Question 1

One result of adverse selection in the market for used cars is

Accepted Answer

A)  more lemons (low quality) may be offered for sale than plums (high quality). 
B)  more plums (high quality) may be offered for sale than lemons (low quality). 
C)  few lemons (low quality) are sold. 
D)  no used cars are sold. 
A)  more lemons (low quality) may be offered for sale than plums (high quality). 
B)  more plums (high quality) may be offered for sale than lemons (low quality). 
C)  few lemons (low quality) are sold. 
D)  no used cars are sold.

Question 2

Suppose you own a plum (high-quality) used car that you are thinking about selling. Further, suppose you know that buyers assume that there is a 30% chance of getting a plum, and that 8 of 10 cars currently in the used car market are lemons (low-quality). Would you likely sell your car?

Accepted Answer

You are more likely to do so than you ty

Question 3

Table 9.6
-Consider the data in Table 9.6. If each firm is currently generating 100 gallons of wastewater per day, Firm B would be willing to pay up to ________ to Firm A to be able to generate 200 gallons of wastewater per day.

Accepted Answer

A)  $10 
B)  $12 
C)  $28 
D)  $200 
A)  $10 
B)  $12 
C)  $28 
D)  $200

Question 4

Pollution imposes costs on people and firms other than those involved in producing or consuming the product that produces pollution.

Accepted Answer

A) True 
 B)False

Question 5

Consumers can reduce their information disadvantage by investigating consumer satisfaction surveys.

Accepted Answer

A) True 
 B)False

Question 6

Offering contributors private goods such as coffee mugs, books, or magazine subscriptions will ________ the free-rider problem and lead to a ________ level of contribution to the public good.

Accepted Answer

A)  reduce; smaller 
B)  reduce; larger 
C)  increase; smaller 
D)  increase; larger 
A)  reduce; smaller 
B)  reduce; larger 
C)  increase; smaller 
D)  increase; larger

Question 7

Table 9.3
-In Table 9.3, Market 3 would be in equilibrium if buyers believed lemons account for

Accepted Answer

A)  45% of the market. 
B)  50% of the market. 
C)  55% of the market. 
D)  60% of the market. 
A)  45% of the market. 
B)  50% of the market. 
C)  55% of the market. 
D)  60% of the market.

Question 8

If a pollution tax imposed on a firm is greater than its external cost

Accepted Answer

A)  the externality will be fully internalized. 
B)  the social production cost will increase by the amount of the pollution tax. 
C)  the pollution tax will be efficient. 
D)  the firm will be producing too little from a society's point of view. 
A)  the externality will be fully internalized. 
B)  the social production cost will increase by the amount of the pollution tax. 
C)  the pollution tax will be efficient. 
D)  the firm will be producing too little from a society's point of view.

Question 9

A seller's verbal assurances that a used car is a plum (high-quality car)

Accepted Answer

A)  is not effective at reducing the problems associated with asymmetric information. 
B)  is an effective way for sellers to prove that the good they are selling is of high quality. 
C)  is a more efficient way to prove high quality than a money-back guarantee because it does not cost the seller any money to make the assurance. 
D)  provides the same protection against adverse selection than does a repair guarantee. 
A)  is not effective at reducing the problems associated with asymmetric information. 
B)  is an effective way for sellers to prove that the good they are selling is of high quality. 
C)  is a more efficient way to prove high quality than a money-back guarantee because it does not cost the seller any money to make the assurance. 
D)  provides the same protection against adverse selection than does a repair guarantee.

Question 10

Public Broadcasting, in its fund drives, often arranges for a corporation to match donations made by its employees. This is likely to ________ the free-rider problem and lead to a ________ level of contribution to the public good.

Accepted Answer

A)  reduce; smaller 
B)  reduce; larger 
C)  increase; smaller 
D)  increase; larger 
A)  reduce; smaller 
B)  reduce; larger 
C)  increase; smaller 
D)  increase; larger

Question 11

Which practice helps health insurance companies overcome the problem of adverse selection?

Accepted Answer

A)  They sell insurance only to unhealthy people. 
B)  They sell insurance only to healthy people. 
C)  They have switched to the experience rating system. 
D)  all of the above 
A)  They sell insurance only to unhealthy people. 
B)  They sell insurance only to healthy people. 
C)  They have switched to the experience rating system. 
D)  all of the above

Question 12

Repair guarantees are a sign the seller thinks they have a lemon.

Accepted Answer

A) True 
 B)False

Question 13

Which one of the following is TRUE of a market for used cars?

Accepted Answer

A)  A consumer typically overestimates the probability of getting a lemon (low-quality car). 
B)  As buyers become more pessimistic about their chances of buying a high-quality car, the price of used cars (both low-quality and high-quality) decreases. 
C)  There is a public information problem. 
D)  The willingness to pay is less than the willingness to accept. 
A)  A consumer typically overestimates the probability of getting a lemon (low-quality car). 
B)  As buyers become more pessimistic about their chances of buying a high-quality car, the price of used cars (both low-quality and high-quality) decreases. 
C)  There is a public information problem. 
D)  The willingness to pay is less than the willingness to accept.

Question 14

Recall the Application about federal quality standards in the market for kiwifruit to answer the following question(s).
-Recall the Application. Prior to enactment of the federal government's order

Accepted Answer

A)  grocers were willing to pay less for any California kiwifruit than for any New Zealand kiwifruit. 
B)  grocers were willing to pay more for any California kiwifruit than for any New Zealand kiwifruit. 
C)  grocers were willing to pay more for California kiwifruit that had been harvested at maturity than for any New Zealand kiwifruit. 
D)  California and New Zealand kiwifruit sold for the same price. 
A)  grocers were willing to pay less for any California kiwifruit than for any New Zealand kiwifruit. 
B)  grocers were willing to pay more for any California kiwifruit than for any New Zealand kiwifruit. 
C)  grocers were willing to pay more for California kiwifruit that had been harvested at maturity than for any New Zealand kiwifruit. 
D)  California and New Zealand kiwifruit sold for the same price.

Question 15

Under a system of marketable pollution permits

Accepted Answer

A)  firms can trade away their right to pollute. 
B)  the amount of pollution an individual firm can generate is determined by the number of permits issued to it by the government. 
C)  the production costs for firms are not affected. 
D)  the government controls the production process of firms who pollute. 
A)  firms can trade away their right to pollute. 
B)  the amount of pollution an individual firm can generate is determined by the number of permits issued to it by the government. 
C)  the production costs for firms are not affected. 
D)  the government controls the production process of firms who pollute.

Question 16

An advantage of pollution taxes that is NOT offered by command-and-control policies is that

Accepted Answer

A)  with a pollution tax zero pollution is produced. 
B)  a pollution tax decreases the price of the polluting good. 
C)  with a pollution tax, firms have flexibility in their choice of strategies to use to clean up pollution. 
D)  a pollution tax decreases the demands for goods that cause pollution. 
A)  with a pollution tax zero pollution is produced. 
B)  a pollution tax decreases the price of the polluting good. 
C)  with a pollution tax, firms have flexibility in their choice of strategies to use to clean up pollution. 
D)  a pollution tax decreases the demands for goods that cause pollution.

Question 17

Which of the following is least likely to overcome the free-rider problem?

Accepted Answer

A)  offer people a private gift for contributing 
B)  arrange for matching contributions 
C)  appeal to peoples' sense of civic or moral responsibility 
D)  maintain anonymity of contributions 
A)  offer people a private gift for contributing 
B)  arrange for matching contributions 
C)  appeal to peoples' sense of civic or moral responsibility 
D)  maintain anonymity of contributions

Question 18

A private good is a good that

Accepted Answer

A)  is consumed by a single person or household. 
B)  cannot be used by private citizens. 
C)  cannot result in external benefits or costs to those who don't consume. 
D)  is available for everyone to consume, regardless of who pays. 
A)  is consumed by a single person or household. 
B)  cannot be used by private citizens. 
C)  cannot result in external benefits or costs to those who don't consume. 
D)  is available for everyone to consume, regardless of who pays.

Question 19

What are the benefits of using a pollution tax rather than a command-and-control system to internalize an externality?

Accepted Answer

A pollution tax will generate less pollu

Question 20

An advantage offered by pollution taxes that is NOT offered by command-and-control policies is that

Accepted Answer

A)  under pollution taxes pollution is usually reduced to zero. 
B)  a pollution tax decreases the price of the polluting good. 
C)  under pollution taxes, the government receives tax revenues that may be used to clean up pollution. 
D)  pollution taxes decrease the demand for the good generating the pollution. 
A)  under pollution taxes pollution is usually reduced to zero. 
B)  a pollution tax decreases the price of the polluting good. 
C)  under pollution taxes, the government receives tax revenues that may be used to clean up pollution. 
D)  pollution taxes decrease the demand for the good generating the pollution.

One result of adverse selection in the market for used cars is

Suppose you own a plum (high-quality) used car that you are thinking about selling. Further, suppose you know that buyers assume that there is a 30% chance of getting a plum, and that 8 of 10 cars currently in the used car market are lemons (low-quality). Would you likely sell your car?

Table 9.6 -Consider the data in Table 9.6. If each firm is currently generating 100 gallons of wastewater per day, Firm B would be willing to pay up to ________ to Firm A to be able to generate 200 gallons of wastewater per day.

Pollution imposes costs on people and firms other than those involved in producing or consuming the product that produces pollution.

Consumers can reduce their information disadvantage by investigating consumer satisfaction surveys.

Offering contributors private goods such as coffee mugs, books, or magazine subscriptions will the free-rider problem and lead to a level of contribution to the public good.

Table 9.3 -In Table 9.3, Market 3 would be in equilibrium if buyers believed lemons account for

If a pollution tax imposed on a firm is greater than its external cost

A seller's verbal assurances that a used car is a plum (high-quality car)

Public Broadcasting, in its fund drives, often arranges for a corporation to match donations made by its employees. This is likely to the free-rider problem and lead to a level of contribution to the public good.

Which practice helps health insurance companies overcome the problem of adverse selection?

Repair guarantees are a sign the seller thinks they have a lemon.

Which one of the following is TRUE of a market for used cars?

Recall the Application about federal quality standards in the market for kiwifruit to answer the following question(s). -Recall the Application. Prior to enactment of the federal government's order

Under a system of marketable pollution permits

An advantage of pollution taxes that is NOT offered by command-and-control policies is that

Which of the following is least likely to overcome the free-rider problem?

A private good is a good that

What are the benefits of using a pollution tax rather than a command-and-control system to internalize an externality?

An advantage offered by pollution taxes that is NOT offered by command-and-control policies is that

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

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

One result of adverse selection in the market for used cars is

Suppose you own a plum (high-quality) used car that you are thinking about selling. Further, suppose you know that buyers assume that there is a 30% chance of getting a plum, and that 8 of 10 cars currently in the used car market are lemons (low-quality). Would you likely sell your car?

Table 9.6 -Consider the data in Table 9.6. If each firm is currently generating 100 gallons of wastewater per day, Firm B would be willing to pay up to ________ to Firm A to be able to generate 200 gallons of wastewater per day.

Pollution imposes costs on people and firms other than those involved in producing or consuming the product that produces pollution.

Consumers can reduce their information disadvantage by investigating consumer satisfaction surveys.

Offering contributors private goods such as coffee mugs, books, or magazine subscriptions will ________ the free-rider problem and lead to a ________ level of contribution to the public good.

Table 9.3 -In Table 9.3, Market 3 would be in equilibrium if buyers believed lemons account for

If a pollution tax imposed on a firm is greater than its external cost

A seller's verbal assurances that a used car is a plum (high-quality car)

Public Broadcasting, in its fund drives, often arranges for a corporation to match donations made by its employees. This is likely to ________ the free-rider problem and lead to a ________ level of contribution to the public good.

Which practice helps health insurance companies overcome the problem of adverse selection?

Repair guarantees are a sign the seller thinks they have a lemon.

Which one of the following is TRUE of a market for used cars?

Recall the Application about federal quality standards in the market for kiwifruit to answer the following question(s). -Recall the Application. Prior to enactment of the federal government's order

Under a system of marketable pollution permits

An advantage of pollution taxes that is NOT offered by command-and-control policies is that

Which of the following is least likely to overcome the free-rider problem?

A private good is a good that

What are the benefits of using a pollution tax rather than a command-and-control system to internalize an externality?

An advantage offered by pollution taxes that is NOT offered by command-and-control policies is that

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

Offering contributors private goods such as coffee mugs, books, or magazine subscriptions will the free-rider problem and lead to a level of contribution to the public good.

Public Broadcasting, in its fund drives, often arranges for a corporation to match donations made by its employees. This is likely to the free-rider problem and lead to a level of contribution to the public good.