Exam 11: Monopolistic Competition and Oligopoly

Figure 11-10 Consider a chemical plant that discharges toxic fumes over a nearby community. To reduce the emissions of toxic fumes, the firm can install pollution abatement devices. Figure 11-10 shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions. -Refer to Figure 11-10.What is the economically efficient level of pollution reduction?

When there is a positive externality,

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain,then,according to the Coase theorem,

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.

Figure 11-6 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source. Figure 11-6 shows the paper market. Use this Figure to answer the following question(s). -Refer to Figure 11-6.What is the economically efficient output level?

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

Figure 11-4 Figure 11-4 shows a market with a negative externality. -Refer to Figure 11-4.The private profit-maximising quantity for the firm is

Consider a used car market in which half the cars are good and half are bad (lemons).Suppose the average price of a good car is $9000 and the average price of a lemon is $3000.If rational buyers are willing to pay $6000 for a used car,then sellers will agree to sell mostly the lemons at this price.What is the term used to describe this situation?

What is a 'social cost' of production?

A positive externality results when

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

Many biologic drug manufacturers are pushing for patent protection to be extended by an additional 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

What is an externality?

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

The 'tragedy of the commons' refers to the phenomenon where

What are some of the limitations of the Coase theorem in practice?

Figure 11-4 Figure 11-4 shows a market with a negative externality. -Refer to Figure 11-4.The efficient output level is

The price of a factor of production that is in fixed supply is called

Overuse of a common resource may be avoided by all of the following methods except