If both a monopoly and a competitive market with the same marginal cost would produce a quantity that is greater than the social optimum in a market because of externalities, then
A) welfare is greater under monopoly.
B) welfare is greater under competition.
C) welfare is the same for both market structures.
D) the social optimum must be zero.
A
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When a natural monopoly is regulated using a marginal cost pricing rule, what can you say about the firm's profit and the market's efficiency?
What will be an ideal response?
An increase in demand is shown graphically by
A) a shift of the demand curve to the left. B) a movement up along the existing curve. C) a shift of the demand curve to the right. D) a movement down the existing curve.
To solve the principle agency problem, which of the following questions should you ask a. Who is making the bad decision?
b. Does the decision maker have all the relevant information? c. Does the decision maker have the incentive to make the right decision? d. All of the above
Imposing taxes in markets where demand and supply are price inelastic:
A. causes less inefficiency than imposing them in price-elastic markets. B. causes more inefficiency than imposing them in price-elastic markets. C. causes no inefficiency. D. cause the same amount of inefficiency because efficiency is unrelated to market elasticity.