Question 1

When a positive externality exists, the equilibrium quantity that emerges from a competitive market is

Accepted Answer

A) too high. 
B) too low. 
C) just right. 
D) sometimes too high and sometimes too low. 
E) zero. 
A) too high. 
B) too low. 
C) just right. 
D) sometimes too high and sometimes too low. 
E) zero.

Question 2

Explain why, in the case of negative externalities, a competitive market produces a greater-than-economically-efficient quantity.

Accepted Answer

When the market fails to account for mar

Question 3

Private markets do not provide national defense because it is impossible to exclude any single individual from receiving the benefit of national defense.

Accepted Answer

A) True 
 B)False

Question 4

An externality is the effect that occurs when the production or consumption of a good directly affects a third party.

Accepted Answer

A) True 
 B)False

Question 5

Rights to the use of, sale of, and proceeds from a good or resource are called

Accepted Answer

A) private rights. 
B) property rights. 
C) economic rights. 
D) human rights. 
E) contingent valuation rights. 
A) private rights. 
B) property rights. 
C) economic rights. 
D) human rights. 
E) contingent valuation rights.

Question 6

Historically, an overgrazing problem was solved by having cattle herdsmen own land in common.

Accepted Answer

A) True 
 B)False

Question 7

One role of government is to define and enforce property rights.

Accepted Answer

A) True 
 B)False

Question 8

If output is produced at the level at which the marginal social benefit curve and the supply curve intersect, then

Accepted Answer

A) the level of output is socially desirable. 
B) the level of output results in a net social cost. 
C) the level of output results in a net social benefit. 
D) producers will incur losses. 
E) there will be no buyers in the market. 
A) the level of output is socially desirable. 
B) the level of output results in a net social cost. 
C) the level of output results in a net social benefit. 
D) producers will incur losses. 
E) there will be no buyers in the market.

Question 9

The government provides national defense because free riders make it difficult for private markets to supply the socially desirable amount.

Accepted Answer

A) True 
 B)False

Question 10

Tradable permits let firms or individuals decide on the most cost-effective way to reduce the total amount of pollution.

Accepted Answer

A) True 
 B)False

Question 11

Affordable housing is seen as a way to reduce crime rates and raise the quality of life in lower-income neighborhoods.

Accepted Answer

The answer of Affordable housing is seen as a way...

Question 12

The fact that people vote even though the benefits seem low compared to the costs is called the voting paradox.

Accepted Answer

A) True 
 B)False

Question 13

A free-rider problem occurs when the consumption of a good is excludable.

Accepted Answer

A) True 
 B)False

Question 14

Describe how the RECLAIM tradable permit program works.

Accepted Answer

RECLAIM controls total emissions, is fle

Question 15

A tradable permit gives a firm an incentive to

Accepted Answer

A) shift the costs of pollution to somebody else. 
B) lower its emissions because the firm can sell the permit if it does not use it. 
C) increase its emissions. 
D) find more costly forms of pollution control. 
E) hold a permit for the long term if it does not use the permit. 
A) shift the costs of pollution to somebody else. 
B) lower its emissions because the firm can sell the permit if it does not use it. 
C) increase its emissions. 
D) find more costly forms of pollution control. 
E) hold a permit for the long term if it does not use the permit.

Question 16

Tradable permits illustrate how important property rights are in resolving externalities.

Accepted Answer

A) True 
 B)False

Question 17

What is government failure?

Accepted Answer

Government failure occurs when

Exam 15: Public Goods, Externalities, and Government Behavior

When a positive externality exists, the equilibrium quantity that emerges from a competitive market is

Explain why, in the case of negative externalities, a competitive market produces a greater-than-economically-efficient quantity.

Private markets do not provide national defense because it is impossible to exclude any single individual from receiving the benefit of national defense.

An externality is the effect that occurs when the production or consumption of a good directly affects a third party.

Rights to the use of, sale of, and proceeds from a good or resource are called

Historically, an overgrazing problem was solved by having cattle herdsmen own land in common.

One role of government is to define and enforce property rights.

If output is produced at the level at which the marginal social benefit curve and the supply curve intersect, then

The government provides national defense because free riders make it difficult for private markets to supply the socially desirable amount.

Tradable permits let firms or individuals decide on the most cost-effective way to reduce the total amount of pollution.

Affordable housing is seen as a way to reduce crime rates and raise the quality of life in lower-income neighborhoods.

The fact that people vote even though the benefits seem low compared to the costs is called the voting paradox.

A free-rider problem occurs when the consumption of a good is excludable.

Describe how the RECLAIM tradable permit program works.

A tradable permit gives a firm an incentive to

Tradable permits illustrate how important property rights are in resolving externalities.

What is government failure?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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