Competitive Markets
Oligopoly
Monopolistic Competition
Externalities
Taxes
100
In competitive markets, are the goods offered similar or different?
They are largely the same.
100
A market structure in which ______ sellers sell ______ products.
Few sellers and similar or identical products.
100
What is excess capacity?
The difference between the quantity produced and the efficient scale.
100
If the marginal social benefit lies above the marginal private benefit curve, then what kind of externality is present?
Negative.
100
Corrective taxes encourage firms to produce _____ output.
Less
200
Buyers and sellers in competitive markets must accept the price the market determines, so they are said to be _____.
Price takers.
200
What is the tool economists use to analyze strategic behavior?
Game theory.
200
Monopolistic competition describes a market where there are _____ sellers, products are ______, and _____ entry.
Many sellers, products are differentiated, and free entry.
200
Marginal private benefit plus marginal external benefit equals...?
Marginal social benefit.
200
How much of the tax do sellers pay if demand or supply is perfectly elastic?
They pay the entire tax.
300
In the long run, when will the firm decide to exit a market?
If TR < TC or if P < ATC.
300
Oligopoly is efficient only if...
The firms innovate.
300
Monopolistic competition results in ______ efficiency.
Production efficiency.
300
Positive externalities in markets produce a ______ quantity than is socially accepted.
Smaller.
300
How does a tax affect the supply curve?
A tax decreases the supply and shifts it to the left.
400
In the short run, when will competitive firms decide to shut down?
If TR< VC.
400
What makes maintaining an agreement in an oligopoly difficult?
When there are more firms involved in the collusive agreement.
400
In the long run, how is the ATC curve relative to the demand curve?
The two curves are tangent to each other.
400
What economist developed the Coase Theorem?
Ronald Coase
400
If income increases and average tax rate remains consistent, then the tax is called a _____ tax.
Progressive tax.
500
Why do competitive firms stay in the market if they make zero profit?
All costs including the opportunity costs are covered.
500
Game theory: If Bonnie and Clyde both confess, they each get 8 years in jail. If Bonnie remains silent, Clyde could confess and go free or remain silent and get 1 year. If Bonnie confesses, Clyde could confess and get 8 years or remain silent and get 20 years. If Clyde confesses, Bonnie could confess and get 8 years or remain silent and get 20 years. If Clyde remains silent, Bonnie could confess and go free or remain silent and get 1 year. What is Bonnie's dominant strategy?
Bonnie's dominant strategy is to confess.
500
What does the Herfindahl-Hirschman index measure?
It measures market concentration by squaring the market share of each firm competing in a market, and then summing the resulting numbers.
500
When an externality causes a market to reach an inefficient allocation of resources, in what two ways can the government respond?
Command and control policies or market based policies.
500
If we tax labor income, will the tax increase or decrease the quantity employed?
The tax decreases the quantity employed because the supply of labor decreases.
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