Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on: a) efficiency. b) consumer surplus. c) economic profit in the long run
What will be an ideal response?
a) Both perfect competition and perfect price discrimination create efficiency.
b) Consumers receive consumer surplus with perfect competition. However, there is no consumer surplus with perfect price discrimination.
c) Perfectly competitive firms cannot make an economic profit in the long run. A perfectly price discriminating monopoly makes the maximum amount of economic profit.
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An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE?
I. U.S. net exports decrease. II. U.S. investment increases. A) only I B) only II C) both I and II D) neither I nor II
Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels, B for his benefits and C for your costs, where B and C are measured in dollars. For any given volume, D, your neighbor's benefit is B = 0.63D - 0.002D2 and your cost is C = 0.06D + 0.001D2. What is the marginal cost to you at the socially efficient noise level?
A. $0.75 B. $0.29 C. $0.24 D. $0.25
If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve, the short-run Phillips curve will be
A) vertical. B) flatter in the long run than it is in the short run. C) negatively sloped. D) positively sloped.
The allocation of resources is efficient under an idealized free market system
a. True b. False Indicate whether the statement is true or false