanham Act Truth in Lending Simplification Act Which cost measures the cost to society of producing a good Internal cost External cost Social cost External cost and social cost 1 points Question 4 1 Answer 1 points Question 5 1 Answer Under the merger guidelines written by the DOJ and FTC a merger is may not be challenged if there is significant foreign competition the firms involved have monetary problems there is an emergence of new technology all of the statements associated with this question are correct Punishment for cheating on pricing agreements usually takes the form of A a retaliatory advertising campaign B a retaliatory price cut C a legal suit D a monetary fine 1 points Question 6 1 Tacit collusion Answer 1 points Question 7 1 Answer 1 points Question 8 1 A is a form of cooperation that occurs without explicit communication B is illegal per se in the U S C involves strict adherence to quotas D seems to rare especially among manufacturers of consumer durables Which of the following statements concerning monopoly is NOT true A market may be monopolistic because there are some legal barriers A monopoly has market power A monopoly is always undesirable There is some deadweight loss in a monopolistic market These are the cost curves for a perfectly competitive firm If the market price is 5 how much profit will the firm earn Answer 600 900 3 000 600 1 points Question 9 1 Answer A firm with market power both a and b all of the above 1 points Question 10 can increase price without losing all sales faces a downward sloping demand curve is the only seller in a market The graph on the left shows the short run marginal cost curve for a typical firm selling in a perfectly competitive industry The graph on the right shows current industry demand and supply What output should the firm produce 1 Answer 200 250 150 300 1 points Question 12 1 Answer 1 points Question 11 Answer Differentiated goods are a feature of a perfectly competitive market monopolistically competitive market monopolistic market monopolistically competitive market and monopolistic market Which of the following is true under monopolistic competition in the short run profits are always zero P MC P MR all of the choices are true in monopolistic competition A monopolistic competitor is producing a level of output at which price is 200 marginal revenue is 100 average total cost is 210 marginal cost is 100 and average variable cost is 180 In order to maximize profit the firm should 1 points Question 13 1 Answer 1 points Question 14 1 Answer increase output keep output the same decrease output shut down demand is elastic A profit maximizing firm with market power will always produce a level of output where demand is inelastic price is greater than average total cost marginal revenue is greater than average total cost The primary difference between Monopolistic Competition and Perfect Competition is the ease of entry and exit into the industry the number of firms in the market all of the statements associated with this question are correct none of the statements associated with this question are correct 1 points Question 15 1 Answer 1 points Question 16 1 Answer If the sellers in a market are aware of their strategic interdependence then A each firm bases its pricing and output decisions on the monopoly model B each firm when making price or output decisions must consider the reactions of its competitors C the firms have little incentive to collude in their pricing and output decisions D the firms undertake little advertising because they cannot recoup the cost through higher prices E no firm is able to earn above normal profit in the long run Answer the question based on the following information for a one shot game What are the dominant strategies for Firm A and Firm B respectively 1 points Question 17 1 Answer 1 points Question 18 1 A low price high price B high price low price C high price high price D low price low price After a person buys insurance for his car he will generally not care for his car as much as he otherwise would This is an example of A adverse selection B moral hazard C risk aversion D none of the above Answer 1 points Question 19 1 Answer 1 points Question 20 1 Answer Price discrimination is more common in service industries because A low price buyers will find it virtually impossible to resell the products of such industries to high price buyers B the costs of providing such industries products to different groups of buyers vary dramatically C the price elasticity of demand is the same for all groups of buyers in these industries D all firms in these industries have significant monopoly power over price All of the following conditions except one must exist in order for a firm to successfully practice price discrimination Which is the exception A The firm must be a price taker B The firm must be able to identify which customers are willing to pay more C The firm must be able to prevent the resale of its output by low price customers to high D The firm must be able to charge higher prices to some customers without losing their price customers business E The firm must be a price setter