Question 1

Transaction costs of private contracts are higher:

Accepted Answer

A) when direct contact between economic actors is frequent. 
B) when the number of actors involved is relatively small. 
C) when the economic actors involved are more homogenous. 
D) when large specific investments have been made. 
A) when direct contact between economic actors is frequent. 
B) when the number of actors involved is relatively small. 
C) when the economic actors involved are more homogenous. 
D) when large specific investments have been made.

Question 2

Which of the following is not a problem when measuring transaction costs?

Accepted Answer

A) transaction costs are net of trade benefits 
B) transaction costs reduce the volume of trade 
C) transaction costs are difficult to observe 
D) transaction costs are normally opportunity costs 
A) transaction costs are net of trade benefits 
B) transaction costs reduce the volume of trade 
C) transaction costs are difficult to observe 
D) transaction costs are normally opportunity costs

Question 3

If a good has a positive externality, at the market equilibrium the marginal private benefit is greater than the marginal private cost.

Accepted Answer

A) True 
 B)False

Question 4

Possible solutions to the misallocations created by externalities include:

Accepted Answer

A) private bargaining but not internalization. 
B) internalization. 
C) central planning. 
D) internalization but not public regulation. 
A) private bargaining but not internalization. 
B) internalization. 
C) central planning. 
D) internalization but not public regulation.

Question 5

In the market for a public good, the equilibrium quantity of the good produced is too low because:

Accepted Answer

A) society does not want more to be produced. 
B) a public good is an example of a negative externality. 
C) the benefits of the good are not fully internalized by the producer. 
D) a public good is a good consumed by the government. 
A) society does not want more to be produced. 
B) a public good is an example of a negative externality. 
C) the benefits of the good are not fully internalized by the producer. 
D) a public good is a good consumed by the government.

Question 6

Whereas negative externalities cause inefficiency, positive externalities are good for the economy and improve economic efficiency.

Accepted Answer

A) True 
 B)False

Question 7

Better defined property rights are always preferred to less defined ones. The reason why property rights are not perfectly defined:

Accepted Answer

A) is due to the presence of fairness issues. 
B) is the absence of transaction costs. 
C) is the result of an optimization process. 
D) is that a large share of voters are ideologically opposed to it. 
A) is due to the presence of fairness issues. 
B) is the absence of transaction costs. 
C) is the result of an optimization process. 
D) is that a large share of voters are ideologically opposed to it.

Question 8

Positive externalities are created when:

Accepted Answer

A) farmers spray pesticide in their fields and it washes into the local river. 
B) your neighbor plants beautiful flowers in her yard and you enjoy looking at them. 
C) you purchase the "Mona Lisa" and lock it in a vault. 
D) other consumer reduce their demand for coffee and price thereby declines. 
A) farmers spray pesticide in their fields and it washes into the local river. 
B) your neighbor plants beautiful flowers in her yard and you enjoy looking at them. 
C) you purchase the "Mona Lisa" and lock it in a vault. 
D) other consumer reduce their demand for coffee and price thereby declines.

Question 9

A nonexcludable good is:

Accepted Answer

A) an essential good. 
B) one whose opportunity cost of production is zero. 
C) one which any individual can consume. 
D) a public good. 
A) an essential good. 
B) one whose opportunity cost of production is zero. 
C) one which any individual can consume. 
D) a public good.

Question 10

According to Coase, the allocation of resources is independent of the distribution of property rights when:

Accepted Answer

A) the allocation is Pareto- optimal. 
B) information is free. 
C) property rights are incomplete. 
D) transaction costs are high. 
A) the allocation is Pareto- optimal. 
B) information is free. 
C) property rights are incomplete. 
D) transaction costs are high.

Question 11

Private provision of goods can be efficient when the goods are:

Accepted Answer

A) non- rivalrous 
B) non- excludable 
C) non- durable 
D) not scarce 
A) non- rivalrous 
B) non- excludable 
C) non- durable 
D) not scarce

Question 12

Transaction costs:

Accepted Answer

A) are information costs, but information costs are not all transaction costs. 
B) are always variable costs, but may not be sunk costs. 
C) are production costs. 
D) are always sunk costs. 
A) are information costs, but information costs are not all transaction costs. 
B) are always variable costs, but may not be sunk costs. 
C) are production costs. 
D) are always sunk costs.

Question 13

An externality is said to exist when:

Accepted Answer

A) the market allocation of resources is not Pareto- optimal. 
B) an agent's consumption affects the prices paid by the agent. 
C) an economic agent directly affects another economic agent or agents. 
D) an economic activity indirectly affects others through prices. 
A) the market allocation of resources is not Pareto- optimal. 
B) an agent's consumption affects the prices paid by the agent. 
C) an economic agent directly affects another economic agent or agents. 
D) an economic activity indirectly affects others through prices.

Question 14

Nonprofit firms:

Accepted Answer

A) have no residual claimants. 
B) cannot be analyzed using economic principles. 
C) fit into a special method of organizing production. 
D) operate at a loss. 
A) have no residual claimants. 
B) cannot be analyzed using economic principles. 
C) fit into a special method of organizing production. 
D) operate at a loss.

Question 15

A nonexcludable good is necessarily:

Accepted Answer

A) one which will always be consumed by a utility- maximizing individual. 
B) a pure public good. 
C) one which will never be produced by a profit- maximizing firm. 
D) a rivalrous good. 
A) one which will always be consumed by a utility- maximizing individual. 
B) a pure public good. 
C) one which will never be produced by a profit- maximizing firm. 
D) a rivalrous good.

Question 16

Transactions costs are costs that violate:

Accepted Answer

A) the rules of market allocation. 
B) the Coase theorem. 
C) the rules of the game. 
D) economic property rights. 
A) the rules of market allocation. 
B) the Coase theorem. 
C) the rules of the game. 
D) economic property rights.

Question 17

Suppose 10 people live on a street and that each of them is willing to pay $2 for streetlight, regardless of the number of streetlights provided. If the cost of providing x streetlights is given by c(x)= x2, what is the Pareto efficient number of streetlights to provide?

Accepted Answer

The efficient number of streetlights is

Question 18

When an individual has the economic property right over a resource they are:

Accepted Answer

A) constrained by the rules of the game. 
B) faced with positive transactions costs. 
C) able to act like monopolists. 
D) able to exercise choices freely. 
A) constrained by the rules of the game. 
B) faced with positive transactions costs. 
C) able to act like monopolists. 
D) able to exercise choices freely.

Question 19

When a positive externality is present:

Accepted Answer

A) resources are underallocated to the source of externality. 
B) transaction costs are positive. 
C) there is no possibility to increase the gains from trade. 
D) resources are overallocated to the source of externality. 
A) resources are underallocated to the source of externality. 
B) transaction costs are positive. 
C) there is no possibility to increase the gains from trade. 
D) resources are overallocated to the source of externality.

Question 20

Coase theorem:

Accepted Answer

A) invalidates all the results from neoclassical economic models. 
B) states that information is free. 
C) applies only to settings characterized by externalities. 
D) explains the distribution of property rights. 
A) invalidates all the results from neoclassical economic models. 
B) states that information is free. 
C) applies only to settings characterized by externalities. 
D) explains the distribution of property rights.

Transaction costs of private contracts are higher:

Which of the following is not a problem when measuring transaction costs?

If a good has a positive externality, at the market equilibrium the marginal private benefit is greater than the marginal private cost.

Possible solutions to the misallocations created by externalities include:

In the market for a public good, the equilibrium quantity of the good produced is too low because:

Whereas negative externalities cause inefficiency, positive externalities are good for the economy and improve economic efficiency.

Better defined property rights are always preferred to less defined ones. The reason why property rights are not perfectly defined:

Positive externalities are created when:

A nonexcludable good is:

According to Coase, the allocation of resources is independent of the distribution of property rights when:

Private provision of goods can be efficient when the goods are:

Transaction costs:

An externality is said to exist when:

Nonprofit firms:

A nonexcludable good is necessarily:

Transactions costs are costs that violate:

Suppose 10 people live on a street and that each of them is willing to pay $2 for streetlight, regardless of the number of streetlights provided. If the cost of providing x streetlights is given by c(x)= x², what is the Pareto efficient number of streetlights to provide?

When an individual has the economic property right over a resource they are:

When a positive externality is present:

Coase theorem:

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

Transaction costs of private contracts are higher:

Which of the following is not a problem when measuring transaction costs?

If a good has a positive externality, at the market equilibrium the marginal private benefit is greater than the marginal private cost.

Possible solutions to the misallocations created by externalities include:

In the market for a public good, the equilibrium quantity of the good produced is too low because:

Whereas negative externalities cause inefficiency, positive externalities are good for the economy and improve economic efficiency.

Better defined property rights are always preferred to less defined ones. The reason why property rights are not perfectly defined:

Positive externalities are created when:

A nonexcludable good is:

According to Coase, the allocation of resources is independent of the distribution of property rights when:

Private provision of goods can be efficient when the goods are:

Transaction costs:

An externality is said to exist when:

Nonprofit firms:

A nonexcludable good is necessarily:

Transactions costs are costs that violate:

Suppose 10 people live on a street and that each of them is willing to pay $2 for streetlight, regardless of the number of streetlights provided. If the cost of providing x streetlights is given by c(x)= x2, what is the Pareto efficient number of streetlights to provide?

When an individual has the economic property right over a resource they are:

When a positive externality is present:

Coase theorem:

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 10 people live on a street and that each of them is willing to pay $2 for streetlight, regardless of the number of streetlights provided. If the cost of providing x streetlights is given by c(x)= x², what is the Pareto efficient number of streetlights to provide?