Exam 9: Imperfect Information, External Benefits, and External Costs

When sellers have more information about the quality of a good than buyers do, a relatively large share of the goods in the market will be low-quality goods. This is the ________ problem.

Recall the Application about space debris in the atmosphere to answer the following question(s). -Recall the Application. The clearing of space debris is a ________ good that ________ subject to the free-rider problem.

For what kinds of goods are buyers most likely to seek additional information about quality?

When private goods have external benefits

Because pollution taxes raise the costs of production for firms, firms

CARFAX is a company that compiles and sells histories of used cars. Used car dealers offer to give their customers a copy of the CARFAX history of the cars in their inventory to

Why might a system of marketable pollution permits lead to a higher concentration of polluted areas than would a command-and-control system?

If a seller of a high-quality good cannot prove the quality of that good

Suppose Johnson's Rubber Factory belches black smoke into the air over the city of Bellowsville. If the city of Bellowsville attempts to internalize the external costs associated with the production of rubber with a pollution tax, then we expect

Adverse selection and moral hazard are two different terms that mean essentially the same thing.

Table 9.7 -Table 9.7 shows the production cost for two utilities at different levels of sulfur dioxide emissions. Assume that the government issued 8 marketable pollution permits to each firm. If Firm A contemplates selling one permit to Firm B, what is Firm A's willingness to accept?

Figure 9.4 -Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. At any price between $X and $Z

Which of the following is NOT an example of the efforts to reduce the adverse selection problem?

Problems associated with thin markets provide incentives for

Table 9.2 -In Table 9.2, Market 3 would be in equilibrium if buyers believed plums account for

When economists say that a good is nonexcludable, they mean that

In the market for pollution permits, the total supply of permits is

Moral hazard is more likely to arise when

If buyers believe that the percentage of high quality goods on the market is greater than the actual percentage of high quality goods on the market

A market in which there are neither external benefits nor external costs is