Why does the government provide public goods?
a) Private markets would not produce the efficient quantity of the good.
b) Private markets would not produce any of the good.
c) Private markets produce public goods less efficiently than the government.
d) Private markets would charge too high a price for the good.
Ans: a) Private markets would not produce the efficient quantity of the good.
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Refer to Figure 4-1. If the market price is $3.00, what is the consumer surplus on the first ice cream cone?
A) $0.50 B) $1.00 C) $5.50 D) $9.00
Lori and Maya are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $10,000 . If they both advertise on radio, each will earn a profit of $14,000 . If neither advertises at all, each will earn a profit of $20,000 . If one advertises on TV and other advertises on radio, then
the one advertising on TV will earn $16,000 and the other will earn $6,000 . If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $30,000 and the other will earn $4,000 . If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other will earn $8,000 . If both follow their dominant strategy, then Lori will a. advertise on TV and earn $10,000. b. advertise on radio and earn $14,000. c. not advertise at all and earn $20,000. d. None of the above is correct. Lori and Maya do not have dominant strategies.
Which of the following firms could raise prices and expect an increase in revenues?
(A) A firm whose product has an elasticity of 3.1. (B) A firm whose product has an elasticity of 1. (C) A firm whose product has an elasticity of 0.31. (D) All firms regardless of the elasticity of their products.
Suppose that you rent a house next to a factory. The factory legally emits a chemical into the air that smells like feet. You now have to spend $300 more per month on air fresheners because the firm pollutes the air. You could move to another house far enough away from the factory, but the rent for that house is $200 more than you now pay. The efficient solution to this problem is that
A. the firm should be able to continue to pollute because only one person is being harmed by the factory's pollution. B. the factory owner should compensate you $300 so that you can pay for the additional expenses you incur. C. you should move to the new house because the additional rent on that new house is less than the additional expenses you incur from living next to the factory. D. the factory owner should reimburse you $100, the difference between your expenses and the higher rent on the new house.