Exam 31: Market Failure: Externalities, Public Goods, and Asymmetric Information

Maria lives next door to Alice.Alice regularly plays loud music,which often disturbs Maria.Maria went over to Alice's house yesterday and asked her to turn down her music because loud music adversely affects her.Alice has complied.Which of the following best describes the economists' view of what has happened?

If an asymmetry of information is removed and laborers' preferences change against employment,this will shift the equilibrium in the labor market to the

A negative externality exists when

Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.

When a professor announces to the class that she will grade on a curve and that no one in the class will receive a grade lower than a "C"

The Coase theorem states that

If a positive externality exists,__________ for the socially optimal output to be reached.

Which of the following situations probably would not yield a negative externality?

Samantha is given a flu shot by her doctor.This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu,too.The latter is an example of a

According to the Coase theorem,externalities

Suppose the socially optimal output is 134 units of a good and the market output is 95 units of the good.A possible reason the market produces "too little" is that

The __________ problem in the market for used cars is capable of collapsing the market for __________.

If society is experiencing a net social cost from the production of a good,this implies that

An insurance company requires homeowners it insures to have smoke detectors in their homes.The insurance company is trying to combat the

If there is a negative externality,and the market output is 100 units more than the socially optimal output,then it follows that

A seller has some information about a good that the buyer does not have.When would the seller be most likely to provide the buyer with the currently "hidden" information?

A positive externality exists when

When students arrive late to class and disrupt their classmates

In which of the following situations would a negative externality most likely be involved?

Suppose the production of a good results in negative externalities.If all costs are taken into account,then