Comment on the following statement: "Since product differentiation allows price competitors to establish some market power, it would be more efficient to not permit product differentiation."
What will be an ideal response?
While it is true that product differentiation softens price competition, it also creates consumer surplus because consumers can consume product characteristics that are closer to their ideal. Eliminating product differentiation may result in more surplus because price is again set to marginal cost, but surplus is also lost as consumers travel further from their ideal in order to consume.
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As more labor is hired, moving along the production function, diminishing returns occur because
A) workers are overworked and so their productivity decreases. B) the wage rate paid is too low and so workers decrease their work effort. C) there are fixed quantities of other resources. D) the real wage rate must increase in order to hire additional workers. E) real GDP increases more rapidly the more workers are hired.
The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the U.S. dollar ________ against the Euro and ________ against the Japanese yen
A) depreciated; depreciated B) appreciated; appreciated C) appreciated; depreciated D) depreciated; appreciated
Figure 9-3
Suppose that U.S. tastes for British goods increase. Then, in
a.
the supply curve shifts from S1 to S2
b.
the supply curve shifts from S2 to S1
c.
the demand curve shifts from D2 to D1
d.
the demand curve shifts from D1 to D2
e.
both demand and supply shift to the right
One World View article titled "Paying to Pollute" reports that the price of a marketable pollution permit in Europe for a ton of carbon dioxide is about $32. The principal advantage of pollution permits is to
A. Eliminate social costs. B. Increase government involvement in pollution control. C. Reduce pollution to zero. D. Reduce the costs of pollution control.