Deck 13: Market Failures, Government Failures, and Rent Seeking

Question 1

When economic activity imposes costs on others not directly involved in the transaction:

A)a negative externality exists.
B)a positive externality exists.
C)then the market,will produce too little of the good.
D)the tragedy of commons problem arises.
E)a free rider problem arises.

Answer 1

A

Question 2

Higher the economic freedom in a country:

A)lower is the standard of living of the people.
B)higher is the life expectancy.
C)greater is the bureaucratic freedom and red-tapism.
D)lower is the level of education due to lack of government schools.
E)lower is the literacy rate.

Answer 2

B

Question 3

When all costs and benefits of a transaction are borne by the participants of that transaction:

A)the market outcome will be inefficient.
B)then private costs and social costs are identical.
C)negative externalities exist.
D)positive externalities exist.
E)the private costs are more than the social costs.

Answer 3

B

Question 4

Which of the following is true of externality?

A)An externality enhances the efficiency of the market system.
B)An externality is not an economic problem because it is external to the market.
C)An externality is a cost borne by the people who are directly or indirectly involved in the production of a good or service.
D)An externality accrues to someone who had nothing to do with the production or consumption of a good or service.
E)An externality refers to some unexpected change in the equilibrium price or quantity of a product.

Question 5

When the benefits of an activity are received by those who are not directly involved in it:

A)a negative externality exists.
B)the government is producing a free good.
C)the society has to bear the burden of that particular activity.
D)the government has to compensate for the loss in social welfare.
E)a positive externality exists.

Question 6

The free-rider problem occurs because:

A)it is easy to exclude others from consuming the good.
B)consumption is rivalrous,so that the consumption of a product by one individual diminishes that available for others.
C)exclusion is costly or impossible,so that a consumer or producer can use the good without having to pay for it.
D)costs are imposed on others not directly involved in the transaction.
E)individuals are not required to pay for those goods which do not yield any utility to them.

Question 7

For which of the following goods will the free rider problem arise?

A)Private golf course
B)Cable television
C)Privately owned apartment
D)National defense
E)Movie theatres

Question 8

Which of the following statements is true?

A)In the case of positive externalities,a private market will produce too little of the good compared with the socially efficient level of output.
B)In the case of positive externalities,a private market will produce too much of the good compared with the socially efficient level of output.
C)Negative externalities occur when benefits accrue to individuals not directly involved in the transaction.
D)Positive externalities occur when costs are imposed on individuals not directly involved in the transaction.
E)In the case of negative externalities,a private market will produce too little of the good compared with the socially efficient level of output.

Question 9

The good for which neither the principle of mutual excludability nor the principle of rivalry applies is referred to as a:

A)public good.
B)commons good.
C)club good.
D)normal good.
E)private good.

Question 10

A good that is both excludable and rivalrous is a(n):

A)public good.
B)club good.
C)private good.
D)inferior good.
E)necessary good.

Question 11

In the case of public goods:

A)the free rider problem does not arise.
B)one person's consumption of the good reduces the consumption of the good by others.
C)individuals can be easily excluded from consuming the good once it is provided.
D)the quantity produced by a private market would be too large from society's viewpoint,because private firms could not force payment for the goods.
E)the principle of mutual excludability and principle of rivalry does not apply.

Question 12

A market failure occurs when:

A)the market outcome is viewed as unfair by a majority of consumers.
B)a market fails to provide the good at a zero price.
C)quantity demanded exceeds quantity supplied.
D)the market outcome is not the socially efficient outcome.
E)prices are determined by the interaction of the forces of demand and supply and not through central planning.

Question 13

Why do market failures arise in case of public goods?

A)The quantity produced is much more than is actually required by the people.
B)The quality of these goods are not good enough.
C)The quantity produced is too less from the society's point of view.
D)The government wastes a lot of resources for producing a public good.
E)The users of such goods are required to pay a high price for these goods.

Question 14

When social costs of producing or consuming a good exceed private costs:

A)a positive externality exists.
B)an inefficiently high quantity of a good will be produced and consumed.
C)the direct consumers of the good will bear the external costs.
D)the individuals involved in the production of the good do not bear the private costs.
E)the quantity of the good produced will be less than the socially efficient level.

Question 15

The free rider problem arises when a good is:

A)rivalrous.
B)excludable.
C)non excludable.
D)non rivalrous.
E)an absolute necessity.

Question 16

Why do externalities arise?

A)The costs of production are not borne by the producer
B)An economic activity imposes a burden on them who are not directly involved in it
C)An economic activity imposes a cost on them who are directly involved in it
D)The government produces such goods and services which are consumed by only a particular class of people
E)Goods of mass consumption are not produced as they do not yield profit for the producers

Question 17

The owner of a good has the right to decide how that good is used and to restrict others from using that good.This idea is known as:

A)the principle of mutual excludability.
B)the principle of comparative advantage.
C)the principle of public ownership.
D)the principle of negative externalities.
E)the law of demand.

Question 18

Social cost is _____.

A)the sum of fixed and variable costs
B)the difference between the total cost and opportunity cost
C)the sum of private and external costs
D)the difference between the private and external cost
E)sum of fixed costs and opportunity costs

Question 19

When there exists a negative externality in case of a particular good and that is not reflected in the price:

A)too little of that good is produced and consumed.
B)too much of that good is produced and consumed.
C)nothing of that is either produced or consumed.
D)the government completely prohibits the production of such goods.
E)the resources are allocated to their highest-valued activity.

Question 20

Which of the following is an example of a positive externality?

A)Smoking a cigarette
B)Driving a less fuel efficient vehicle
C)Setting up a chemicals factory in a residential area
D)Overuse of chemical fertilizers
E)Beekeepers keeping bees for honey

Question 21

When negative externalities exist in production:

A)the social supply curve lies to the left of the private supply curve.
B)the social supply curve lies to the right of the private supply curve.
C)the social supply curve is identical to the private supply curve.
D)the private demand curve lies to the right of the social demand curve.
E)the private demand curve lies to the left of the social demand curve.

Question 22

If the government is successful in internalizing the external costs of production in a market,then:

A)social costs will equal private costs.
B)an inefficient level of output will be produced.
C)social costs will exceed private costs.
D)social costs will be less than private costs.
E)social costs will fall to zero.

Question 23

The following table shows the costs and benefit of producing a commodity. Table 13.1
In Table 13.1,what level of tax per unit would be appropriate to internalize the externality?

A)$4
B)$6
C)$1
D)$8
E)$2

Question 24

The following table shows the costs and benefit of producing a commodity. Table 13.1
According to Table 13.1,at the free market equilibrium:

A)1 unit of output is produced.
B)2 units of output is produced.
C)5 units of output is produced.
D)4 units of output is produced.
E)3 units of output is produced.

Question 25

The existence of externalities in a market implies that:

A)resources are being used efficiently.
B)there is no other allocation of resources that would make society as a whole better off.
C)consumers cannot be excluded from consuming the good once it is provided.
D)resources are not being used in their highest valued activity.
E)the societal welfare as a whole is maximized.

Question 26

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
Refer to Table 13.2.Suppose fish sells for $1 per pound.If each fisherman decides whether or not to fish based on the average catch,how many boats per hour will go out to fish?

A)6
B)5
C)4
D)3
E)2

Question 27

In China prior to 1990,most residential buildings were in dilapidation because:

A)people were not aware of the maintenance and beautification techniques.
B)the government did not encourage wastage of resources for such purposes.
C)no one had a property right to a home.
D)all the properties were ancestral.
E)the people had private property rights so they did not have an incentive to repair the houses.

Question 28

One of the reasons that communism failed in the Soviet Union is that,under communism:

A)no one had a property right,so there is little incentive to use resources efficiently.
B)there were high rates of unemployment and homelessness accompanied by a high rate of inflation.
C)planners did not have all the information necessary to make efficient decisions.
D)there was a high degree of political freedom.
E)there was a high degree of economic freedom.

Question 29

Which of the following is not a problem with a public good?

A)An incentive to free-ride
B)A public good is often underconsumed
C)An absence of private property rights
D)An inability to limit consumption to those who purchase the good
E)A public good is usually underproduced

Question 30

Tragedy of commons refers to:

A)a problem that is created when everything is privately owned.
B)a situation when the resources are owned by the government and the common people have limited access to them.
C)a problem that arises when government takes incorrect measures which adversely affect common people.
D)a problem that is created when everyone has an access to a particular resource.
E)the adverse situation that arises when the government fails to take adequate measures to solve common problems.

Question 31

One reason that some whales were hunted close to extinction is that no one can claim ownership of a whale until it is killed.If property rights to the whale population were established:

A)then whales would surely be hunted to extinction.
B)the owners would have the incentive to ensure a sustainable yield of whales,so the whale population could recover.
C)no one would hunt whales.
D)the price of whales would be kept artificially low so that trade in whales would become unprofitable.
E)the whales would be hunted to extinction only when the price is high and it is profitable to trade in whales.

Question 32

When a divergence between social costs and private costs exists,then:

A)markets will always provide an efficient allocation of resources.
B)there will be too much or too little production and consumption in the market.
C)there will be an acute shortage of goods and services in the market.
D)there will be an excess demand for goods and services in the market.
E)private costs must be greater than social costs.

Question 33

The following table shows the costs and benefit of producing a commodity. Table 13.1
According to Table 13.1,at the social equilibrium:

A)4 units of output is produced.
B)5 units of output is produced.
C)2 units of output is produced.
D)3 units of output is produced.
E)1 unit of output is produced.

Question 34

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
Refer to Table 13.2.Suppose fish sells for $1 per pound.What is the amount of total profit earned when the fishermen use the socially optimal number of boats?

A)$50
B)$80
C)$45
D)$90
E)$0

Question 35

The following table shows the costs and benefit of producing a commodity. Table 13.1
According to Table 13.1,the external cost of producing 5 units of the output is:

A)$5.
B)$6.
C)$10.
D)$8.
E)$4.

Question 36

Why are cows and chickens less prone to become extinct?

A)They are usually consumed in huge numbers
B)They are mainly privately owned
C)They are a part of common resources
D)Poaching these animals for their meat is banned by the government
E)They are not used for commercial purposes

Question 37

Which of the following is true of a public good?

A)The demand curve for a public good is clearly defined because each consumer consumes the same quantity of the good.
B)The demand curve for a public good is clearly defined because each individual pays the same price.
C)The demand curve for a public good may not exist because individuals can consume the good without being forced to pay a market price for the good.
D)The supply curve of a public good may not exist because individuals can consume the good without being forced to pay a market price for the good.
E)The supply curve of a public good is perfectly elastic as a small increase in the price leads to an infinite increase in the supply of the good.

Question 38

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
Refer to Table 13.2.Suppose fish sells for $1 per pound.If each fisherman decides whether or not to fish based on the average catch,what is the profit that each fisherman earns?

A)$500
B)$1,000
C)$3,000
D)$5,000
E)0

Question 39

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
Refer to Table 13.2.Suppose fish sells for $1 per pound.What is the socially optimal number of boats that will maximize the profit earned by the fishermen?

A)1
B)2
C)3
D)4
E)5

Question 40

When the commons are converted into privately owned resources:

A)utilization is increased,and benefits to the society declines.
B)utilization is increased,and the benefits to the society also increases.
C)utilization is decreased,and the benefits to the society also decreases.
D)utilization remains unchanged,and the benefits to the society increases.
E)utilization is decreased,and the benefits to the society increases.

Question 41

Suppose that the current price of a marketable permit to emit one ton of gunk is $60.For firm A,the marginal cost of reducing one ton of gunk is $50.For firm B,the marginal cost of reducing one ton of gunk is $70.Under a marketable permit system:

A)both firms will buy a permit and emit one more ton of gunk.
B)firm A will buy a permit and emit one more ton of gunk,whereas firm B will reduce its emissions of gunk by one ton.
C)firm B will buy a permit and emit one more ton of gunk,whereas firm A will reduce its emissions of gunk by one ton.
D)both firms will reduce their emissions of gunk by one ton.
E)both firms will go out of business.

Question 42

The figure below shows the demand and supply curves in the market for elementary education. Figure 13.1
In the figure,
D: Private demand curve for elementary education
D + s: Demand curve which includes public benefits
S: Supply curve of education
Price and Quantity have been taken on vertical and horizontal axes respectively.
In Figure 13.1,D represents the private demand for education,and D+s represents the demand including the public benefits of education.According to the figure,the optimal subsidy is equal to:

A)0Q_s -0Q_p.
B)0P_s - 0P_p.
C)Q_pa - Q_pc.
D)Q_sb - Q_sd.
E)the distance bc.

Question 43

Asymmetric information arises when:

A)both the parties to an exchange have perfect information about the good.
B)none of the parties to exchange have any information about the good.
C)one party to an exchange knows more than the other party.
D)a good is provided by the government.
E)the market is perfectly competitive.

Question 44

The figure given below shows the demand and supply curves of automobiles. Figure 13.3 In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax
In Figure 13.3,the amount of tax levied by the government is equal to:

A)0P_t
B)0P_.
C)Q_td - Q_tc.
D)0Q - 0Q_t.
E)Q_tb - Q_td.

Question 45

When the government tries to control pollution through cap and trade,it _____.

A)issues permits that enables the owners of the permit to pollute.
B)strictly mentions the amount of pollutants that can be emitted by a particular firm.
C)levies tax on the polluting firm.
D)gives subsidies to the firms who adopt clean production technologies.
E)takes legal actions against the firms who pollute beyond the specified level.

Question 46

The Clean Air Act of 1972 required some companies to install the "best available" pollution control technologies.This was an example of:

A)the government using a subsidy to encourage a negative externality.
B)the government using the command approach to discourage a negative externality.
C)the government using the command approach to encourage a positive externality.
D)a marketable pollution permit.
E)a pollution tax.

Question 47

The figure given below shows the demand and supply curves of steel.S_p is the private supply curve,and S_s is the social supply curve that includes both private costs and external costs. Figure 13.2 In Figure 13.2,external costs are equal to _____.

A)P_s - P_p
B)da
C)Q_p - Q_s
D)ab
E)bc

Question 48

The figure given below shows the demand and supply curves of steel.S_p is the private supply curve,and S_s is the social supply curve that includes both private costs and external costs. Figure 13.2 According to Figure 13.2:

A)both points a and b are socially efficient.
B)both points a and b are inefficient.
C)point a represents the social equilibrium,whereas point b represents the private equilibrium.
D)point a represents the private equilibrium,whereas point b represents the social equilibrium.
E)when external costs are zero,the socially efficient output level is equal to 0Q_s units.

Question 49

Suppose the current price of a marketable permit to emit one ton of sulfur dioxide is $100.If the marginal cost for a firm to reduce one ton of sulfur dioxide is $80,then:

A)the firm will buy the permit and emit one more ton of sulfur dioxide.
B)the firm will reduce its emissions of sulfur dioxide by one ton.
C)the firm will buy the permit and increase its emissions by 20 tons.
D)the firm will shut down.
E)the firm will be willing to pay up to $200 for a permit.

Question 50

The figure given below shows the demand and supply curves of automobiles. Figure 13.3 In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax
Figure 13.3 represents a situation of:

A)positive externality.
B)Pareto efficiency.
C)negative externality.
D)tragedy of commons.
E)free rider problem.

Question 51

The figure given below shows the demand for permits and the maximum permissible level of pollution. Figure 13.4 In the figure,
The downward sloping line is the demand curve of permits;
The vertical line denotes the maximum permissible limit of pollution.
Refer to Figure 13.4.Suppose the government wishes to reduce pollution to a quantity of Q_b.If it sells marketable pollution permits at a quantity of Q_b then:

A)firms will bid the price of the permits up to a price of P_a,and Q_a pollution will result.
B)firms will bid the price of the permits up to a price of P_b,and Q_b pollution will result.
C)firms will bid the price of the permits up to a price of P_c,and Q_c pollution will result.
D)firms will bid the price of the permits up to a price of P_c,and Q_b pollution will result.
E)firms will not be willing to pay a price for the permits,so no pollution will be reduced.

Question 52

The figure given below shows the demand for permits and the maximum permissible level of pollution. Figure 13.4 In the figure,
The downward sloping line is the demand curve of permits;
The vertical line denotes the maximum permissible limit of pollution.
In Figure 13.4,if the government sells Q_b permits to pollute at a price of P_b each,then:

A)the allocation of pollution reduction is inefficient.
B)firms in the market will be forced to shut down due to excessive government regulation.
C)the allocation of pollution reduction is efficient,because only those firms with a marginal cost of pollution reduction greater than P_b will buy the permits.
D)the allocation of pollution reduction is efficient,because only those firms with a marginal cost of pollution reduction less than P_b will buy the permits.
E)the allocation of pollution reduction is inefficient,because only those firms with the lowest costs of pollution reduction will purchase the permits.

Question 53

If education has positive externalities:

A)the private market will provide an efficient allocation of resources.
B)the private costs of production will exceed the social costs.
C)the government can help to bring about a more efficient allocation through subsidies.
D)the only benefits of consumption accrue to the consumers themselves.
E)the government can help to bring about a more efficient allocation by levying education cess.

Question 54

The European Union Emission Trading Scheme is an example of:

A)a pollution tax.
B)a pollution subsidy.
C)a command approach.
D)cap and trade.
E)a direct government control on private firms.

Question 55

Which of the following is a measure taken by the government to internalize the externalities?

A)Value Added Tax
B)Income Tax
C)Cap and Trade
D)Tariffs
E)Deficit financing

Question 56

Which of the following is an example of the command approach to regulation?

A)The market for permits to emit sulfur dioxide on the Chicago Mercantile Exchange
B)A carbon tax
C)Zoning in many areas that restricts the types of buildings that can be constructed
D)The government providing subsidies for public education
E)A Pigouvian tax

Question 57

The figure below shows the demand and supply curves in the market for elementary education. Figure 13.1
In the figure,
D: Private demand curve for elementary education
D + s: Demand curve which includes public benefits
S: Supply curve of education
Price and Quantity have been taken on vertical and horizontal axes respectively.
According to Figure 13.1,the outcome of an unregulated,unsubsidized market would be:

A)point a.
B)point b.
C)point c.
D)point d.
E)point e.

Question 58

The figure below shows the demand and supply curves in the market for elementary education. Figure 13.1
In the figure,
D: Private demand curve for elementary education
D + s: Demand curve which includes public benefits
S: Supply curve of education
Price and Quantity have been taken on vertical and horizontal axes respectively.
Figure 13.1 represents a situation of:

A)positive externalities.
B)negative externalities.
C)excess capacity.
D)optimal provision of a public goods.
E)comparative advantage.

Question 59

The figure given below shows the demand and supply curves of automobiles. Figure 13.3 In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax
According to Figure 13.3,the market attains equilibrium before the tax at:

A)point d.
B)point a.
C)point b.
D)point c.
E)point e.

Question 60

When the government imposes a tax on production of a commodity:

A)production will invariably increase.
B)the cost of production increases,so the supply curve shifts to the left.
C)the benefits of consumption increases,so the demand curve shifts to the right.
D)there is no change in demand or supply.
E)both the demand and supply curves shift to the right.

Question 61

When a firm increases its short-run supplies only by hiring more labor,other inputs remaining unchanged,eventually:

A)output will increase at a decreasing rate.
B)the total cost of producing the good will decline.
C)the marginal productivity of the fixed inputs will decline.
D)the average cost of producing the good will decline.
E)the productivity of laborers will increase.

Question 62

A market in which adverse selection may not occur is:

A)the market for pre-owned residential apartments.
B)the lemons market.
C)the market for new sports utility vehicles.
D)the capital market.
E)the market for health insurance.

Question 63

Which of the following wouldhelp to minimize adverse selection?

A)Having a middleman or specialist to sell used products to consumers
B)Doing away with the down payment on a loan
C)Raising the price on a good or service,such as the interest rate on a loan
D)Eliminating the system of providing a collateral while taking a loan.
E)Eliminating the system of deductibles in health insurance.

Question 64

Which of following would help minimize moral hazard in the financial market?

A)Raising the interest rate on loans
B)Decreasing the down payment on a loan
C)Eliminating the need for a borrower to provide collateral
D)Requiring an insurance policyholder to carry a deductible
E)An insurance company increasing the premium and reducing the deductible

Question 65

If the value of a network to a single user is $1 for each other user on the network,then a network of size 100 has a value of:

A)$9,500.
B)$9,900.
C)$9,000.
D)$10,000.
E)$10,100.

Question 66

When a good commodity is driven out of the market by a bad commodity it is called:

A)moral hazard.
B)adverse selection.
C)positive externality.
D)negative externality.
E)tragedy of commons.

Question 67

Why does an existing less efficient technology drive out a new more efficient technology?

A)The existing technology is a network that has become locked in
B)People are receptive to the new technology
C)The new technology is costlier to hire
D)The existing technology is a network that has become locked out
E)The government imposes taxes on the new technology

Question 68

Which of the following may be explained by adverse selection?

A)When banks raise the interest rate on loans,high-risk applicants leave the market.
B)When health insurance companies decrease insurance charges but increase deductibles,less healthy people are more willing to purchase insurance.
C)As the cost of insurance rises,low-risk applicants reduce their coverage.
D)Products are sold at prices that reflect their true value.
E)Loan companies do not require down payments.

Question 69

Moral hazard is the term used to describe the situation in which:

A)a consumer may buy a low-quality product.
B)consumers receive a lower price because of a mistake on the part of the clerk.
C)a consumer is being compensated for a defective product.
D)people may change their behavior after they have signed a contract or agreed to a specified behavior.
E)people want to change their behavior after they have signed a contract or agreed to a specified behavior but are unable to do so.

Question 70

_____ occurs when unobservable qualities are valued incorrectly because of a lack of information.

A)Moral hazard
B)Adverse selection
C)Conspicuous consumption
D)Marginal selection
E)Statistical discrimination

Question 71

Which of the following is an example of government failure?

A)Negative externalities
B)Logrolling
C)Club goods
D)Information asymmetries
E)Moral hazard

Question 72

When economic resources are devoted to transferring wealth from one sector of the economy to another rather than being used for productive purposes,the process is known as:

A)rent seeking.
B)logrolling.
C)central planning.
D)negative externalities.
E)deficit financing.

Question 73

Why does network externality arise?

A)Each additional unit of a good sold reduces the value of the previously sold units.
B)As more and more units of a good are produced,the average cost declines.
C)Consumption of a good by one user does not affect the consumption of subsequent users.
D)The firms enjoy economies of scale in the long run.
E)Each additional unit of the good sold increases the value of the previously sold units.

Question 74

The Coase theorem states that when transactions costs are low,then:

A)bargaining will never lead to a socially efficient allocation.
B)bargaining will lead to a socially optimal allocation only if liability is placed on the polluter.
C)bargaining will lead to a socially optimal allocation only if liability is placed on the victim of pollution.
D)bargaining will lead to a socially efficient allocation regardless of where liability is placed.
E)the governmental intervention becomes absolutely necessary.

Question 75

When each additional resource adds increasing amounts of additional output,it refers to a situation of:

A)constant returns.
B)economies of scale.
C)diseconomies of scale.
D)diminishing returns.
E)increasing returns.

Question 76

James insured his car with a renowned insurance company that checked his driving skills and verified his accident records before insuring his car.After paying two premiums for this insurance,James took to drinking and driving.This action of James is likely to create:

A)an economic loss.
B)a positive externality.
C)an economic bad.
D)a moral hazard.
E)diseconomies of scale.

Question 77

The Austrian school of economists stressed on the efficiency of the markets on the pretext that:

A)resources can be efficiently allocated through price system and free markets.
B)governmental intervention was necessary for the efficient allocation of resources.
C)the price charged under the free market system was always lower than under central planning.
D)the market had never failed earlier.
E)the market did not suffer from imperfect information.

Question 78

Suppose the wheat industry is in long-run equilibrium,so that farmers are earning a normal rate of return.Suppose the farmers are able to convince the Congress to provide a minimum price for wheat that is above the equilibrium price.The result would be:

A)deadweight losses in the long run -higher costs to consumers and no more profits to farmers.
B)deadweight losses in the short run -higher costs to consumers and no more profits to farmers.
C)increase in economic efficiency in the long run.
D)increase in economic efficiency in the short run.
E)an increase in economic rents in the long run.

Question 79

When legislators support one another's project in order to ensure support for their own,it is referred to as:

A)rent seeking.
B)moral hazard.
C)political hazard.
D)logrolling.
E)bribery.

Question 80

Wikipedia and other projects utilizing wiki technology,represent an example of:

A)cap and trade.
B)voluntary contributions.
C)transaction cost.
D)market failure.
E)path dependence.