Multiple choice

1. A form of oligopoly in which a dominant firm sets the price and all smaller firms in the industry follow the dominant firm's pricing policy is called (Points : 1) 

the Cournot model.

the contestable markets model.

a cartel.

the price-leadership model. 

2. Which one of the following is NOT a source of market failure? (Points : 1) 

externalities.

public goods.

imperfect information.

price ceilings.

3. Suppose a policy change will generate $100,000 of benefits for low-income families and $120,000 of costs for high-income families. This change can best be described as (Points : 1) 

Pareto efficient.

inefficient.

potentially efficient.

equitable. 

4. Society will produce the efficient mix of output if all firms equate (Points : 1) 

price and marginal cost.

price and average total cost.

marginal cost and average total cost.

price and marginal revenue.