Equilibrium output for a monopolistic competitor

Question

Question 1. At the equilibrium output for a monopolistic competitor:

• Price equals marginal cost equals marginal revenue
• Price equals average total cos equals marginal revenue
• Marginal cost equals marginal revenue equals average total costs
• Price equals average total cost and marginal cost equals marginal
• revenue

Question 2. For a cartel to be successful in increasing economic profits for its members:

• Entry of new firms must be blocked
• Price must be set equal to marginal cost
• Individual firms must be encouraged to adjust output so as to maximize
• their own profits at the cartel price
• Price must be set equal to average total cost

Question 3. Once vaccinated a person cannot catch a cold nor give a cold to someone else. As a result the marginal social benefit resulting from consumption of the vaccine:

• Exceeds the marginal benefit received by consumers of the vaccine
• Equals the marginal social cost of producing the vaccine in a
• competitive equilibrium.
• is less than the marginal benefit received by consumers of the
• vaccine.

Question 4. A rightward shift of the marginal social benefit curve for pollution control:

• Has no effect on the efficient percentage reduction in polluting abatement.
• Makes it efficient to spend more on pollution abatement.
• Makes it efficient to spend less on pollution abatement.
• Makes pollution abatement cheaper.

Question 5. A 2004 article written immediately after the re-election of George W. Bush referred to his environmental policy system where power plants buy and sell the right to pollute in the form of emission credits. Do economists tend to favor this approach to pollution control:

No; these programs are ineffective because they encourage major
polluters to free ride on the efforts of others.
No; it is possible for some firms to do nothing if they simply buy
enough credits.
Yes; they encourage all firms to cut pollution by the same
percentage.
Yes; they believe that such a proposal would achieve a level of
pollution reduction with the lowest cost to society.

Question 6. If a positive externality is associated with the purchase of smoke detectors:

• The marginal social benefit of smoke detectors exceeds their price
• The marginal social benefit of smoke detectors is zero
• The marginal social benefit of smoke detectors equals their price
• More than the efficient quantity of smoke detectors will be sold

Question 7. What do economists mean when they say there is "market failure"?

• Business has introduced a product that consumers did not want
• Free markets have led to excessive profits
• Markets have surpluses or shortages so that government rationing is necessary.
• Free markets yield results that economists do not consider socially optimal.

Question 8. A market for information is more likely to develop even in the absence of government regulation of information as long as the marginal:

• Cost of information is zero
• Benefit of information is zero
• Cost of information exceeds the marginal benefit
• Benefit of information exceeds the marginal cost

Question 9. A widget has an opportunity cost of 4 wadgets in Saudi Arabia and 2 wadgets in the United States. Given these opportunity costs, you would suggest that:

• Saudi Arabia specialize in widgets and the US in wadgets
• No trade should take place
• Saudi Arabia specialize in wadgets and the US in widgets
• Both countries produce an equal amount of each.

Question 10. Some residents of Key West, an island located at the end of the Florida Keys, fly the flag of the Conch Republic to empahasize that they are different from the rest of the U.S. Suppose that Key West separated from the U.S. and that all trade between it and the rest of the U.S. ceased. What would happen?

• The U.S. would be little affected while the effects on the Key West would be large.
• Key West would be little affected while the effects on the U.S. would be large
• Both the U.S. and Key West would be affected about equally
• We cannot know without knowing about their bargaining abilities

Question 11. Isolationism a policy of trying to minimize a nations political and economic interactions with the rest of the world:

• Has always been key part of American politics
• Was important until the late 19th century and then declined
• Rose in America in the late 19th century and was an important
• political element until World War II
• Rose to importance in the U.S. after World War II

Question 12. All of the following are arguments in support of protectionist

• legislation except
• Supporting infant industries
• Preserving domestic employment
• Increasing global trade
• Promoting National Security

Question 13. In the early 2000s, China taxed its textile exports when the international quota system for textiles expired. Many countries
were worried about rapid Chines expansion into textiles, and there was discussion of new tariffs and quotas to slow an anticipated increase in Chinese exports. Is there any advantage to China for imposing export tariffs rather than having importers impose import
tariffs?

No; Both result in fewer jobs in China and higher prices in the U.S.
Yes; With a Chinese export tariff, China would get the revenue,
whereas with an American import tariff, the U.S. would get the
revenue.
Yes; With the Chinese export tariff, China will lose fewer jobs than
it would with an American import tariff
Yes; with the Chinese export tariff, prices will not rise in the U.S.
as they would with an American import tariff

Question 14. If the primary purpose of a tariff is to completely eliminate foreign competition, it will be expected to:

• Raise either a large or a small amount of revenue depending on the magnitude of the tariff imposed
• Raise a relatively large amount of tax revenue
• Raise an amount of revenue equal to the amount of the tariff
• multiplied by the volume of exports
• Raise a relatively small amount of tax revenue.