Question 1

Why might a public regulation sometimes be a crude means of rectifying externalities?

Accepted Answer

A) It reduces productivity. 
B) It restricts individual choice. 
C) It often imposes a single solution on many different problems. 
D) It is too costly. 
A) It reduces productivity. 
B) It restricts individual choice. 
C) It often imposes a single solution on many different problems. 
D) It is too costly.

Question 2

The neoclassical model of supply and demand:

Accepted Answer

A) cannot explain why the price mechanism does not work at times. 
B) can explain a quite limited amount of observable phenomena. 
C) is inconsistent and cannot be tested. 
D) lacks a good definition of the concept of equilibrium. 
A) cannot explain why the price mechanism does not work at times. 
B) can explain a quite limited amount of observable phenomena. 
C) is inconsistent and cannot be tested. 
D) lacks a good definition of the concept of equilibrium.

Question 3

The fact that thieves are able to break into houses:

Accepted Answer

A) means that the thieves have legal property rights. 
B) means the police is powerless. 
C) means that the the thieves have economic property rights. 
D) means that economic property rights are not circumscribed. 
A) means that the thieves have legal property rights. 
B) means the police is powerless. 
C) means that the the thieves have economic property rights. 
D) means that economic property rights are not circumscribed.

Question 4

Attempts to implement legislation to reduce carbon dioxide emissions have thus far not been successful on a global scale. One reason for this may be that

Accepted Answer

A) the science of climate change is not widely accepted 
B) internalizing an externality is never successful 
C) the domestic cost exceeds the domestic benefit 
D) the transaction costs are extremely high 
A) the science of climate change is not widely accepted 
B) internalizing an externality is never successful 
C) the domestic cost exceeds the domestic benefit 
D) the transaction costs are extremely high

Question 5

The economic property rights:

Accepted Answer

A) exist only in market economies. 
B) are not essential for the ability to trade with others. 
C) are necessary for the existence and creation of wealth. 
D) are identical with legal property rights. 
A) exist only in market economies. 
B) are not essential for the ability to trade with others. 
C) are necessary for the existence and creation of wealth. 
D) are identical with legal property rights.

Question 6

Transactions costs are:

Accepted Answer

A) the costs of establishing and maintaining property rights. 
B) the costs of exploiting economic resources for production. 
C) very expensive. 
D) caused when people impose externalities on others. 
A) the costs of establishing and maintaining property rights. 
B) the costs of exploiting economic resources for production. 
C) very expensive. 
D) caused when people impose externalities on others.

Question 7

There are two necessary conditions for the existence of transactions costs: costly and asymmetric information. Compare and contrast them.

Accepted Answer

The presence of costly information expla

Question 8

Which of the following is a situation where property rights are complete?

Accepted Answer

A) Your neighbour is always disturbing you with loud music. 
B) Your neighbour pays you a fee because his driveway crosses your property. 
C) You always get seated too close to the smoking section in restaurants. 
D) An individual owns a property but cannot mine it. 
A) Your neighbour is always disturbing you with loud music. 
B) Your neighbour pays you a fee because his driveway crosses your property. 
C) You always get seated too close to the smoking section in restaurants. 
D) An individual owns a property but cannot mine it.

Question 9

When externalities are present the assigning of property rights

Accepted Answer

A) interferes with the Nash equilibrium 
B) impedance the efficiency of markets 
C) is not a Pareto improvement 
D) reduces overall wealth 
A) interferes with the Nash equilibrium 
B) impedance the efficiency of markets 
C) is not a Pareto improvement 
D) reduces overall wealth

Question 10

The Coase theorem says that when information is free:

Accepted Answer

A) there will be more externalities. 
B) the allocation of resources is Pareto- optimal. 
C) people will over consume information. 
D) there will be more free riders. 
A) there will be more externalities. 
B) the allocation of resources is Pareto- optimal. 
C) people will over consume information. 
D) there will be more free riders.

Question 11

The assignment of property rights:

Accepted Answer

A) enhances the wealth of some parties, while lowering the wealth of others. 
B) always enhances the the wealth of everybody involved. 
C) leads frequently to a Pareto- improvement. 
D) makes some parties better off while leaving all others as well of as before. 
A) enhances the wealth of some parties, while lowering the wealth of others. 
B) always enhances the the wealth of everybody involved. 
C) leads frequently to a Pareto- improvement. 
D) makes some parties better off while leaving all others as well of as before.

Question 12

Provide an economic explanation for why climate change legislation is difficult to pass and implement in most countries.

Accepted Answer

The benefits of fighting climate change

Question 13

Which of the following is not a valid response to the presence of externalities?

Accepted Answer

A) internalization 
B) do nothing 
C) deregulation 
D) assigning property rights 
A) internalization 
B) do nothing 
C) deregulation 
D) assigning property rights

Question 14

Which of the following solves an externality problem through internalization?

Accepted Answer

A) The state institutes mandatory safety checks for automobiles. 
B) The municipal government imposes a height restriction on buildings. 
C) Buying property to cut trees and improve the view. 
D) The municipal government bans smoking in public buildings. 
A) The state institutes mandatory safety checks for automobiles. 
B) The municipal government imposes a height restriction on buildings. 
C) Buying property to cut trees and improve the view. 
D) The municipal government bans smoking in public buildings.

Question 15

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. Suppose the MC of providing the public good is given by MC = 10 + 2y. A social optimum is achieved if:

Accepted Answer

A) y = 21.7. 
B) y = 30. 
C) y = 23. 
D) y = 15. 
A) y = 21.7. 
B) y = 30. 
C) y = 23. 
D) y = 15.

Question 16

Internalizing an externality:

Accepted Answer

A) is solely in the purview of governments. 
B) entails a solution that provides incentives to private actors to act efficiently. 
C) means exacerbating the external effect. 
D) does not involve minimizing the impact of free riders. 
A) is solely in the purview of governments. 
B) entails a solution that provides incentives to private actors to act efficiently. 
C) means exacerbating the external effect. 
D) does not involve minimizing the impact of free riders.

Question 17

If a pure public good is produced in a competitive market, then:

Accepted Answer

A) too much or too little of the good will be produced. 
B) too little of the good will be produced. 
C) the socially optimal amount of the good is produced. 
D) too much of the good will be produced. 
A) too much or too little of the good will be produced. 
B) too little of the good will be produced. 
C) the socially optimal amount of the good is produced. 
D) too much of the good will be produced.

Question 18

Explain the distinction between legal and economic property rights and illustrate it with an example.

Accepted Answer

Legal rights are prescribed by law while

Question 19

Holding property rights means that:

Accepted Answer

A) an individual does not have to incur transaction costs anymore. 
B) governments can guarantee an individual's ability to make choices. 
C) one is able to do whatever he pleases with the assets in question. 
D) there are limits on an individual's ability to derive income from or transfer a good. 
A) an individual does not have to incur transaction costs anymore. 
B) governments can guarantee an individual's ability to make choices. 
C) one is able to do whatever he pleases with the assets in question. 
D) there are limits on an individual's ability to derive income from or transfer a good.

Question 20

Better- defined property rights are preferred:

Accepted Answer

A) because ownership of assets leads to wealth. 
B) as long as their marginal value is larger than their marginal cost. 
C) due to the existence of high transaction costs. 
D) because certainty is valuable. 
A) because ownership of assets leads to wealth. 
B) as long as their marginal value is larger than their marginal cost. 
C) due to the existence of high transaction costs. 
D) because certainty is valuable.

Why might a public regulation sometimes be a crude means of rectifying externalities?

The neoclassical model of supply and demand:

The fact that thieves are able to break into houses:

Attempts to implement legislation to reduce carbon dioxide emissions have thus far not been successful on a global scale. One reason for this may be that

The economic property rights:

Transactions costs are:

There are two necessary conditions for the existence of transactions costs: costly and asymmetric information. Compare and contrast them.

Which of the following is a situation where property rights are complete?

When externalities are present the assigning of property rights

The Coase theorem says that when information is free:

The assignment of property rights:

Provide an economic explanation for why climate change legislation is difficult to pass and implement in most countries.

Which of the following is not a valid response to the presence of externalities?

Which of the following solves an externality problem through internalization?

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. Suppose the MC of providing the public good is given by MC = 10 + 2y. A social optimum is achieved if:

Internalizing an externality:

If a pure public good is produced in a competitive market, then:

Explain the distinction between legal and economic property rights and illustrate it with an example.

Holding property rights means that:

Better- defined property rights are preferred:

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

Why might a public regulation sometimes be a crude means of rectifying externalities?

The neoclassical model of supply and demand:

The fact that thieves are able to break into houses:

Attempts to implement legislation to reduce carbon dioxide emissions have thus far not been successful on a global scale. One reason for this may be that

The economic property rights:

Transactions costs are:

There are two necessary conditions for the existence of transactions costs: costly and asymmetric information. Compare and contrast them.

Which of the following is a situation where property rights are complete?

When externalities are present the assigning of property rights

The Coase theorem says that when information is free:

The assignment of property rights:

Provide an economic explanation for why climate change legislation is difficult to pass and implement in most countries.

Which of the following is not a valid response to the presence of externalities?

Which of the following solves an externality problem through internalization?

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. Suppose the MC of providing the public good is given by MC = 10 + 2y. A social optimum is achieved if:

Internalizing an externality:

If a pure public good is produced in a competitive market, then:

Explain the distinction between legal and economic property rights and illustrate it with an example.

Holding property rights means that:

Better- defined property rights are preferred:

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. Suppose the MC of providing the public good is given by MC = 10 + 2y. A social optimum is achieved if: