Exam 4: Part B: Market Failures: Public Goods and Externalities

Refer to the supply and demand graph for a public good.Which line segment would indicate the amount by which the marginal benefit of this public good is greater than the marginal cost?

If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.

Answer the question based on the following information.Way-Below Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism.The university is now considering several alternative levels of crime control.This table shows the expected annual costs and benefits of these alternatives.If Way-Below Normal undertakes Level Three:

Which is a characteristic of a public good?

A supply-side market failure occurs when supply curves do not reflect the full cost of producing a good or service.

The right and efficient amount of a public good will be produced when:

If there are external benefits or positive externalities associated with the consumption of a good or service:

Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.

The difference between the price consumers are willing to pay and the actual price they do pay is referred to as:

Why does pollution continue to be an issue?

The MB curves in the diagram slope downward because of the law of:

Consumer surplus and the market price are positively related.

Cost-benefit analysis attempts to:

By levying taxes on households and businesses, governments:

Consumer surplus refers to:

From society's perspective, if MB₁ and MC₂ are relevant:

The following information is for four highway programs of increasing scope.All figures are in millions of dollars.On the basis of the data we can say that:

Which is a characteristic of a public good?

Supply-side market failure

The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.