The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created.
If the market for transportation services is competitive and unregulated, the equilibrium quantity is ________ and the equilibrium price is ________. A) 120; 14
B) 120; 8
C) 80; 12
D) 80; 6
Ques. 2Adverse selection is created by
A) incentives to change behavior after two parties have reached an agreement.
B) risk.
C) lump-sum taxes.
D) private information.
Ques. 3What is the best outcome for society: when firms in an oligopoly enter into a collusive agreement to operate as a monopoly or when they act as perfect competitors? Briefly explain your answer.
What will be an ideal response?
Ques. 4Compared to a single-price monopoly, the output of a perfectly competitive market with the same costs
A) is more than the monopoly's output.
B) is the same as the monopoly's output.
C) is less than the monopoly's output.
D) could be more than, less than, or equal to the monopoly's output.
Ques. 5Constellation Brands Inc is the world's biggest wine firm with 300-plus brands, from jug wines to coveted California reds, including the Clos du Bois, Geyser Peak and Woodbridge by Robert Mondavi labels.
Based on this characteristic of firms, why would Constellation be more efficient than a market at coordinating economic activity? A) Constellation has economies of scope.
B) Constellation has lower transaction costs.
C) Constellation has economies of scale.
D) Constellation has economies of team production.
Ques. 6A rent ceiling set above the equilibrium rent efficiently allocates resources in the housing market.
Indicate whether the statement is true or false
Ques. 7In the market for bicycles, explain what happens to the supply and demand curves when there is an increase in the price of steel used to make bikes.
What will be an ideal response?
Ques. 8Is there any set of relationships between price elasticity of supply and total revenue similar to the relationships between price elasticity of demand and total revenue?
What will be an ideal response?