Question

16. Which of the following would you expect to have the least market power?

A. A wheat farmer

B. A gasoline station in a small rural town

C. A small biotech company with a patent on a drug

D. All of the above would have equal market power

E. None of the above would have any market power

17. When a monopolist switches from charging the monopoly price to price discriminating, which of the

following is/are true?

A. producer surplus will increase.

B. consumers with high elasticity of demand will be charged a lower price than consumers with

low elasticity of demand.

C. if the quantity sold increases, then total surplus will increase.

D. all of the above.

E. none of the above.

18. Contracting around observable characteristics to try and solve information problems are examples of

A. first best efficient outcomes

B. second best efficient outcomes

C. positive externalities

D. negative externalities

E. creative destruction

19. If a firm with market power lowers its price,

A. it will increase total revenue regardless of the elasticity of demand.

B. it will decrease total revenue regardless of the elasticity of demand.

C. it will always increase its profits.

D. it will increase profits if the resulting marginal revenue is greater than the marginal cost.

20. The Coase Theorem can be summarized by saying the efficient allocation of resources will be guaranteed

as long as 2 conditions are met:

A. Clearly defined property rights and no market power

B. No market power and low transaction costs

C. low transactions costs and clearly defined property rights

D. perfect competition and no government intervention in the market

E. government taxation of negative externalities and subsidies for positive externalities.

21. A Nash Equilibrium is

A. a best-response to a best-response

B. a set of strategies for which no player has an incentive to choose a different strategy

C. the guaranteed outcome of a game.

D. all of the above

E. A and B

Answer 1