Exam 16: Market Failures and Government Intervention

Which of the following roles of the government is most fundamental to a society's ability to function safely and carry on normal economic and social life?

For a production process that involves a positive externality,it is true that

The concept of "institution building" is becoming more prominent.Which of the following best describes the aim of institution building?

The diagram below shows demand and supply curves for some perfectly competitive market. FIGURE 16-2 -Refer to Figure 16-2.Suppose that the marginal benefit curve (MB)includes all social benefits and that there are no externalities in production.In this case,________ for allocative efficiency.

The construction of the TransCanada highway is an example of government intervention through

Which of the following statements about market economies is true?

The diagram below shows the marginal benefit and marginal cost of a public good.This economy has 3 individuals,A,B and C.The diagram shows the MB for each individual and a summation of their marginal benefits. FIGURE 16-4 -Refer to Figure 16-4.Suppose the optimal amount of this good is provided,but that Individual B was only consuming Q₂ units of the good.What would be the marginal cost of Individual B consuming an extra unit of this good?

If a homeowner uses wood to heat his house,

Governments continue to provide public support to some farmers,even in the absence of market failures.Choose the best explanation for this practice according to public choice theory.

Which of the following phenomena is NOT an example of market failure?

FIGURE 16-1 -Refer to Figure 16-1.Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC₀ and MB₁,respectively,then there exists

The government has seatbelt and airbag requirements in cars,and laws requiring individual drivers to use them.What broader social goal is being met in this case?

In a free-market economy that is continually adjusting toward equilibrium,a primary force driving this adjustment is

The efficient price to charge consumers for their use of a public good is

The Canadian government operates a progressive personal income-tax system.What broader social goal is being met in this case?

Consider a non-rivalrous good,like national defence,provided by the government.At the socially optimal level of provision of this good,the marginal

Government intervention in a particular industry is unnecessary if each of the industry's firms is operating where

The diagram below shows the supply and demand diagrams for the competitive market for honey in one region.MC₀ represents private marginal cost and MB₀ represents private marginal benefit. FIGURE 16-3 -Refer to Figure 16-3.Assume there are two types of firms in this region - beekeepers that produce honey and orchard keepers that produce peaches.The bees provide a benefit to the orchard keepers by pollinating their peach trees.We can say that there is a ________ externality in the production of honey.The curve ________ represents the ________ marginal benefit of honey.

Which of the following are characteristics of a common-property resource?

The diagram below shows the supply and demand diagrams for the competitive market for honey in one region.MC₀ represents private marginal cost and MB₀ represents private marginal benefit. FIGURE 16-3 -Refer to Figure 16-3.Assume there are two types of firms in this region - beekeepers that produce honey and orchard keepers that produce peaches.The bees provide a benefit to the orchard keepers by pollinating their peach trees.If the government subsidizes the beekeepers so as to fully internalize the externality,the equilibrium price of honey would be ________ and the allocatively efficient output would be ________.