Exam 5: Difficult Cases for the Market, and the Role of Government

Figure 5-4 -Refer to Figure 5-4. The figure illustrates an industry that generates

When economists say that an activity meets the criterion for economic efficiency, they mean

When market failure is present,

Markets fail when externalities are present

When external benefits are present in a market,

Government provision of goods and services that cannot easily be provided through markets because it is difficult to establish a one-to-one link between payment and consumption of the good is referred to as the

Students in a class are assigned to groups to work on a project. A grade will be given for each project, and everyone in the group will receive that grade. For the members of a particular group, the grade is a

People who receive the benefit of a good without contributing to its costs of production are called

Sparkle-Bright toothpaste is a new product that advertises it will give you fresh breath and shiny, white teeth. You buy a tube for $1.99, and after brushing, you have both bad breath and dull teeth. Is there a role for the public sector in this situation?

A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?

Suppose that the producers of copper are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of copper products in a competitive market compare with their values under conditions of ideal economic efficiency?

Which of the following correctly describes the external benefit resulting from an individual's purchase of a winter flu shot?

When there is reason to think that the existing structure of incentives will cause individuals in the market to act in ways that are inconsistent with ideal economic efficiency, economists say that

A good that is both nonexcludable and nonrival-in-consumption is called a

In a competitive market, if the production process involves an external benefit, the market will

Markets may have difficulty providing the proper quantity of a public good because

"Government failure" exists when political decision-makers choose actions that

Figure 5-4 -Refer to Figure 5-4. The efficient price and quantity are

Suppose the actions of the producers of a good impose an external cost which results in the actual market price of $18 and market output of 400 units. How does this outcome compare to the efficient, ideal equilibrium?

If government taxes a firm which pollutes this will