A market situation in which a large number of firms produce similar but not identical products is
A) a monopoly.
B) an oligopoly.
C) monopolistic competition.
D) perfect competition.
Answer: C
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Costs to the firm arising from reaching agreements on input prices with suppliers and then ensuring that terms of agreements are fulfilled, are called
A) negotiation costs. B) agency costs. C) transactions costs. D) implicit costs.
Insurance companies try to mitigate the problem of adverse selection by:
A. asking potential customers a seemingly endless list of questions to gain as much information as they can about the person's risk characteristics. B. charging a higher premium to groups with similar ages or behaviors that correlate with risky behavior. C. charge a higher price to all individuals to cover the lack of information. D. All of these statements are true.
Suppose that income tax revenues are maximized at an average (income) tax rate of 45 percent. If the Laffer curve is a correct diagrammatic representation of the relationship between tax rates and tax revenue, it follows that a tax rate of
A) 35 percent will reduce tax revenues. B) 48 percent will reduce tax revenues. C) 48 percent will generate as much tax revenue as a tax rate of 45 percent. D) 35 percent will generate as much tax revenue as a tax rate of 45 percent. E) a and b
The Sherman Antitrust Act
A. called for the establishment of the Federal Trade Commission. B. made tying contracts illegal and banned price discrimination. C. limited mergers that would substantially limit competition. D. declared monopoly and trade restraints illegal.