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WorksheetsContestable Markets and Misc
Total questions: 12
Worksheet time: 23mins
In a contestable market
there must be lots of firms
there must be a few firms or more
there can be any number of firms
Gym membership at Jim's Gym are priced as following
Adult: £18
65 & Over: £13
18 – 24: £10
What type of price discrimination does this gym use?
first
third
second
fourth
Choose the correct answers (there are three)
The free market equilibrium exceeds the social optimum quantity.
The free market equilibrium is below the social optimum quantity.
There is a welfare loss equal to MTZ.
There is a welfare loss equal to TZG.
An increase in quantity from the free market equilibrium will lead to a net welfare gain.
There is a condition for hit-and-run competition to be able to take place choose the answer you think makes the most sense:
Supernormal profits earned must be greater than entry and exit costs.
Supernormal profits must equal entry and exit costs.
Supernormal profits earned must be smaller than entry and exit costs.
Profits should not exceed the normal profit making level.
Which of the following forms of government intervention could help to solve the free rider problem?
Provision of public goods
Taxation on the consumption of public goods
Banning the consumption of luxury goods
Granting of subsidies to goods which yield high external costs
In a contestable market:
supernormal profits can be earned in the long run but not the short run.
supernormal profits can be earned in the short run but not the long run.
only supernormal profits can be earned in the short run and the long run.
only normal profits can be earned in the short run and the long run.
Which of the following forms of government intervention could correct market failure?
Indirect taxes removed from merit goods.
Taxation of goods which yield high external benefits
Banning the consumption of luxury goods
Granting of subsidies to goods which yield high external benefits.
A firm is selling 500 units of a good at a price of £20. Having increased the price to £25, the quantity demanded falls to 425 units. Calculate the price elasticity of demand.
-0.4
-1.4
-0.6
-1.6
What is the dominant strategy for Yellow?
Producing a low level of output
Producing a high level of output
There isn't one.
Limit pricing is (two correct answers):
Setting prices below cost to drive out competition
Setting prices below profit maximising levels to deter new entrants
Setting prices above a limit.
A pricing strategy used by firms in competitive oligopoly markets.
A pricing strategy used by firms in non-competitive oligopoly markets.
Choose the correct answer.
An increase in consumer income will lead to a more than proportionate increase in demand for fruit drinks.
A decrease in consumer income will cause a fall in the demand for all of the drinks.
An increase in consumer income will lead to a decrease in demand for fizzy drinks.
A decrease in consumer income will lead to a less than proportionate decrease in demand for bottled water.
What type of tax is this? (two correct answers)
Specific
Indirect
Direct
Ad Valorem
