Question 1

Public goods:

Accepted Answer

A) refer to the goods flowing to the public. 
B) refer to symmetric information. 
C) are not related to transaction costs. 
D) are a special case of externality. 
A) refer to the goods flowing to the public. 
B) refer to symmetric information. 
C) are not related to transaction costs. 
D) are a special case of externality. D

Question 2

According to the Coase theorem part I, no fault divorce should have:

Accepted Answer

A) not changes the divorce rate but made women better off. 
B) not changed the divorce rate, and not made anyone better or worse off. 
C) changed the divorce rate, but made men better off. 
D) not changed the divorce rate, but made women worse off. 
A) not changes the divorce rate but made women better off. 
B) not changed the divorce rate, and not made anyone better or worse off. 
C) changed the divorce rate, but made men better off. 
D) not changed the divorce rate, but made women worse off. B

Question 3

Property rights are limited:

Accepted Answer

A) by people's ignorance. 
B) in order to insure fairness. 
C) by a variety of factors but not by the law. 
D) because it is costly to enforce them. 
A) by people's ignorance. 
B) in order to insure fairness. 
C) by a variety of factors but not by the law. 
D) because it is costly to enforce them. D

Question 4

When the recipient of an externality pays its producer to reduce production, the externality has been solved by:

Accepted Answer

A) internalization. 
B) assigning property rights. 
C) negotiation. 
D) regulation. 
A) internalization. 
B) assigning property rights. 
C) negotiation. 
D) regulation.

Question 5

When an economic agent affects the well being of another, for better or worse, the agent is:

Accepted Answer

A) imposing an externality. 
B) learning from the other agent. 
C) using noneconomic analysis. 
D) acting as a psychologist. 
A) imposing an externality. 
B) learning from the other agent. 
C) using noneconomic analysis. 
D) acting as a psychologist.

Question 6

Which of the following is a Pareto- improving solution for an externality?

Accepted Answer

A) private bargaining 
B) property condemnation 
C) increased taxation 
D) assigning property rights 
A) private bargaining 
B) property condemnation 
C) increased taxation 
D) assigning property rights

Question 7

The presence of negative externalities:

Accepted Answer

A) does not create allocational distortions. 
B) resources are overallocated. 
C) is encountered only between firms. 
D) resources are underallocated. 
A) does not create allocational distortions. 
B) resources are overallocated. 
C) is encountered only between firms. 
D) resources are underallocated.

Question 8

National Defense is largely provided by public agencies because

Accepted Answer

A) technical changes have enhanced the public good characteristics 
B) governments are afraid of being overthrown 
C) the benefits are often small 
D) private production leads to moral hazard problems 
A) technical changes have enhanced the public good characteristics 
B) governments are afraid of being overthrown 
C) the benefits are often small 
D) private production leads to moral hazard problems

Question 9

The fundamental reason for the existence of transaction costs is:

Accepted Answer

A) the absence of perfect property rights. 
B) the sheer number of transactions in an economy. 
C) the fact that information is costly. 
D) the fact that all economic agents have the same information. 
A) the absence of perfect property rights. 
B) the sheer number of transactions in an economy. 
C) the fact that information is costly. 
D) the fact that all economic agents have the same information.

Question 10

The price charged for a nonrivalrous good is socially optimal if:

Accepted Answer

A) the price is zero. 
B) the price is just enough so that revenues equal the production costs. 
C) the price is above zero but less than the marginal cost. 
D) the price is equal to the MC of producing the good. 
A) the price is zero. 
B) the price is just enough so that revenues equal the production costs. 
C) the price is above zero but less than the marginal cost. 
D) the price is equal to the MC of producing the good.

Question 11

Market demand for a public good is:

Accepted Answer

A) obtained by vertically summing individual demands. 
B) always perfectly elastic. 
C) obtained by horizontally summing individual demands. 
D) always perfectly inelastic. 
A) obtained by vertically summing individual demands. 
B) always perfectly elastic. 
C) obtained by horizontally summing individual demands. 
D) always perfectly inelastic.

Question 12

Non- zero transaction costs are a result of

Accepted Answer

A) gambling by risk lovers 
B) asymmetric information 
C) the Nash equilibrium 
D) high wages paid to lawyers 
A) gambling by risk lovers 
B) asymmetric information 
C) the Nash equilibrium 
D) high wages paid to lawyers

Question 13

When transaction costs are positive:

Accepted Answer

A) property rights are absent. 
B) the marginal value of rights is equal to their marginal costs in equilibrium. 
C) property rights are fully defined. 
D) the marginal value of rights is larger than to their marginal costs in equilibrium. 
A) property rights are absent. 
B) the marginal value of rights is equal to their marginal costs in equilibrium. 
C) property rights are fully defined. 
D) the marginal value of rights is larger than to their marginal costs in equilibrium.

Question 14

Transaction costs exist because:

Accepted Answer

A) the information is costly. 
B) the information is asymmetric. 
C) we need to define property rights. 
D) the information is asymmetric and costly to obtain. 
A) the information is costly. 
B) the information is asymmetric. 
C) we need to define property rights. 
D) the information is asymmetric and costly to obtain.

Question 15

Jim the welder likes to smoke cigars, but Dennis, his assistant cannot stand them. The optimal solution to their disagreement is to:

Accepted Answer

A) find a rule that allows Jim to smoke occasionally. 
B) impose a no- smoking rule. 
C) let Jim smoke when he wants. 
D) break- up the welding team. 
A) find a rule that allows Jim to smoke occasionally. 
B) impose a no- smoking rule. 
C) let Jim smoke when he wants. 
D) break- up the welding team.

Question 16

Externalities result because:

Accepted Answer

A) the rules of the game are not complete. 
B) there is unemployment. 
C) people are maximizers. 
D) there are not enough resources. 
A) the rules of the game are not complete. 
B) there is unemployment. 
C) people are maximizers. 
D) there are not enough resources.

Question 17

Which of the following is not a public good?

Accepted Answer

A) national defense 
B) light houses 
C) police protection 
D) charitable giving 
A) national defense 
B) light houses 
C) police protection 
D) charitable giving

Question 18

Why are transaction costs fundamental for the analysis of property rights?

Accepted Answer

By definition, transaction cost are the

Question 19

Suppose that the economy is composed of two individuals, A and B. Their respective demand curves for a public good, y, are given by: yA = 50 - p/2 and yB = 25 - p. The marginal social value (MSV)function is:

Accepted Answer

A) MSV = 75 - 3p/2. 
B) MSV = 75 - y. 
C) MSV = 125 - 3y. 
D) MSV = 25 + p/2. 
A) MSV = 75 - 3p/2. 
B) MSV = 75 - y. 
C) MSV = 125 - 3y. 
D) MSV = 25 + p/2.

Question 20

Suppose you live on the main floor of a house. The person who lives upstairs performs aerobic exercises every night during your favorite T.V. program. Which of the following behaviours does not represent a Pareto- improvement?

Accepted Answer

A) You tape the program and watch it later. 
B) Your neighbor pays you $20 to miss your program. 
C) Your neighbor accepts $20 to exercise while you are out. 
D) You complain to the manager, who evicts your neighbor. 
A) You tape the program and watch it later. 
B) Your neighbor pays you $20 to miss your program. 
C) Your neighbor accepts $20 to exercise while you are out. 
D) You complain to the manager, who evicts your neighbor.

Public goods:

According to the Coase theorem part I, no fault divorce should have:

Property rights are limited:

When the recipient of an externality pays its producer to reduce production, the externality has been solved by:

When an economic agent affects the well being of another, for better or worse, the agent is:

Which of the following is a Pareto- improving solution for an externality?

The presence of negative externalities:

National Defense is largely provided by public agencies because

The fundamental reason for the existence of transaction costs is:

The price charged for a nonrivalrous good is socially optimal if:

Market demand for a public good is:

Non- zero transaction costs are a result of

When transaction costs are positive:

Transaction costs exist because:

Jim the welder likes to smoke cigars, but Dennis, his assistant cannot stand them. The optimal solution to their disagreement is to:

Externalities result because:

Which of the following is not a public good?

Why are transaction costs fundamental for the analysis of property rights?

Suppose that the economy is composed of two individuals, A and B. Their respective demand curves for a public good, y, are given by: y_A= 50 - p/2 and y_B= 25 - p. The marginal social value (MSV)function is:

Suppose you live on the main floor of a house. The person who lives upstairs performs aerobic exercises every night during your favorite T.V. program. Which of the following behaviours does not represent a Pareto- improvement?

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 18: Assymmetric Information, the Rules of the Game, and Externalities

Public goods:

According to the Coase theorem part I, no fault divorce should have:

Property rights are limited:

When the recipient of an externality pays its producer to reduce production, the externality has been solved by:

When an economic agent affects the well being of another, for better or worse, the agent is:

Which of the following is a Pareto- improving solution for an externality?

The presence of negative externalities:

National Defense is largely provided by public agencies because

The fundamental reason for the existence of transaction costs is:

The price charged for a nonrivalrous good is socially optimal if:

Market demand for a public good is:

Non- zero transaction costs are a result of

When transaction costs are positive:

Transaction costs exist because:

Jim the welder likes to smoke cigars, but Dennis, his assistant cannot stand them. The optimal solution to their disagreement is to:

Externalities result because:

Which of the following is not a public good?

Why are transaction costs fundamental for the analysis of property rights?

Suppose that the economy is composed of two individuals, A and B. Their respective demand curves for a public good, y, are given by: yA = 50 - p/2 and yB = 25 - p. The marginal social value (MSV)function is:

Suppose you live on the main floor of a house. The person who lives upstairs performs aerobic exercises every night during your favorite T.V. program. Which of the following behaviours does not represent a Pareto- improvement?

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Suppose that the economy is composed of two individuals, A and B. Their respective demand curves for a public good, y, are given by: y_A= 50 - p/2 and y_B= 25 - p. The marginal social value (MSV)function is: