Study guide

19. Because buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply, the market equilibrium is not efficient. (_ 20. In the presence of a negative externality, the market equilibrium quantity of a commodity is less than the socially optimal quantity.(_ 21. The free-rider problem arises when a person who receives the benefit of a good can avoid paying for it.(_ 22. Club goods are free to their consumers. (_ 23. The marginal product of an input is the output produced per unit of that input hired. 24. Whenever marginal cost is less than average variable cost, average variable cost is falling. 25. Average fixed cost does not vary with output.. 26. Sunk cost is a cost that, although it is committed, can be recovered (_ 27. Marginal revenue is the additional revenue a firm receives for selling any unit above the break-even level of output (_ 28. A profit maximizing competitive firm will produce until P=MC (_ 29. A monopolist produces the socially efficient quantity of output. ( 30. For monopoly, price exceeds marginal revenue. ( 31. The essence of an oligopolistic market is that the actions of any one seller can have a large impact on the profits of all other sellers. (_ 32. In a game of repeated prisoners' dilemma, the players may well be able to reach a cooperative outcome.( 33. The price effect of an increase in production tends to increase profit. (_ 34. As the number of sellers in an oligopoly grows larger, the magnitude of the output effect falls. ( 35. Predatory pricing occurs when a firm lowers its price to drive current competitors out of business and to discourage new entrants into markets, so that it can enjoy higher future profits.(