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

It seems quite possible that cigarette companies concealed information about the effect of smoking on health,causing cigarette prices to be __________ and cigarette sales to be __________ than would have been the case under symmetric information.

It is argued that the market will

Which of the following situations is descriptive of the existence of a negative externality.

The Coase theorem

The primary characteristic of a public good is that it is nonrivalrous in consumption.

The Coase theorem is significant because it

Asymmetric information exists when

When marginal private benefit is equal to marginal private cost,

Which of the following is an example of a negative externality?

For a good where network externalities are present,having an early lead in the race for customers may be the only lead necessary to ultimately win the race for dominance in the good's market.

Exhibit 31-3 -Refer to Exhibit 31-3.What is the cost to Firm A of eliminating 2 tons of pollution?

A good is nonrivalrous in consumption if

Which of these goods may be considered rivalrous in consumption and nonexcludable?

From an economist's point of view,zero pollution is always preferable to some pollution.

A public good can be excludable or nonexcludable.

When marginal private cost is less than marginal social cost,

Exhibit 31-5 -Refer to Exhibit 31-5.If a positive externality exists,then the external benefits associated with the positive externality equal the distance between points __________,and the market output is __________.

The primary difference between private goods and public goods is that

Exhibit 31-1 -Refer to Exhibit 31-1.If the exhibit represents a negative externality situation,then what is Q₁? A) It is the quantity of output at which marginal social costs (MPC). b. It is the quantity of output at which MPC > MSC. c. It is the market output; it is the quantity of output that exists if the external costs associated with the negative externality are not taken into account. d. It is the socially optimal output; it is the quantity of output that exists if the external costs associated with the negative externality are taken into account. e. none of the above

When an insurance company specifies certain precautions that an insured person must take it is trying to control for moral hazard.