Cartels engage in price fixing in order to:
A. drive out competition.
B. retain customers.
C. increase profits.
D. promote entry.
Answer: C
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Refer to Figure 9.2. At price 0E and quantity Q*, consumer surplus is the area
A) 0FCQ*. B) AFC. C) EFC. D) AEC. E) none of the above
The idea that individuals can reach an efficient equilibrium through private trades, even in the presence of an externality, is called:
A. market failure. B. trade quotas. C. the Coase theorem. D. the invisible hand.
To correct for the externalities, the revenue generated by a corrective tax on steel producers would most likely be used to ______.
a. help the company pay for internalizing the cost b. compensate those harmed by pollution c. expand the firm’s production output d. help lower the market price for consumers
In the presence of ________ externalities, too much of the good is produced and in the presence of ________ externalities, too little of the good is produced.
A. no; negative B. positive; no C. negative; positive D. positive; negative