Exam 30: Market Failure Externalities Public Goods and Asymmetric Information

Firm X pays firm Y $345 for a pollution permit. This expenditure on the part of firm X is considered a __________. Firm Y ends up spending $200 to eliminate some pollution. This expenditure on the part of firm Y is considered a __________.

Which of the following statements is false?

For a good where network externalities are present, having an early lead in the race for customers may be the only lead necessary to ultimately win the race for dominance in the good's market.

Exhibit 30-1 ​ -Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, then what is Q₁?

Exhibit 30-1 ​ -Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the triangle ABC is representative of

The disagreement between A. C. Pigou and Ronald Coase arose because

Sometimes, when goods are produced and consumed, side effects are felt by people who are not directly involved in the market exchanges. In general, these side effects are called

A positive externality exists and government wants to apply a per-unit subsidy in order to bring about the socially optimal output. Under what condition will the solution (of the subsidy) be worse than the problem (the market failure)?

Exhibit 30-1 ​ -Refer to Exhibit 30-l. If the exhibit represents a negative externality situation, the private cost of expanding output from Q₂ to Q₁ is the area of

If private property rights were established in the air, there would probably be

From an economist's point of view, zero pollution is always preferable to some pollution.

The free-rider problem arises if goods are

If society is experiencing a net social cost from the production of a good, this implies that

Which of the following statements is false?

A public good can be excludable or nonexcludable.

When marginal private cost is less than marginal social cost,

The Coase theorem states that

It is argued that the market will

A positive externality exists when

If an asymmetry of information is removed and laborers' preferences change against employment in a labor market, it would __________ employment and __________ the wage at the equilibrium in the market.