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QR Challenge: Economics IB

QuestionAnswer
When is productive efficiency achieved?At AC min
When is allocative efficiency achieved?When P=MC
Apart from accounting costs, what other Economic Costs does a firm have to cover in order to make a normal profit?Opportunity Costs
Why can’t a firm in Monopolistic Competition earn abnormal profits in the long run?Because there are no barriers to entry
How can an oligopolist earn abnormal profits?By colluding
Give one of the conditions for price discriminationMarket power/can separate consumers into groups/consumers have different PEDs
Which diagram can be used to explain why Oligopoly is characterized by price stability?The kinked demand curve
Why might one firm in a collusive Oligopoly break their collusive behavior?To grab a portion of its rivals market share
Can a firm in perfect competition earn supernormal profit in the short run?No
In what sort of a market might a Monopoly decide not to earn Monopoly profits?A contestable market
What might minimum prices cause an excess of?Supply
What is the difference between Economies of Scale and the Law of Diminishing Returns?Economies of Scale happen in the long run
Where does MC intersect AC?At AC minimum
Give one example of a market where there may be asymmetric information?E.g. insurance market
Give one example of a regulation that could be used to reduce a given negative externality of consumptionAccurate example
If left to the market, why will merit goods be underprovided by the market?Their MSB is higher than their MPB/Firms do not have a financial incentive to provide enough of them
What does the triangle in an externality diagram show?Welfare loss/deadweight loss
What is the equation for cross elasticity of demand? % change in price of good X divided by % change in price of good Y

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