Question

TRUE/FALSE QUESTIONS

23. A few firms with market power selling an identical product and competing over price arrive to the competitive equilibrium. 24. In an oligopoly setting, joint profits are the highest when firms act according to a Stackelberg model. 25. In the presence of a negative externality generated by producing a good, a competitive market will produce less of that good than is socially optimal. 26. An example of the tragedy of the commons is when farmers pump more groundwater from an aquifer than is socially optimal.

Answer 1

23) Correct answer is FALSE.

Reason: With few firms, Perfectly competitive outcome can't be gained or obtained.

24) Correct answer is TRUE.

Reason: In the oligopoly market, more output in stackelberg and also higher joint profits are obtained.

25) Correct answer is FALSE.

Reason: In the negative externality, the competitive market outcome will lead to the over production of the goods or commodities.

26) Correct answer is TRUE.

Reason: In the case of the tradegy of commons, the individual rational outcomes results in the over exploitation of the resource.

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