Which of the following is most accurate?
A. In all cases, competitive markets yield more consumer surplus than would be enjoyed in a monopoly market with the same cost structure.
B. In all cases, competitive markets yield less consumer surplus than would be enjoyed in a monopoly market with the same cost structure.
C. In some cases, competitive markets can yield less consumer surplus than would be enjoyed in a monopoly market with the same cost structure.
D. In all cases, competitive markets yield the same consumer surplus that would be enjoyed in a monopoly market with the same cost structure.
Answer: A
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Assume that there are two nations, Alpha and Beta. Each nation produces two products, wheat and steel. Alpha has a comparative advantage in the production of wheat. If the two nations trade, the trade price of wheat in terms of steel will be
A. greater than the domestic opportunity cost of wheat in both nations. B. less than the domestic opportunity cost of wheat in both nations. C. less than the domestic opportunity cost of wheat in Alpha and greater than the domestic opportunity cost of wheat in Beta. D. greater than the domestic opportunity cost of wheat in Alpha and less than the domestic opportunity cost of wheat in Beta.
Which of the following is a reason why IBM decided to provide consulting services rather than manufacturing machines?
A) It had a comparative advantage in providing consulting services. B) It had a comparative advantage in manufacturing machines. C) Manufacturing of machines generated a positive. D) Manufacturing of machines generated a negative.
The Herfindahl index for a pure monopolist is:
A. 100. B. 10,000. C. 100,000. D. 10.
Tom and Jerry have two tasks to do all day: make dishes and build fences. If Tom spends all day making dishes, he will have make 16 dishes. If he instead devotes his day to building fences, Tom will build 4 fences. If Jerry spends his day making dishes, he will make 14 dishes; if he spends the day building fences, he will build 7 fences. After looking at the production possibilities for both Tom and Jerry, we can surmise that:
A. Jerry has the absolute advantage in the production of both dishes and fences. B. Tom has the absolute advantage in the production of fences and Jerry has the absolute advantage in dish production. C. Tom has the absolute advantage in the production of dishes and Jerry has the absolute advantage in fence production. D. Tom has the absolute advantage in the production of both dishes and fences.