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

A negative externality exists and government wants to impose a per-unit tax in order to bring about the socially optimal output.To accomplish its objective,government must set the tax equal to marginal

Which of the following is definitely not a nonexcludable public good?

Exhibit 31-1 -Refer to Exhibit 31-l.If the exhibit represents a negative externality situation,the private cost of expanding output from Q₁ to Q₂ is the area of

Under an emission tax,polluters ________ what price they have to pay to pollute,__________________________ how much pollution will be generated.

There is an average price for a used car that accounts for both good used cars and bad used cars ("lemons").At the current market price for used cars,the persons __________ likely to offer their used cars for sale are people who own __________.

Which of the following situations is clearly and unambiguously descriptive of a positive externality?

The Coase theorem states that

Which of the following is true?

When a good is nonexcludable,then individuals

Moral hazard occurs when the parties on once side of the market,who have information not known to others,self select in a way that adversely affects the parties on the other side of the market.

A negative externality is

Suppose the production of a good results in positive externalities.If output occurs at the intersection of the marginal social benefits curve and the supply curve,then

Generally,negative externalities result in

Suppose the optimal amount of X is 100 units and that the market provides 123 units.This situation is descriptive of

Exhibit 31-1 -Refer to Exhibit 31-1.This graph represents a negative externality situation.Given this,which of the two curves,X or Y,represents marginal social costs and why?

Exhibit 31-4 -Refer to Exhibit 31-4.If a negative externality exists,then the external costs associated with the negative externality equal the distance between points __________,and the socially optimal output is __________.

Marginal social benefits are equal to

Exhibit 31-5 -Refer to Exhibit 31-5.If a positive externality exists,then curve 1 represents the __________,curve 2 represents the __________,curve 3 represents the __________ and Q₁ represents the __________.

The free rider problem is the main source of market failure in the provision of nonexcludable public goods.

A consequence of a negative externality is that social costs __________ private costs,and the socially optimal level of output __________.