Question 1

The major difficulty in asking people to pay voluntarily what a government program is worth to them is:

Accepted Answer

A)   the free-rider problem.
B)   people have poor judgment.
C)   the fact that people don't know what programs they want.
D)   we would increase government expenditures too much.E) B) and D)
F) B) and C)

Question 2

The term "productive efficiency" refers to:

Accepted Answer

A)   the situation where producer surplus is greater than consumer surplus.
B)   the production of the product-mix most desired by consumers.
C)   the production of a good in the least costly way.
D)   the production of any good which producer desires to produce.E) C) and D)
F) All of the above

Question 3

A demand-side market failure occurs when demand curves do not reflect consumers' full willingness to pay for a good or service.

Accepted Answer

A) True 
 B)False

Question 4

Quasi-public goods are:

Accepted Answer

A)   government produced goods that can be produced so that exclusion is possible.
B)   government produced goods that can be produced so that exclusion is not possible.
C)   privately produced goods that can be produced so that exclusion is possible.
D)   privately produced goods that can be produced so that exclusion is not possible.E) None of the above
F) C) and D)

Question 5

Market for asparagus.At the market price of $2,area A + B represents:

Accepted Answer

A)   total consumer benefit.
B)   total revenue to sellers.
C)   consumer surplus.
D)   returns to capital and to labour.E) A) and D)
F) A) and B)

Question 6

Refer to the diagram.The area of producer surplus would be represented by triangular area:

Accepted Answer

A)   a.
B)   b.
C)   c.
D)   d.E) B) and C)
F) C) and D)

Question 7

It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle,and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

Accepted Answer

A)   Government agencies can make a great deal of money.
B)   Pollution would be eliminated because nobody would want to pay for such a right.
C)   The quality of water or air can be maintained at some acceptable standard through economic incentives.
D)   The social consciousness of people would be raised as they obtain more appreciation for the importance of conservation.E) A) and C)
F) B) and D)

Question 8

Which one of the following might shift the marginal benefit curve from MB1 to MB2? 1 to MB2?   A)  major new studies strongly linking cancer to pollution B)  improved technology for reducing pollution C)  a change in consumer tastes from manufacturing goods to services D)  a decrease in the price of recycled goods" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   major new studies strongly linking cancer to pollution
B)   improved technology for reducing pollution
C)   a change in consumer tastes from manufacturing goods to services
D)   a decrease in the price of recycled goodsE) None of the above
F) A) and B)

Question 9

Which of the following statements is correct?

Accepted Answer

A)   Private goods yield direct benefits to the purchaser and are financed by government.
B)   Public goods yield widespread external benefits and are purchased by government with tax revenues.
C)   Public goods are bought voluntarily out of private incomes and yield no significant external benefits.
D)   Public goods are bought voluntarily out of private incomes and yield widespread external benefits.E) B) and C)
F) None of the above

Question 10

Ed,Mike,and Scott are the only three people in a community and Ed is willing to pay $20 for the 5th unit of a public good;Mike,$15;Scott,$25.The government should produce the 5th unit of the public good if the marginal cost is:

Accepted Answer

A)   less than $150.
B)   less than $100.
C)   less than $60.
D)   less than $300.E) A) and D)
F) All of the above

Question 11

Which of the following is an example of externalities?

Accepted Answer

A)   There are not enough tickets available to concerts of extremely popular performers.
B)   The price of medical care has risen dramatically as a result of the introduction of sophisticated equipment and techniques.
C)   Polio shots and chest x-rays provide widespread benefits to the community as a whole as well as to the individuals who get them.
D)   Extensive decreases in the prices of electronic equipment resulted in large numbers of bankruptcies in the computer industry.E) B) and C)
F) All of the above

Question 12

Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production,including external costs.Assume that the number of people affected by these external costs is large.Without government interference,this market will result in: 1 is a supply curve comprising all costs of production,including external costs.Assume that the number of people affected by these external costs is large.Without government interference,this market will result in:   A)  an optimal allocation of society's resources. B)  an under-allocation of resources to this product. C)  an over-allocation of resources to this product. D)  a higher price than is consistent with an optimal allocation of resources." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   an optimal allocation of society's resources.
B)   an under-allocation of resources to this product.
C)   an over-allocation of resources to this product.
D)   a higher price than is consistent with an optimal allocation of resources.E) None of the above
F) A) and D)

Question 13

Which is a characteristic of a public good?

Accepted Answer

A)   rivalry among firms
B)   excludability
C)   non-excludability
D)   no free-rider problemE) All of the above
F) None of the above

Question 14

Which of the following is a characteristic of a private good:

Accepted Answer

A)   free-rider problem
B)   external benefits
C)   external costs
D)   excludabilityE) B) and C)
F) C) and D)

Question 15

The market demand curve for a public good:

Accepted Answer

A)   is derived in the same manner as demand curves for private goods.
B)   is derived by horizontally summing all individual demand curves.
C)   shows the total value that all individuals place on each unit of the good.
D)   shows the total number of units that would be produced by the private sector at each possible price.E) All of the above
F) B) and C)

Question 16

Which of the following is a private good?

Accepted Answer

A)   a ballpoint pen
B)   national defence
C)   a highway
D)   a lighthouseE) C) and D)
F) None of the above

Question 17

Suppose that a large tree on Shawn's property is blocking Sam's view of the lake below.Shawn accepts Sam's offer to pay Shawn $100 for the right to cut down the tree.This situation describes:

Accepted Answer

A)   the Coase Theorem.
B)   the diamond-water paradox.
C)   logrolling.
D)   a market for externality rights.E) All of the above
F) B) and C)

Question 18

The following information is for a public good.Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good,rather than do without it.These people are the only two members of society.The collective willingness of this society to pay for the 2nd unit of this public good is: a and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good,rather than do without it.These people are the only two members of society.The collective willingness of this society to pay for the 2nd unit of this public good is:   A)  $2 B)  $4 C)  $6 D)  $8" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   $2
B)   $4
C)   $6
D)   $8E) B) and C)
F) A) and D)

Question 19

Examples of quasi-public goods include:

Accepted Answer

A)   education.
B)   highways.
C)   museums.
D)   all of the given possible answers are examples of quasi-public goods.E) B) and C)
F) B) and D)

Question 20

In a purely competitive industry at equilibrium price and quantity

Accepted Answer

A)   the producer surplus exceeds the consumer surplus.
B)   the sum of consumer and producer surplus is maximized.
C)   the consumer surplus exceeds producer surplus.
D)   the willingness of consumers to pay exceeds the opportunity cost of producing the product.E) A) and D)
F) None of the above

Exam 4: Market Failures: Public Goods and Externalities

Which of the following statements is correct?

Correct Answer
verified

Refer to the diagram in which S is the market supply curve and S₁ is a supply curve comprising all costs of production,including external costs.Assume that the number of people affected by these external costs is large.Without government interference,this market will result in:

Correct Answer
verified

It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle,and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

Correct Answer
verified

Correct Answer
verified

Quasi-public goods are:

Correct Answer
verified

Ed,Mike,and Scott are the only three people in a community and Ed is willing to pay $20 for the 5^th unit of a public good;Mike,$15;Scott,$25.The government should produce the 5th unit of the public good if the marginal cost is:

Correct Answer
verified

Which of the following is an example of externalities?

Correct Answer
verified

The market demand curve for a public good:

Correct Answer
verified

Which one of the following might shift the marginal benefit curve from MB₁ to MB₂?

Correct Answer
verified

Which of the following is a private good?

Correct Answer
verified

Examples of quasi-public goods include:

Correct Answer
verified

In a purely competitive industry at equilibrium price and quantity

Correct Answer
verified

Market for asparagus.At the market price of $2,area A + B represents:

Correct Answer
verified

Refer to the diagram.The area of producer surplus would be represented by triangular area:

Correct Answer
verified

Which of the following is a characteristic of a private good:

Correct Answer
verified

Which is a characteristic of a public good?

Correct Answer
verified

The term "productive efficiency" refers to:

Correct Answer
verified

A demand-side market failure occurs when demand curves do not reflect consumers' full willingness to pay for a good or service.

Correct Answer
verified

The major difficulty in asking people to pay voluntarily what a government program is worth to them is:

Correct Answer
verified

Suppose that a large tree on Shawn's property is blocking Sam's view of the lake below.Shawn accepts Sam's offer to pay Shawn $100 for the right to cut down the tree.This situation describes:

Correct Answer
verified

Exam 4: Market Failures: Public Goods and Externalities

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production,including external costs.Assume that the number of people affected by these external costs is large.Without government interference,this market will result in:

Correct AnswerverifiedShow Answer

It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle,and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Quasi-public goods are:

Correct AnswerverifiedShow Answer

Ed,Mike,and Scott are the only three people in a community and Ed is willing to pay $20 for the 5th unit of a public good;Mike,$15;Scott,$25.The government should produce the 5th unit of the public good if the marginal cost is:

Correct AnswerverifiedShow Answer

Which of the following is an example of externalities?

Correct AnswerverifiedShow Answer

The market demand curve for a public good:

Correct AnswerverifiedShow Answer

Which one of the following might shift the marginal benefit curve from MB1 to MB2?

Correct AnswerverifiedShow Answer

Which of the following is a private good?

Correct AnswerverifiedShow Answer

Examples of quasi-public goods include:

Correct AnswerverifiedShow Answer

In a purely competitive industry at equilibrium price and quantity

Correct AnswerverifiedShow Answer

Market for asparagus.At the market price of $2,area A + B represents:

Correct AnswerverifiedShow Answer

Refer to the diagram.The area of producer surplus would be represented by triangular area:

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a private good:

Correct AnswerverifiedShow Answer

Which is a characteristic of a public good?

Correct AnswerverifiedShow Answer

The term "productive efficiency" refers to:

Correct AnswerverifiedShow Answer

A demand-side market failure occurs when demand curves do not reflect consumers' full willingness to pay for a good or service.

Correct AnswerverifiedShow Answer

The major difficulty in asking people to pay voluntarily what a government program is worth to them is:

Correct AnswerverifiedShow Answer

Suppose that a large tree on Shawn's property is blocking Sam's view of the lake below.Shawn accepts Sam's offer to pay Shawn $100 for the right to cut down the tree.This situation describes:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Refer to the diagram in which S is the market supply curve and S₁ is a supply curve comprising all costs of production,including external costs.Assume that the number of people affected by these external costs is large.Without government interference,this market will result in:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Ed,Mike,and Scott are the only three people in a community and Ed is willing to pay $20 for the 5^th unit of a public good;Mike,$15;Scott,$25.The government should produce the 5th unit of the public good if the marginal cost is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which one of the following might shift the marginal benefit curve from MB₁ to MB₂?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified