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• The belief that education makes a person more productive and thereby raises his or her wage is referred to as the ________ view of education. human-capital, compensating-differential, natural-ability, unmeasured-variables
• Market failure caused by the free rider problem is associated with pure public goods, Asymmetric information, price discrimination, negative externalities
• A natural monopoly arises when: economies of scale are so great that only one firm can exist in a market., a firm acquires a patent., two firms merge to become the only firm serving an entire market, a single firm controls all of a natural resource.
• A solution to market failure in the particular application of environmental policy: can be the establishment of a new market where one had not existed before., an never be market-based, as market failure implies that markets damage the environment., can never involve the government because the government initially created the market failure., s impossible because firms and consumers follow their self-interest
• Which of the following is a characteristic of a monopolistically competitive market? I. There are many sellers., lII. Firms sell slightly differentiated products., II. The demand curve facing each individual firm is horizontal., A) I and II only, B) I and III only, C) II and III only, D) I, II, and III
• How does the firm-specific demand curve in a perfectly competitive market compare to that in a monopoly? The firm-specific demand curve in a perfectly competitive market is horizontal. The demand curve in a monopoly is downward sloping., They are the same., The firm-specific demand curve in a perfectly competitive market is horizontal. The demand curve in a monopoly is upward sloping., The firm-specific demand curve in a perfectly competitive market is vertical. The demand curve in a monopoly is horizontal.
• A firm that faces the duopolists' dilemma can avoid the dilemma by: elling customers that it will match any competitor's price., undercutting its competitor's price., agreeing to join a cartel., always choosing its dominant strategy regardless of the other firm's action.
• Which of the following is a short-run adjustment in a market? A firm hires six new workers., Three new firms enter the computer chip industry., The number of farms in Kansas increases by 10%., A firm opens two new plants.
• Suppose that the supply of milk decreases. Price will ________ and consumer surplus will ________. increase; decrease, ncrease; increase, decrease; increase, decrease; decrease
• If demand is price inelastic, then buyers do not respond much to a change in price., buyers respond substantially to a change in price, but the response is very slow., buyers respond substantially to a change in price, but the response is very slow., the demand curve is very flat
• When the stores reduce the prices of the goods sold, we can state that producer surplus decreases., sellers expect the buyers to behave irrationally., consumer surplus decreases., sellers behave irrationally.

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