In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities. The concept the DOT used to allow mergers where there was obvious concentration was most likely
a. the good trust principle.
b. contestability.
c. the efficient market principle.
d. the monopolistic competition principle.
b
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Which of the following is an example of a government action to internalize a cost externality?
A) a fine imposed on a company that pollutes a stream B) the closing of a public library C) a sales tax on jewelry D) the increase on bridge tolls
A more efficient process for refining oil into gasoline is developed. As a result, the market price of gasoline: a. and the quantity of gasoline purchased both increase
b. increases and the quantity of gasoline purchased falls. c. decreases and the quantity of gasoline purchased rises. d. decreases and the demand curve for gasoline shifts to the right.
A Nash equilibrium is
A. the same as a dominant strategy. B. is the outcome where a player has selected her best strategy, given the choices of the other players. C. occurs in a game when a cartel solution is reached. D. occurs when one player can change her strategy and be better off.
Answer the following statements true (T) or false (F)
1. As long as government officials have to be elected, they are always held accounted for their policy decisions and choices. 2. Economic analysis would focus on the size of the government, in order to assess whether or not it fosters economic efficiency. 3. It is generally believed that, because of the election process, the incentives and pressures for internal efficiency are stronger in the public sector than in the private sector. 4. Critics of government contend that the market system creates incentives and pressures for internal efficiency which are absent in the public sector. 5. "Good economics" is about marginal costs and marginal benefits of specific projects; "good politics" is more about clear benefits and hidden costs.