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  1. When a country allows trade and becomes an importer of a good, what is the result?
    The gains of the winners exceed the losses of the losers.
  2. Turkey is an importer of goose down pillows. The world price of these pillows is $50. Turkey imposes a $7 tariff on pillows. Turkey is a price-taker in the pillow market. As a result of the tariff, what will Turkey's price of pillows be and what will happen to the quantity of pillows purchased?
    $57 and the quantity of pillows purchased will decrease
  3. Which of the following statements about a market that is characterized by a negative production externality is most accurate ?
    The equilibrium quantity of output is greater than the socially optimal quantity.
  4. ow can the government internalize a positive externality?
    by subsidizing production, which would increase supply
  5. What does it mean when a good is rival?
    One person's use of the good diminishes another person's ability to use it.
  6. To increase safety at a bad intersection, you must decide whether to install a traffic light in your home town at a cost of $10 000. If the traffic light reduces the risk of fatality by 0.5 percent and the value of a human life is about $10 million, what should you do?
    c.  You should install the light because the expected benefit of $50 000 is greater than the cost.
  7. A stairwell in a certain office building is always congested at 12:00 p.m. and 5:00 p.m. The congestion is so bad that people have been complaining to the building's owner. Which of the following methods would be the most efficient way of reducing congestion?
    Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the stairs the most will be the ones who use the stairwell at peak times.
  8. What would be an example of an implicit cost of production?
    the income an entrepreneur could have earned working for someone else
  9. On a 100-acre farm, a farmer is able to produce 3000 bushels of wheat when he hires 2 workers. He is able to produce 4400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?
    diminishing marginal product
  10. When a firm in a competitive market produces 11 units of output, it has a marginal revenue of $9.00. What would be the firm's total revenue when it produces 8 units of output?
  11. When price is greater than marginal cost for a firm in a competitive market, which of the following is correct?
    There are opportunities to increase profit by increasing production.
  12. Assume a certain firm is producing 1000 units of output (so Q = 1000). At Q = 1000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.Refer to Scenario 14-2. At Q = 1000, what is the firm's profit?
  13. Assume a certain firm is producing 1000 units of output (so Q = 1000). At Q = 1000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
    Refer to Scenario 14-2. At Q = 999, what is the firm's total cost?
    10 985
  14. Competitive firms and monopolists differ in which of the following ways?
    .  A competitive firm's marginal revenue curve is horizontal; a monopolist's marginal revenue curve is downward sloping.
  15. For a monopolist, what do we know about marginal revenue?
    It is negative when the price effect is greater than the output effect.
  16. A monopoly does NOT have or do which of the following things?
    have a supply curve
  17. What is one problem with government regulation of monopolies?
    The government typically has little incentive to reduce costs.
  18. If firms in a monopolistically competitive market are incurring economic losses, which of the following scenarios would best reflect the change facing incumbent firms (those who are able to stay in the market) as the market adjusts to its new equilibrium?
    an increase in demand
  19. When a firm operates with excess capacity, which of the following statements is correct?
    Additional production would lower the average total cost.
  20. With what is the product-variety externality associated?
    the consumer surplus that is generated from the introduction of a new product
  21. When we compare diagrams for firms in different market structures, what do we notice?
    For competitive firms and monopolistically competitive firms, the cost curves are similar but the revenue curves are quite different.
  22. Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together, what results?
    d.  They are unable to maintain the same degree of monopoly power enjoyed by a monopolist.
  23. The concept of a Nash equilibrium, when applied to an oligopoly, relies on the notion that Firm A in an oligopoly chooses its own best strategy based on which of the following considerations?
    given the strategies that other firms have chosen
  24. When two firms advertise to attract the same customers, what do we know?
    They face a problem similar to the prisoners' dilemma.
  25. Under what circumstances may oligopolists well be able to reach their preferred, cooperative outcome?
    if the game they play is repeated a sufficient number of times
  26. Assume that Peach Computers has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc. (CSS Inc.) and CompuMart. Which of the following outcomes will result?
    CompuMart and CSS Inc. will sell Peach Computers for exactly the same price.
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quiz 2
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