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

The Fed's low short-term interest rate policy from 2002-2004, along with housing regulations promoting low down-payment loans to sub-prime borrowers, encouraged

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

Which of the following resulted from Fed policy that first kept short-term interest rates extremely low during 2002-2004, and then pushed them up substantially during 2005-2006?

If government taxes a firm which pollutes this will

Which of the following was a contributing factor to the rising default and foreclosure rates beginning in the latter half of 2006?

Between 2001-2005,

Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?

In the latter half of the 1990s, the Department of Housing and Urban Development imposed regulations on Fannie Mae and Freddie Mac, requiring them to

A market is unlikely to provide an efficient quantity of public goods because

Is education a public good? Focus on whether it meets the two criteria for being a public good.

The economic way of thinking indicates that government action will

When government failure is present,

When a firm generates external benefits, a more efficient outcome would result if

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

An analysis of housing prices between 1987 and 2008 indicates that prices

Externalities are fundamentally the result of

Economic analysis indicates that

Consider two goods--one that generates external costs and another that generates external benefits. The actual market outcome would

A hilly, public golf course is often used by sledders in the winter. One of the sledders was quoted as saying, "This is public property, so we have just as much a right to be on these hills as anyone else. Besides, when it snows, golfers can't use the course anyway. Sledding doesn't harm anything." Is he correct? Why or why not?

When external costs are present in a market,