Question 1

Are there any types of market failure that result in the underproduction of a good? Explain.

Accepted Answer

Yes. There are two. Underproduction occu

Question 2

The nice thing about a pollution tax is that it

Accepted Answer

A)  eliminates pollution 
B)  forces cleanup to occur 
C)  is imposed only on the market with the externality 
D)  creates new property rights 
E)  creates positive externalities to compenstate for negative externalities 
A)  eliminates pollution 
B)  forces cleanup to occur 
C)  is imposed only on the market with the externality 
D)  creates new property rights 
E)  creates positive externalities to compenstate for negative externalities

Question 3

Free ridership is associated with what kind of externality, and why?

Accepted Answer

A)  positive, because costs are identified but not internalized 
B)  negative, because costs are identified but not internalized 
C)  positive, because many who benefit are not always identified or accounted for 
D)  negative, because many who benefit are not always identified or accounted for 
E)  positive, because social value equals private value 
A)  positive, because costs are identified but not internalized 
B)  negative, because costs are identified but not internalized 
C)  positive, because many who benefit are not always identified or accounted for 
D)  negative, because many who benefit are not always identified or accounted for 
E)  positive, because social value equals private value

Question 4

Catering to special interest lobbying may distort the government's provision of public goods away from the social optimum.

Accepted Answer

A) True 
 B)False

Question 5

Many colleges have decided to ban the use of halogen lamps because they are deemed tobe a fire hazard. This is an example of which type of solution?

Accepted Answer

A)  creating new property forms 
B)  levying a pollution compensation tax 
C)  creating obligatory controls 
D)  bubble concept, similar to emission standards 
E)  free market efficiency 
A)  creating new property forms 
B)  levying a pollution compensation tax 
C)  creating obligatory controls 
D)  bubble concept, similar to emission standards 
E)  free market efficiency

Question 6

Government failure describes a situation where government activity creates negative externalities.

Accepted Answer

A) True 
 B)False

Question 7

The existence of positive externalities indicates that the market is producing too many goods.

Accepted Answer

A) True 
 B)False

Question 8

If the quantity of public goods produced were decided by market forces (supply and demand),

Accepted Answer

A)  there would be more goods provided than would be optimal 
B)  there would be fewer goods provided than would be optimal 
C)  the markets would provide the optimal number of goods 
D)  prices would be optimal, but the optimal quantity of goods would not be produced 
E)  the firms producing the public goods would earn excess profit 
A)  there would be more goods provided than would be optimal 
B)  there would be fewer goods provided than would be optimal 
C)  the markets would provide the optimal number of goods 
D)  prices would be optimal, but the optimal quantity of goods would not be produced 
E)  the firms producing the public goods would earn excess profit

Question 9

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because

Accepted Answer

A)  there are positive externalities associated with the potholes 
B)  the value to the neighborhood exceeds the cost of repair 
C)  it costs them more than the benefits they derive 
D)  they do not trust the government 
E)  there are negative externalities associated with the repair 
A)  there are positive externalities associated with the potholes 
B)  the value to the neighborhood exceeds the cost of repair 
C)  it costs them more than the benefits they derive 
D)  they do not trust the government 
E)  there are negative externalities associated with the repair

Question 10

Which of the following best describes the characteristics of a set of property rights that are consistent with the achievement of economic efficiency?

Accepted Answer

A)  specified, nonexclusive, nonrival, enforced 
B)  nonexclusive, rival, enforced, transferable 
C)  exclusive, rival, enforced, nontransferable 
D)  specified, exclusive, transferable, enforced 
E)  specified, exclusive, nonrival, enforced 
A)  specified, nonexclusive, nonrival, enforced 
B)  nonexclusive, rival, enforced, transferable 
C)  exclusive, rival, enforced, nontransferable 
D)  specified, exclusive, transferable, enforced 
E)  specified, exclusive, nonrival, enforced

Question 11

Which of the following is an example of a negative externality?

Accepted Answer

A)  A Japanese company exports cars to the U.S., which causes American workers to lose their jobs. 
B)  An employee of a chemical company spills acid on his arm, causing severe damage. 
C)  John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. 
D)  Sally buys coffee at McDonald's, spills some and burns her hand. 
E)  Jack attempts to fix his roof, falls off, and breaks his leg. 
A)  A Japanese company exports cars to the U.S., which causes American workers to lose their jobs. 
B)  An employee of a chemical company spills acid on his arm, causing severe damage. 
C)  John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. 
D)  Sally buys coffee at McDonald's, spills some and burns her hand. 
E)  Jack attempts to fix his roof, falls off, and breaks his leg.

Question 12

Positive externalities can be more easily measured than negative externalities.

Accepted Answer

A) True 
 B)False

Question 13

A neighborhood tree-planting program generates positive externalities.

Accepted Answer

A) True 
 B)False

Question 14

The presence of positive and negative externalities associated with many economic activities generates __________ in our economy.

Accepted Answer

A)  extra values 
B)  market failure 
C)  incompleteness 
D)  illegality 
E)  free and unfree riders 
A)  extra values 
B)  market failure 
C)  incompleteness 
D)  illegality 
E)  free and unfree riders

Question 15

When externalities are present in market activity and production occurs at P = MC,

Accepted Answer

A)  the market generates an optimal distribution of resources 
B)  the market does not generate an optimal distribution of resources 
C)  a free-rider condition always raises price 
D)  P = ATC as well 
E)  the firm suffers economic losses 
A)  the market generates an optimal distribution of resources 
B)  the market does not generate an optimal distribution of resources 
C)  a free-rider condition always raises price 
D)  P = ATC as well 
E)  the firm suffers economic losses

Question 16

The government agency charged with environmental regulation is the

Accepted Answer

A)  Justice Department 
B)  Department of Commerce 
C)  Federal Trade Commission 
D)  Environmental Protection Agency 
E)  Internal Revenue Service 
A)  Justice Department 
B)  Department of Commerce 
C)  Federal Trade Commission 
D)  Environmental Protection Agency 
E)  Internal Revenue Service

Question 17

-Exhibit N-3 depicts a market showing the demand curve for a good and two supply curves, one reflecting the industry's private costs; the other reflecting the costs of resources to society producing the good. It is clear from this representation of the marketthat the market-generated price and output would be

Accepted Answer

A)  $4.00 and 32 
B)  $4.00 and 24 
C)  $3.70 and 32 
D)  $3.70 and 24 
E)  $3.85 and 28 
A)  $4.00 and 32 
B)  $4.00 and 24 
C)  $3.70 and 32 
D)  $3.70 and 24 
E)  $3.85 and 28

Question 18

If the quantity demanded of a public good is greater than the quantity supplied,

Accepted Answer

A)  an excess quantity demanded emerges, which could be eliminated (corrected) by the government decreasing taxes to allow people to buy more of the good 
B)  it is proof that market failure exists 
C)  it is proof that government failure exists 
D)  an excess quantity demanded emerges, which could be eliminated (corrected) by the government increasing taxes to provide more of the good 
E)  the market will create the supply to bring the market for the public good into equilibrium 
A)  an excess quantity demanded emerges, which could be eliminated (corrected) by the government decreasing taxes to allow people to buy more of the good 
B)  it is proof that market failure exists 
C)  it is proof that government failure exists 
D)  an excess quantity demanded emerges, which could be eliminated (corrected) by the government increasing taxes to provide more of the good 
E)  the market will create the supply to bring the market for the public good into equilibrium

Question 19

-Exhibit N-3 depicts a market showing the demand curve for a good and two supply curves, one reflecting the industry's private costs; the other reflecting the costs of resources to society producing the good. It is clear from this representation of the market that the market would choose a price which is too ___________ and an output which istoo __________.

Accepted Answer

A)  high; low 
B)  low; low 
C)  high, high 
D)  low; high 
E)  valuable; constant 
A)  high; low 
B)  low; low 
C)  high, high 
D)  low; high 
E)  valuable; constant

Question 20

Who is affected by externalities? Those receiving external benefits differ from those incurring external costs in that external benefits are associated with

Accepted Answer

A)  government intervention 
B)  market failure 
C)  unclear property rights 
D)  third parties 
E)  free riders 
A)  government intervention 
B)  market failure 
C)  unclear property rights 
D)  third parties 
E)  free riders

Are there any types of market failure that result in the underproduction of a good? Explain.

The nice thing about a pollution tax is that it

Free ridership is associated with what kind of externality, and why?

Catering to special interest lobbying may distort the government's provision of public goods away from the social optimum.

Many colleges have decided to ban the use of halogen lamps because they are deemed tobe a fire hazard. This is an example of which type of solution?

Government failure describes a situation where government activity creates negative externalities.

The existence of positive externalities indicates that the market is producing too many goods.

If the quantity of public goods produced were decided by market forces (supply and demand),

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because

Which of the following best describes the characteristics of a set of property rights that are consistent with the achievement of economic efficiency?

Which of the following is an example of a negative externality?

Positive externalities can be more easily measured than negative externalities.

A neighborhood tree-planting program generates positive externalities.

The presence of positive and negative externalities associated with many economic activities generates __________ in our economy.

When externalities are present in market activity and production occurs at P = MC,

The government agency charged with environmental regulation is the

If the quantity demanded of a public good is greater than the quantity supplied,

Who is affected by externalities? Those receiving external benefits differ from those incurring external costs in that external benefits are associated with

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Exam 14: Externalities, Market Failure, and Public Choice

Are there any types of market failure that result in the underproduction of a good? Explain.

The nice thing about a pollution tax is that it

Free ridership is associated with what kind of externality, and why?

Catering to special interest lobbying may distort the government's provision of public goods away from the social optimum.

Many colleges have decided to ban the use of halogen lamps because they are deemed tobe a fire hazard. This is an example of which type of solution?

Government failure describes a situation where government activity creates negative externalities.

The existence of positive externalities indicates that the market is producing too many goods.

If the quantity of public goods produced were decided by market forces (supply and demand),

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because

Which of the following best describes the characteristics of a set of property rights that are consistent with the achievement of economic efficiency?

Which of the following is an example of a negative externality?

Positive externalities can be more easily measured than negative externalities.

A neighborhood tree-planting program generates positive externalities.

The presence of positive and negative externalities associated with many economic activities generates __________ in our economy.

When externalities are present in market activity and production occurs at P = MC,

The government agency charged with environmental regulation is the

If the quantity demanded of a public good is greater than the quantity supplied,

Who is affected by externalities? Those receiving external benefits differ from those incurring external costs in that external benefits are associated with

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters