A necessary condition for market power to exist for a particular company in a market is that
A. information must be understood by both buyers and sellers.
B. consumers perceive all products as homogeneous.
C. effective barriers to entry must exist.
D. the number of firms should be over 150.
Answer: C
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
If there is allocative efficiency in a purely competitive market for a product, the maximum price consumers are willing to pay is:
A. Less than marginal benefit B. Greater than marginal cost C. Equal to the amount of efficiency or deadweight losses D. Equal to the minimum price producers are willing to accept
The maximum price that a buyer would be willing to pay for a good or service is also called:
A. the buyer-max price. B. the reservation price. C. the opportunity cost. D. the reserved max price.
In the United States, the distribution of income after the income tax is ____ the distribution of income before the income tax.
A. slightly less equal than B. about as equal as C. slightly more equal than D. a great deal more equal than