Ch16 - Ch16 Student: _ 1. Natural monopoly arises when A....

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Ch16 Student: ___________________________________________________________________________ 1. Natural monopoly arises when A. there is only one firm in the area. B. there are high barriers to entry. C. costs are subadditive. D. it is more cost efficient to have multiple firms. E. none of the above 2. An over allocation of resources in an industry means that for the last unit produced, A. economic profit is negative but rising. B . society places a higher value on the resources required to produce the last unit than the value society places on consuming the last unit. C. the demand price for the last unit exceeds the marginal cost of producing the last unit. D. the marginal cost of production is falling. E. the average cost is falling. 3. An under allocation of resources in an industry means that for the last unit produced, A. economic profit is still rising. B . society places a higher value on the resources required to produce the last unit than the value society places on consuming the last unit. C. the demand price for the last unit exceeds the marginal cost of producing the last unit. D. the cost of producing the last unit exceeds its value to society. E. long-run average cost is falling. 4. When social surplus is maximized in competitive equilibrium A. marginal social benefit equals marginal social cost. B. allocative and productive efficiency are achieved. C. consumer surplus is maximized. D. both a and b E. all of the above 5. When we say that market prices allocate goods to the highest-valued users, we mean that A. only consumers with higher incomes will get any of the good, while lower income consumers get none of the good. B. only consumers who value the good more than the market price of the good will choose to buy the good. C . government allocation of the good is warranted because government can make sure that the good gets consumed by deserving individuals. D. there is no shortage.
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6. The less information consumers have about product quality, A. the greater will be the loss of social surplus due to productive inefficiency. B. the smaller will be the loss of social surplus due to productive inefficiency. C. the greater will be the loss of social surplus due to allocative inefficiency. D. the smaller will be the loss of social surplus due to allocative inefficiency. 7. Private provision of public goods fails to achieve economic efficiency because A. the free rider problem causes overproduction of the good. B. the free rider problem prevents collection of sufficient revenue. C. the price of the privately supplied public good must exceed zero in order to be allocatively efficient. D. both a and c E. both b and c 8. In long-run perfectly competitive equilibrium, economic efficiency is achieved because A. price equals long-run marginal cost for every firm in the industry. B. price equals average fixed cost for every firm in the industry.
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This note was uploaded on 01/08/2011 for the course MBA ECON taught by Professor Hamza during the Spring '10 term at Prince Sultan University.

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Ch16 - Ch16 Student: _ 1. Natural monopoly arises when A....

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