When consumers cannot tell the difference at the time of sale between high-quality products and those with defects, strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market. Economists call this
a. the curse of advertising.
b. the imperfect information problem.
c. the brand name problem.
d. an open-access resource.
B
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If education produces positive externalities and the government does not intervene in the market, we would expect
a. the equilibrium price to be higher than the optimal price. b. the equilibrium quantity to be lower than the optimal level. c. the equilibrium quantity to be higher than the optimal level. d. both a and b are correct
For normal goods
A. the substitution effect of a price decrease will decrease the quantity of the good demanded while the income effect of a price decrease will increase the quantity of the good demanded. B. the substitution and income effects of a price decrease will both increase the quantity of the good demanded. C. the substitution effect of a price decrease will increase the quantity of the good demanded while the income effect of a price decrease will decrease the quantity of the good demanded. D. the substitution and income effects of a price decrease will both decrease the quantity of the good demanded.
The figure above shows a perfectly competitive firm. If the market price is $40 per unit, then the firm produces ________ units and makes an economic profit that is ________
A) more than 45; more than $400 B) 40; more than $400 C) 40; less than $400 D) 30; equal to zero E) 30; more than $250
Happy Campers is competing in the camping market with Camping R Us. Happy Campers drops its price below its cost and, in doing so, drives Camping R Us out of the market. Once Happy Campers is a monopoly, they raise their price and enjoy economic profit. This is an example of ________.
A) market division B) resale price maintenance C) bid rigging D) predatory pricing