ECO 365 Week 4 Knowledge Check

1. What do economists mean when they say there is "market failure"?
• Business has introduced a product that consumers did not want.
• Free markets have led to excessive profits.
• Markets have surpluses or shortages so that government rationing is necessary.
• Free markets yield results that economists do not consider socially optimal.

2.If a market has no externalities, marginal private costs
• exceed marginal social costs
• equal marginal social costs
• are below marginal social costs
• intersect marginal social costs

3.Economists generally call the effect of an agreement on others that is not taken into account by the parties making the agreement
• an externality
• welfare loss
• Pareto optimality
• excess burden

4.The size performance improvements sought by those pursuing horizontal mergers is
• economies of scale
• increased market share
• to coordinate activities more efficiently to spur growth
• to decrease competition

5.A company buys another company in the same supply chain, but either in front of it or behind it in the supply chain. This is called
• a horizontal acquisition
• a vertical acquisition
• a conglomerate
• a joint venture

6.Sony and Toshiba become partners in a microprocessor manufacturing company. This is called
• a horizontal acquisition
• a vertical acquisition
• a conglomerate
• a joint venture

7.If two companies share ownership in a venture and agree on a formal management structure including members of both companies,this is called a
• horizontal acquisition
• vertical acquisition
• joint venture
• conglomerate

8.Two companies come together to take on a project that has an explicit time cycle and ending point. The most efficient form of acquisition of this project is
• a horizontal acquisition
• a joint venture
• a vertical acquisition
• a conglomerate

9.The more elastic the supply and the demand curves are, 
• the smaller the shortage a price ceiling will create
• greater the shortage a price ceiling will create
• smaller the surplus a price ceiling will create
• greater the surplus a price ceiling will create

10.Assuming a binding price floor, the more elastic the supply and demand curves are, 
• the smaller the shortage a price floor will create
• greater the shortage a price floor will create
• smaller the surplus a price floor will create
• greater the surplus a price floor will create