Exam 14: A Managers Guide to Government in the Marketplace

Consider the monopoly in the figure below with price regulated at $2 per unit.Deadweight loss resulting from the unregulated monopoly price is _________ than the deadweight loss resulting from the regulated price.

In the 1990s the Mobil Oil Corporation acquired the rights to increase pollution by 900 pounds of sulfur dioxide per day at its Torrance,California,refinery.These rights were purchased from South Gate,California,at a price of $3 million after the latter acquired them from General Motors.As a result of this change,Mobil increased its output of noxious vapors in Torrance,California,by 900 pounds per day.Do you think the environment was harmed as a result of the sale of these pollution rights?

Consider the monopoly in the figure below with price regulated at $2 per unit.Consumer surplus at the regulated price is:

A lump-sum tariff imposed on foreign competitors will:

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

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

A price ceiling imposed on a monopoly may:

Which of the following raises domestic prices only when demand is relatively low?

The presence of government in the market leads to:

The external marginal cost of producing coal is MC_external = 8Q while the internal marginal cost is MC _internal = 6Q.The inverse demand for coal is given by P = 180 − 4Q.What is the socially efficient level of output?

Which of the following is NOT a valuable role of government in a free market society?

When the government imposes an effective price ceiling on a monopolist,what will be sure to happen in the short run?

Suppose a monopoly faces an inverse demand curve of P = 100 − 2Q and has constant marginal cost of 6Q.If the government is considering legislation that would regulate price to the competitive level,what is the maximum amount the monopoly would spend on (legal)lobbying activities designed to thwart the regulation?

Which of the following raises domestic prices when demand is relatively high?

An excise tariff is:

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

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

Which of the following is a public good?

The domestic demand and supply for sugar are Q^d = 60,000 − 400P and Q^SD = 20,000 + 500P.The foreign supply is Q^SF = 20,000 + 100P.What is the domestic market price of sugar?

The manager of Roy's Video noticed a newspaper advertisement by a rival store that erroneously claimed,"We are the only firm in town that does not sell pornographic videos." He initially dismissed the deceptive advertisement but decided to reconsider his course of action when the rival refused to stop running the advertisement.In the interim,numerous churches and other organizations boycotted Roy's Video,resulting in an estimated loss of $25,000.Do you think it would be advisable for Roy to seek legal counsel?