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Unformatted text preview: CHAPTER 11PERFORMANCE AND STRATEGY IN COMPETITIVE MARKETS MULTIPLE CHOICE 1. In competitive market equilibrium, social welfare is measured by: a. the difference of net benefits derived by consumers and producers. b. the sum of net benefits derived by consumers and producers. c. net benefits derived by consumers. d. net benefits derived by producers. ANS: B 2. No externalities exist when: a. private costs exceed social costs. b. private costs and benefits equal social costs and benefits. c. private benefits are less than social benefits. d. private benefits exceed social benefits. ANS: B 3. A government policy that addresses market failures caused by positive externalities is: a. patent grants. b. subsidies for pollution reduction. c. tax policy. d. the establishment of operating controls. ANS: A 4. The burden of a per unit tax on a product will fall primarily on producers when: a. the tax is collected from customers. b. demand is highly elastic with respect to price. c. demand is highly inelastic with respect to price. d. the tax is collected from producers. ANS: B 5. A per unit tax will cause output prices to increase least when: a. marginal cost is constant. b. marginal cost is falling. c. average cost is falling. d. marginal cost is rising. ANS: D 6. Failure by market structure can occur when: a. joint products are produced in variable proportions. b. joint products are produced in fixed proportions. c. externalities exist. d. few buyers or sellers are present. ANS: D 7. In competitive markets: a. high-wage workers tend to be those that are most productive. b. companies earn excess profits by better serving customer needs. c. fairness is sacrificed in the interest of efficiency. d. firms dictate the quantity and quality of goods and services provided. ANS: A 8. Consumer sovereignty reflects: a. buyer power. b. failure by market structure. c. failure by incentive. d. externalities. ANS: A 9. Competition in the cable television service industry is furnished by: a. imports. b. potential entrants. c. large numbers of providers in local markets. d. government regulation. ANS: B 10. Producer surplus is the: a. amount paid to sellers above and beyond the value received by consumers. b. amount paid to sellers above and beyond the required minimum. c. amount paid to sellers. d. cost of production. ANS: B 11. The welfare loss triangle depicts: a. deadweight losses suffered by consumers. b. deadweight losses suffered by producers. c. deadweight losses suffered by consumers and producers. d. lost profits. ANS: C 12. Profits stemming from market power reflect: a. high prices. b. superior efficiency. c. exceptional capability. d. rapid industry growth. ANS: A 13. Failure by market structure is caused by: a. positive spillover effects....
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This note was uploaded on 03/08/2011 for the course ECONABA 635 taught by Professor Leiter during the Summer '10 term at Andrew Jackson.
- Summer '10