Study Questions For The Final Exam

ECON 262

 

These questions are not designed to take the place of studying your notes and the reading assignments.  Do not e-mail me and ask me to answer all or some of these questions for you.  If you have missed class, it is your responsibility to get the notes from another student.  Once you have answered these questions yourself, if you are unsure of any of your answers, let me know and I will tell you if you are correct or not.  Don't be afraid to ask me questions, I just want you to try to answer the questions yourself first.

 

 

     Topic:  Competition and Monopoly

  1. Not all economists agree on how we should define and analyze competition and monopoly.  What are the two different "schools of thought" called that we looked at in class?

  2. What is a monopoly?  Oligopoly?  Duopoly? Monopsony? (as defined in this class -- no other definitions please)!

  3. What is the "structure" of an industry?

  4. What is the most competitive structure according to the structuralist view and what is the least competitive structure?

  5. How does the structuralist view define efficiency?  Define productive efficiency?  Define allocative efficiency?

  6. What are some relevant barriers to entry according to the structuralist view?

  7. What is the policy recommendation of the structuralist view (are antitrust laws seen as increasing competition and why)?

  8. What is the "public interest" view of government regulation?  Does the structuralist view believe in this?  Explain.  (This relates to the previous question)

  9. How does the process or rivalry view of competition define competition (there are two parts)?

  10. What does it mean to say that competition can be viewed as a “discovery procedure or process”?  Whose theory is this (name of the economist)?

  11. Is a monopolist always anti-competitive or does it depend upon the definition of competition you use?  Explain why the process view says monopolies can be competitive under certain conditions (what conditions?)

  12. How does the process view of competition define efficiency?

  13. What barriers to entry are relevant under the process view?  Examples?

  14. Why are the antitrust laws seen as causing a decrease in competition under the process view?

  15. What is the capture theory of government?  How does it relate to special interest groups?

  16. What was the Antitrust law passed in 1890?

    Topic:  Cartels

  1. What is a cartel?

  2. Distinguish between a cartel and collusion.

  3. What requirements are more or less conducive to successful cartels?

  4. Even if these criteria (from the above question) are met, what are three reasons cartels will still have problems being successful?  Explain.

  5. Provide an example of how government has helped cartels in the past.

  6. Provide some examples of real world cartels.

  7. What did Nash add to Adam Smith's theory regarding human behavior? 

  8. Using a pay-off matrix, explain why cartels break down.  Make sure you explain two incentives (offensive and defensive) that firms have to cheat on the cartel (in other words, what sets up the prisoner's dilemma with respect to cartels)?   

    Topic:  Price Discrimination

  1. What is price discrimination?  What are two ways it can take place?

  2. Why do firms practice price discrimination?  Are consumers better off because of it (in general) - why or why not?

  3. What conditions must be met before a firm can price discriminate (esp. 3rd degree).

  4. What is a "reservation price?"

  5. Explain, graph and give an example of each of the three degrees of price discrimination.

  6. What other ways might we categorize different kinds of price discrimination?

 

   Topic:  Environmental Economics, Externalities, Etc.

  1. Economists emphasize what kind of solutions (over conflict) with respect to environmental issues?  Example?

  2. What basic principles do economists follow when studying environmental economics?

  3. What is an externality?  Positive?  Negative?  In production?  In consumption?  Give examples of both positive and negative externalities in production and consumption.

  4. What do "social costs" and "social benefits" include?  Be able to do a graphically (and in words) explanation of what happens when externalities are not included - and then internalized - with respect to output (trade) in a market.

  5. What does it mean to "internalize" an externality? 

  6. Explain some "private solutions" to an externality (ways to internalize, etc.) and problems with each.

  7. Explain three government policies towards externalities and problems with each.

  8. What is a common resource or common property?  Example? 

  9. What is the free rider problem with respect to common property?

  10. What is the tragedy of the commons?  This relates to the question above.

  11. As an example of the tragedy of the commons, why does common property in animals often lead to extinction?  Give an example. 

  12. What is a possible solution to the tragedy of the commons that economists discuss?

  13. What is a "total allowable catch" system?  How does it work?  How do "individual transferable quotas" work in the system?

  14. What is Stroup's and Ostrom's (and Deb's) views of where property rights should come from?  Why (what are the arguments for establishing property rights this way instead of via government)?  Explain.  Give examples from the reading and also make sure you have seen the Ostrom video and understand what her main point is.

  15. In order for property rights to be effective - they must have three qualities (as per Stroup) - what are they?

  16. Explain some ways that property rights help the environment.

  17. Explain the difference between direct and indirect effects of property rights with respect to environmental quality.  Give an example of each.

  18. How might the size of the population impact the ability to internalize externalities?

  19. What is the Environmental Kuznets Curve (what relationship does it demonstrate - graph)?

  20. What are the theories that support the Kuznets Curve?

  21. What are some critiques of the theories that support the Kuznets Curve?

    Topic:  THE COMPREHENSIVE QUESTIONS THAT MIGHT BE ON THE FINAL EXAM!

 

Question over "What Do Markets Do?"

Question over "The Broken Window Fallacy"

Question regarding the following:

 

If there's one thing I want all of you to remember:  if you want a certain outcome to happen (less poverty, better environment, whatever) -- people must have an interest in acting for that outcome -- if rules go against their self interest -- all you will get are unintended outcomes - most of them negative !!  (Hint:  What was the first model we discussed in class?)  RULES - INCENTIVES - ACTIONS - OUTCOMES!

 

 

Readings:  Make sure you look over Chapters 17, 18, 19, 25 and 27 in MBN, handouts, in class exercises, and homework assignments. 

 

 

It has been fun - have a great summer (what is left of it)!