Multiple choice:

Q1. To move closer to the social optimum when a negative externality exists, the cost to society of the externality should be

A. incorporated/added on to the price so that demand reflects the true social costs B. minimized by subsidizing the producers of the externality C. calculated per unit and producers taxed accordingly with a goal of making the supply curve reflective of the marginal social cost of the externality D. minimized by forcing producers of the externality to shut down when they produce a negative externality

Q2. Identify the truthfulness of the following statements.

I. Cournot firms do not attain the monopoly or collusive equilibrium.

II.The equilibrium output in a Cournot oligopoly market does not maximize industry profit.

A. Both I and II are false

B. Both I and II are true.

C. I is false; II is true

D. I is true; II is false

Q3. Identify the false statement.

A. A monopolist and a perfectly competitive firm both maximize profits.

B. A monopolist and a perfectly competitive firm both charge a price based on the demand curve facing the firm and the costs borne by the firm

C. A monopolist and a perfectly competitive firm both produce an output level where marginal revenue equals marginal cost.

D. A monopolist and a perfectly competitive firm both produce where price equals marginal cost

Q4. If the government sets a production quota limiting the production of a specific good, it is likely that ____________.

A. consumer surplus and producer surplus will go up and there will be a deadweight gain

B. none of the above

C. consumer surplus and producer surplus will go up and there will be a deadweight loss

D. consumer surplus and producer surplus will go down and there will be a deadweight loss

Q5.If the monopolist is producing where marginal revenue exceeds marginal cost, then the monopolist should ___________ to maximize profits.

A. stop producing

B. raise price

C. produce more

D. produce less

Q6.Which of the following is an example of horizontally differentiated products?

A. Product E, which some believe is better than Product F (while others believe Product F is better than Product E).

B. Product G, which everyone agrees is the same quality as product H

C. Product A, which everyone agrees is superior to Product B D. Product C, which everyone agrees is worse than Product D

Q7. In the Cournot model, the firm chooses

A. its optimal level of output, holding the output of the other firm constant

B. its best response to the price changes of the competitor firm

C. the level of output that would optimize profits for all firms

D. its optimal price, holding the price of its competitors constant

Q8. Which of the following is a key feature of a public good?

A. The good is rival in its consumption, but a consumer cannot be excluded from the good

B. The good is rival in its consumption and a consumer can be excluded from the good

C. The good is non-rival in its consumption, but a consumer can be excluded from the good

D. The good is non-rival in its consumption and a consumer cannot be excluded from the good

Q9. What of the following is completely true in long run, monopolistically competitive equilibrium?

A. the slope of the demand and average cost curves are positive, P > MC, and MC = MR

B. the slope of the demand and average cost curves are the same, P > MC, and MC = MR.

C. the slope of the demand and average cost curves are negative, P > MC, and MC > MR

D. the slope of the demand and average cost curves are the same, P = MC, and MC = MR

Q10.What must be true for the provision of wireless service in an airport to be considered a public good?

A. It must be free and it must include the use of a laptop with no charge also

B. It must be available to all, but the airport could charge for access to the service

C. It must be free and it must have enough excess capacity in the network such that additional users do not reduce the ability of other individuals to utilize the network

D. It must be free and it would still be considered a public good even though additional users may crowd people off the network or make it too slow to utilize effectively