When a positive externality is present
A) the market price is too low.
B) the market price is too high.
C) the market price is in equilibrium.
D) none of these choices.
QUESTION 2Three airlines account for most of the air traffic in and out of a local city. If the three airlines joined together in setting fares and air travel schedules, economists would say that they were acting as:
a. monopolistic competitors, as each firm would have to differentiate its airline services from its rivals.
b. perfect competitors, as each firm would sell travel services at the same fares as the other airlines.
c. a cartel, as the three airlines together would attempt to coordinate policies in the local market to jointly maximize profits.
d. none of the above
QUESTION 3If too many high risk policyholders migrate to a comprehensive health insurance plan which covers a wide range of treatments, the price of a policy must increase.
Indicate whether the statement is true or false
QUESTION 4When a negative externality is present
A) the market price is too low.
B) the market price is too high.
C) the market price is at equilibrium.
D) none of these choices.
QUESTION 5Cartels are:
a. difficult to organize.
b. difficult to preserve.
c. especially unlikely to succeed if the members sell many varied products.
d. all of the above.
QUESTION 6The lemons model suggests that owners will have superior information about the quality of their cars and incentives to conceal it, to which buyers will respond by lowering their bids.
Indicate whether the statement is true or false
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