Question 1

According to the Clean Air Act,a new firm in the covered industry is required to:

Accepted Answer

The Clean Air Act requires new firms in the covered industry to obtain a permit to pollute and at least match the most effective system existing in the industry in order to reduce their emissions and maintain air quality standards.

Question 2

A firm has a constant marginal social cost of producing that equals $2Q.What is the socially efficient level of production for a firm facing an inverse demand P = 60 − 2Q?

Accepted Answer

The answer of A firm has a constant marginal social...

Question 3

In the United States,government is the sole property owner of:

Accepted Answer

The answer of In the United States,government is the sole...

Question 4

Which cost measures the cost to society of producing a good?

Accepted Answer

The social cost measures the total cost of producing a good, including both internal costs borne by the producer and external costs borne by society as a whole. It takes into account both the private costs of production (such as labor, materials, and capital) and the external costs (such as pollution, congestion, and other negative spillover effects). Therefore, the correct answer is social cost.

Question 5

How can a firm in a merger avoid antitrust action by the government?

Accepted Answer

Proving that efficiency will improve from the merger can help justify it under antitrust laws, as it suggests consumer benefits.

Question 6

The Clean Air Act aids new entrants in a regulated industry when demand increases and provides an incentive for existing firms to invest in new antipollution technology by:

Accepted Answer

The answer of The Clean Air Act aids new entrants...

Question 7

Which of the following is true for a monopoly?

Accepted Answer

In a monopoly, the firm has market power and can set a price higher than the marginal cost to maximize profit. This means that in a monopoly, price does not equal marginal cost. (Option A is not necessarily true, as a monopoly may incur losses in the short-run. Option B is not always desirable, as a price ceiling may lead to shortages and reduce incentives for the firm to invest in research and development. Option D is a combination of incorrect statements.)

Question 8

The Clean Air Act and its amendments increase the production costs of the firms in a covered industry through increased:

Accepted Answer

The Clean Air Act and its amendments typically require firms to invest in pollution control technologies or processes, which increases both fixed costs (due to the investment in equipment or modifications) and marginal costs (due to the ongoing costs associated with operating the pollution control technologies).

Question 9

To prevent air pollution and breach of contract,which tools does the government use?

Accepted Answer

The government typically uses permits to regulate air pollution by setting limits on emissions and requiring companies to obtain a permit before they can release pollutants into the air. Breach of contract, on the other hand, is typically enforced through penalties or legal action. Therefore, option C is the best choice, as it involves using permits for pollution control and penalties for breach of contract.

Question 10

In order to eliminate the inefficiency brought about by a monopoly,the government wants to impose a price ceiling on the monopoly.What is the optimal price to be imposed?

Accepted Answer

If the government imposes a price ceiling at the competitive price, it will promote efficiency and prevent the monopoly from charging a price above the competitive level. However, if the competitive price is lower than the average total cost (ATC), the monopoly will suffer losses and might exit the market. Therefore, the optimal price ceiling should be the competitive price, unless it falls below the monopoly's ATC, in which case the price ceiling should be set at the monopoly's ATC to prevent it from leaving the market.

Question 11

The marginal cost of producing a good to society is the:

Accepted Answer

The marginal cost of producing a good to society is the vertical sum of the supply curve and the marginal cost of polluting. This is because the supply curve represents the private cost to firms of producing the good, while the marginal cost of polluting represents the external cost imposed on society as a whole. The vertical sum of these two costs reflects the total cost to society of producing the good, which is what the marginal cost represents.

Question 12

The domestic demand and supply for sugar are Q^d = 40,000 − 200P and Q^SD = 10,000 + 300P.The foreign supply is Q^SF = 20,000 + 100P.What is the total supply of sugar in the domestic market?

Accepted Answer

To find the total supply in the domestic market, we need to add the domestic supply and the foreign supply: Q = Q^d + Q^SD + Q^SF Q = (40,000 − 200P) + (10,000 + 300P) + (20,000 + 100P) Q = 70,000 + 200P Therefore, the total supply of sugar in the domestic market is Q = 30,000 + 400P.

Question 13

The domestic demand and supply for sugar are Q^d = 40,000 − 200P and Q^SD = 10,000 + 300P.The foreign supply is Q^SF = 20,000 + 100P.Suppose an import quota of 5,000 is imposed in the domestic market.What will be the new market price of sugar?

Accepted Answer

The answer of The domestic demand and supply for sugar...

Question 14

What is the immediate result of applying the Clean Air Act to a previously nonregulated industry?

Accepted Answer

Applying the Clean Air Act to a previously nonregulated industry would require them to invest in pollution controls, which would increase their costs of production. This would lead to an increase in the price of their products. Additionally, production may be reduced due to the costs associated with compliance.

Question 15

Which cost measures the pollution cost to society?

Accepted Answer

External cost measures the pollution cost to society because it includes the costs that are not borne by the producer or consumer of the good or service, but rather by third parties.

Question 16

In the absence of price regulation,a monopolist:

Accepted Answer

In the absence of price regulation, a monopolist has the ability to charge a price higher than marginal cost (MC) in order to maximize profits. This is because they have market power and can control the quantity supplied. However, charging a price above MR would result in a reduced demand for the good, so they aim to set a price where MR equals MC, in order to maximize profits while selling the most possible at that price. This means that choice D is incorrect. The monopolist does not charge a price below MR either, as this would not be the optimal point of profit maximization. Therefore, the correct answer is B - the monopolist charges a price above MC.

Question 17

The domestic demand and supply for sugar are Q^d = 40,000 − 200P and Q^SD = 10,000 + 300P.The foreign supply is Q^SF = 20,000 + 100P.What is the domestic market price of sugar?

Accepted Answer

To find the equilibrium market price of sugar, we need to find the price at which the quantity demanded equals the quantity supplied. At equilibrium: Q^d + Q^SF = Q^SD 40,000 − 200P + 20,000 + 100P = 10,000 + 300P 60,000 − 100P = 10,000 + 300P 400P = 50,000 P = 125 Therefore, the equilibrium market price of sugar is P = $16.7 (rounded to one decimal place). The correct answer is C) 16.7.

Question 18

If the government imposes a price ceiling below the monopolist's average cost curve,then in the long run the regulation makes:

Accepted Answer

Imposing a price ceiling below the monopolist's average cost curve means the monopolist cannot cover its costs in the long run, potentially leading to reduced production or exit from the market, which would make consumers worse off due to decreased availability of the product.

Question 19

If a firm has been proven liable for a false ad,it has to:

Accepted Answer

When a firm has been proven liable for a false ad, it must terminate the false ad, recall any product with the false claim on it, and compensate more than the damage it has caused. All of the statements associated with this question are correct.

Question 20

Which of the following statements is NOT true in the presence of externalities?

Accepted Answer

In the presence of externalities, a monopoly might produce less than the socially efficient level of output, but it does not always produce more. The statement that a monopoly always produces more than the socially efficient level of output is not true, as monopolies typically produce less than the socially efficient quantity to maximize profit.

Quiz 14: A Managers Guide to Government in the Marketplace