Microeconomics III: Markets and Externalities - Market Challenges and Solutions

7 important questions on Microeconomics III: Markets and Externalities - Market Challenges and Solutions

True or False. In a perfecty competetive market, the marginal revenue (MR) will always be equal to the market price.

True

What is the formula of Average Total Cost (ATC)?

ATC = total costs / quantity of good being produced

True or False. In the short run, if price drops below minimum AVC, we should shut down temporarily to avoid losing more money.

True
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True or False. The long run supply curve is perfectly elastic.

True

Meaning firms has unspoken agreement

Collude

What are 3 instances of Market Failure?

  1. Free Rider
  2. Tragedy of the commons
  3. Externalities

True or False. Positive externalities lead to underproduction.

True

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