Define the following terms and explain their importance to the study of economics:
a.
Antitrust policy
b.
Economies of scale
c.
Economies of scope
What will be an ideal response?
| a. | Antitrust policyis designed to prevent the acquisition of monopoly power and to ban certain monopolistic practices. |
| b. | Economies of scaleare cost savings that are acquired through increases in quantities produced. If a firm has large economies of scale, it may be a natural monopoly. Natural monopoly is one justification for regulation. |
| c. | Economies of scopeare cost savings that are acquired through simultaneous production of many different products. If a firm has economies of scope, it may be a natural monopoly in the provision of those products and a candidate for regulation. |
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When quantity supplied is greater than quantity demanded, market price is _______ the equilibrium price.
Fill in the blank(s) with the appropriate word(s).
All of following are commonly considered to be common property EXCEPT
A) spotted owls in the wild. B) fish in an ocean. C) pigs raised in a farm. D) wild salmon in a river.
One thousand adults live in Milltown. Every day, they all leave work at 4:30 p.m., arrive home at exactly 5:00 p.m., and go to bed at 9:00 p.m. Three fundraisers, Alpha, Beta, and Charlie, have targeted Milltown's population. To get a donation, they must call Milltown's residents after they get home from work but before they go to bed. Because the charities raising the funds are identical, the first to call a willing donor will get the donation. Beta's manager has decided that the best time to call is 7:00 p.m. because it is exactly halfway between 5:00 p.m. and bedtime. Which of the following is true?
A. Alpha and Charlie will also make calls at 7:00 p.m. B. Beta is certain to generate the most donations. C. Alpha and Charlie will divide up the rest of the market, with one choosing to call at 6:00 p.m. and the other at 8:00 p.m. D. Beta's manager did not choose wisely.
Refer to Scenario 14-1. M1 in this simple economy equals
A) $1,000. B) $2,000. C) $3,000. D) $8,000.