How would you evaluate the quality of this equation overall? Do you have any concerns? Explain. What will be an ideal response? ANSWER The overall equation is significant, as shown by the F-test. The R2 value is reasonably high. One variable is not significant (might be desirable to re-estimate the equation without it, although […]
A dominant-firm’s residual demand curve is A) the horizontal difference between the market demand curve and the supply curve of the fringe firms. B) the vertical difference between the market demand curve and the supply curve of the fringe firms. C) the demand curve left for the fringe firms after the dominant firm has determined […]
If a monopolist sets a low price to discourage potential competitors from entering the market, it is referred as A) price skimming. B) predatory pricing. C) penetration pricing. D) limit pricing. ANSWER D
Which of the following would be considered open-access common property? A) a library B) the world wide web C) a company gym D) broadcast television ANSWER A
Which of the following measures are government regulations to increase competition? A) Government ends the ban on steel imports. B) Government shortens the term of the patent for a drug. C) Government subsidizes firms to enter energy market. D) All of above. ANSWER D
Why does each of the following facilitate the creation and stability of a cartel? a. High barriers to entry b. An identical product c. Similar costs ANSWER a. A successful cartel implies positive profits. Positive profits attract entry, if it is possible, and increasing the number of firms in the industry erodes the cartel’s […]
When would you use a one-tailed rather than a two-tailed t-test when checking significance levels? What will be an ideal response? ANSWER You would use a one-tailed test when the sign of the variable is important. That is, if you only want to know if the independent variable has a statistically significant effect on […]
In the presence of a negative externality, a specific tax can achieve the social optimum because A) output is reduced to zero as a result. B) it internalizes the external cost. C) it directly charges the producer for polluting. D) the price of the good rises by the full amount of the tax. ANSWER […]
To alleviate the commons problem, the government can A) apply a tax. B) set a quota. C) assign property rights. D) All of the above. ANSWER D
Industry demand is given by: QD = 1000 P All firms in the industry have identical and constant marginal and average costs of $50/unit. a. If the industry is perfectly competitive, what will industry output be? What will be the equilibrium price? What profit will each firm earn? b. Now suppose that there are […]
