Refer to Figure 4-4. The figure above represents the market for iced tea. Assume that this is a competitive market. At an output of 10,000 units
A) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high.
B) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low.
C) the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently low.
D) producers should lower the price to $1 in order to sell the quantity demanded of 10,000.
B
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BP and Exxon both produce petroleum products and sell them at the wholesale and retail levels. One of them is also in the coal business. The merger of the two firms is an example of
a. horizontal integration. b. vertical integration. c. both horizontal and vertical integration. d. a tournament.
The idea that what’s good for one person may not be good for all people is known as the
a. cause-effect fallacy. b. fallacy of composition. c. moral hazard problem. d. disequilibrium position.
Other things remaining the same, an increase in the price of butter can be expected to
A) increase margarine sales. B) decrease margarine sales. C) increase butter sales. D) None of the above
Which statement is true if the monopolist can observe the consumer's type in the nonlinear-pricing application?
a. The monopolist supplies the consumer with as much of the good as if it were competitively priced. b. The monopolist's profit approaches the upper bound from the simple linear pricing problem. c. The monopolist extracts all of the surplus from the low type but not the high type. d. The monopolist extracts all of the surplus from the high type but not the low type.