Which of the following is an advantage of carrying out economic transactions through firms?
A. The number of transactions carried out by a firm is more than that carried out in a market, thereby reducing the contracting cost.
B. The number of transactions carried out by a firm is fewer than that carried out in a market, thereby reducing the contracting cost.
C. Transactions made by or with a firm involve no opportunity cost.
D. Firms lack knowledge about the products they produce and distribute in a market.
Answer: B
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Which oligopoly model results in firms successively undercutting their rivals' prices until the competitive outcome is reached?
a. The contestable market model. b. The Cournot model of oligopoly. c. The Bertrand model of oligopoly. d. The monopolistic competition model.
If a perfectly competitive firm is producing an output level for which MR equals $5, MC equals $6, and ATC equals $4, the firm
a. is earning a profit but should reduce output. b. is earning a profit and should increase output. c. is suffering a loss and should reduce output. d. is suffering a loss but should increase output.
Which one of the following is the best description of a monopolist?
a. a firm that produces a single product b. a firm that is the sole producer of a narrowly defined product class, such as yellow, grade-A butter produced in Wisconsin c. a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry d. a firm that is large relative to its competitors
Based on the graph showing the effects of an investment tax credit or a technological change, eliminating an investment tax credit would ______.
a. create a higher equilibrium quantity of saving and investment
b. create a lower equilibrium quantity of saving and investment
c. have no influence on the equilibrium quantity of saving and investment
d. drive the equilibrium quantity of saving and investment to zero