Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true?
A) Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price takers. Under monopoly conditions, economic surplus is equal to producer surplus.
B) Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized.
C) Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss.
D) Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions.
C
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Refer to Common Property I. The efficient level of production and consumption on the common property is
a. zero. b. Q1. c. Q2 d. cannot be determined from the graph.
Suppose Lefty has utility characterized by the equation: U l = 3I 1/2 , where I is income. In addition, Righty has utility characterized by the equation: U r = 4I 1/2 , where I is income.
(A) If each had $100,000, which one would have the higher level of utility? (B) Illustrate Lefty's and Right's utility functions. (C) What equal amount of income could we give to both that would also give them the same level of utility?
The supply curve will shift to the left when
A) the supply of the product increases. B) the demand for the product decreases. C) some producers leave the industry. D) the product becomes fashionable.
The text argues that if avocado growers in Mexico can produce avocadoes cheaper than avocado growers in the United States, this will not reduce total jobs available in the United States. The logic underlying this argument is that
A) avocado growers in the United States did not earn much anyway. B) avocado growers in the United States are welcome to emigrate to Mexico. C) avocado growers in the United States will switch to specializing in a crop in which they hold the comparative advantage. D) avocado growers in Mexico need the jobs more than Americans do.