Exam 14: Government Intervention in the Market

Overuse of a common resource may be avoided by all of the following methods except

One effect of adverse selection in a market is that the equilibrium quantity of the product may be smaller than it would have been if there were no information problems.

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production,and consumer surplus plus producer surplus is maximised,then

A patent

Consider a used car market in which half the cars are good and half are bad (lemons).Suppose the average price of a good car is $9000 and the average price of a lemon is $3000.If rational buyers are willing to pay $6000 for a used car,then sellers will agree to sell mostly the lemons at this price.What is the term used to describe this situation?

Figure 14-2 Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 14-2 shows their willingness to pay for different quantities of street lights,the market demand for street lights and the marginal cost of installing the street lights. -Refer to Figure 14-2.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

A modern example of the tragedy of the commons is the forests in many poor countries.

What is the principal-agent problem?

Figure 14-1 -Refer to Figure 14-1.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $9,

Consider a used car market in which half the cars are good and half are bad (lemons).A rational buyer in this market should

Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Figure 14-1 -Refer to Figure 14-1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,

Governments grant patents to

Economic rent is defined as

Figure 14-1 -Refer to Figure 14-1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9,

Which of the following is an example of a common resource?

Which of the following statements about rent seeking is false?