ECO 550 Final Exam 4

ECO 550 Final Exam 4
1). In the absence of any legally binding enforcement mechanism, individual
cartel producers may find it advantageous to cheat on the agreements and engage
in secret price concessions.
2). When a promisor fails to put full effort into the performance of an
agreement, yet the lack of effort is not independently verifiable, this lack of
effort constitutes a
3). The Herfindahl-Hirschman index is a measure of ____.
4). In long-run equilibrium, all firms in a pure competition market
situation operating under a condition of certainty will have identical costs
even though they may use different production and operation techniques.
5). The distinctive characteristic of an oligopolistic market structure is
that there are recognizable interdependencies among the decisions of the firms.

6). The Sherman Act prohibits:
7). Buying electricity off the freewheeling grid at one quarter ’til the
hour for delivery on the hour illustrates:
8). Effective collusion generally is more difficult as the number of
oligopolistic firms involved increases.
9). In pure competition:
10). An oligopoly is characterized by:
11). The kinked demand curve model was developed to help explain:
12). The profit-maximizing monopolist, faced with a negative-sloping demand
curve, will always produce:
13). Capital expenditures:
14). Which of the following public policies has (have) the effect of
restricting competition:
15). The cost of capital can be thought of as the rate of return required by
investors in the firm’s securities.
16). ____ occur whenever a third party receives or bears costs arising from
an economic transaction in which the individual (or group) is not a direct
participant.
17). A firm in pure competition would shut down when:
18). The expected rate of return from a share of stock consists of:
19). In the purely competitive case, marginal revenue (MR) is equal to
20). In the short-run for a purely competitive market, a manufacturer will
stop production when:
21). Patents have been defended by some on the grounds that they stimulate
inventive activity. Others have argued for changes in current patent laws
because:
22). A monopoly will always produce less than a purely competitive industry,
ceteris paribus.
23). The practice by telephone companies of charging lower long-distance
rates at night than during the day is an example of:
24). When the cross elasticity of demand between one product and all other
products is low, one is generally referring to a(n) ____ situation.
25). The decision by the Municipal Transit Authority to either refurbish
existing buses, buy new large buses, or to supplement the existing fleet with
mini-buses is an example of:
26). Which of the following statements is (are) true concerning a pure competition
situation?
27). Which of the following are not approaches to resolving the
principal-agent problem:
28). If a cartel seeks to maximize profits, the market share (or quota) for
each firm should be set at a level such that the ____ of all firms is
identical.
29). In the electric power industry, residential customers have relatively
____ demands for electricity compared with large industrial users and generally
are charged ____ rates.
30). The largest problem faced in cartel pricing agreements such as OPEC is:

31). Non-redeployable durable assets that are dependent upon unique
complementary and perfectly redeployable assets to achieve substantial
value-added will typically be organized as
32). Governance mechanisms are designed
33). A(n) ____ is characterized by a relatively small number of firms
producing a product.
34). The antitrust laws regulate all of the following business decisions
except ____.
36). In the case of pure monopoly: