Deck 7: Do Markets Work

Question 1

Complete this sentence with the most appropriate choice below. Negative externalities…

A) Lead to over production in the free market.
B) Lead to under production in the free market.
C) Are provided free by the government.
D) Are owned by the state.

Answer 1

a

Question 2

A product that is non diminishable and non excludable is known as a ______ good.

Answer 2

Public

Question 3

What is asymmetric information?

A) It means that some individuals have more information than others.
B) It means there is perfect information in the market.
C) It is non-excludable and non diminishable.
D) It has no opportunity cost.

Answer 3

a

Question 4

When does a potential welfare gain occur?

A) The social marginal benefit equals the social marginal cost.
B) The social marginal benefit is greater than the social marginal cost.
C) The social marginal benefit is less than the social marginal cost.
D) The price is zero.

Question 5

What is true for a public good?

A) It must be provided by the private sector.
B) It is provided at no charge in the free market.
C) It is over-provided in the free market.
D) It is not provided in optimal amounts by the free market.

Question 6

A negative externality leads to overproduction in the free market.

Question 7

A government might want to subsidise positive externalities

Question 8

All products provided by the government are public goods.

Question 9

A monopoly is likely to lead to higher prices than a competitive market.