Question

TRUE OR FALSE

1. A few firms with market power selling an identical product and competing over price arrive to the competitive equilibrium.
2. In an oligopoly setting, joint profits are the highest when firms act according to a Stackelberg model.
3. 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.
4. An example of the tragedy of the commons is when farmers pump more groundwater from an aquifer than is socially optimal.

Answer 1

Q1) false

with few firms, perfecfly Competitive outcome can't be achieved

2) true

in oligopoly, more output in stackelberg ,& higher joint profits

3) false

in negative externality, the compt market outcome leads to overproduction of the good

4) true

In case of tragedy of commons, the individual rational outcome results in over exploitation of the resource