Question 1

Consumer surplus and the market price are positively related.

Accepted Answer

A) True 
 B)False

Question 2

The marginal benefit to society of reducing pollution declines with increases in pollution moderation because of the law of:

Accepted Answer

A) increasing costs. 
B) diminishing returns. 
C) diminishing marginal utility. 
D) conservation of matter and energy. 
A) increasing costs. 
B) diminishing returns. 
C) diminishing marginal utility. 
D) conservation of matter and energy.

Question 3

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good.Also, assume that the marginal cost of the third unit is $17.We can conclude that:

Accepted Answer

A) the third unit should not be produced. 
B) the third unit should be produced. 
C) zero units should be produced. 
D) 4 units should be produced. 
A) the third unit should not be produced. 
B) the third unit should be produced. 
C) zero units should be produced. 
D) 4 units should be produced.

Question 4

A demand curve for a public good is determined by:

Accepted Answer

A) summing vertically the individual demand curves for the public good. 
B) summing horizontally the individual demand curves for the public good. 
C) combining the amounts of the public good that the individual members of society demand at each price. 
D) multiplying the per-unit cost of the public good by the quantity made available. 
A) summing vertically the individual demand curves for the public good. 
B) summing horizontally the individual demand curves for the public good. 
C) combining the amounts of the public good that the individual members of society demand at each price. 
D) multiplying the per-unit cost of the public good by the quantity made available.

Question 5

Examples of quasi-public goods include:

Accepted Answer

A) education. 
B) highways. 
C) museums. 
D) all of the given possible answers are examples of quasi-public goods. 
A) education. 
B) highways. 
C) museums. 
D) all of the given possible answers are examples of quasi-public goods.

Question 6

Productive efficiency means that the society is producing the combination of the output most desirable by consumers.

Accepted Answer

A) True 
 B)False

Question 7

Answer the next question on the basis of the following information is for public good.Pa and Pb represent the prices that citizens (a) and (b), the only two people in this nation, are willing to pay for additional units of a quantity (Qc) of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6, then the collective quantity demanded will be:

Accepted Answer

A) 1 unit and the socially optimal quantity supplied will be 5 units. 
B) 2 units and the socially optimal quantity supplied will be 4 units. 
C) 3 units and the socially optimal quantity supplied will be 3 units. 
D) 4 units and the socially optimal quantity supplied will be 2 units. 
A) 1 unit and the socially optimal quantity supplied will be 5 units. 
B) 2 units and the socially optimal quantity supplied will be 4 units. 
C) 3 units and the socially optimal quantity supplied will be 3 units. 
D) 4 units and the socially optimal quantity supplied will be 2 units.

Question 8

The graphs below refer to two separate product markets.Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1in diagram (a) and from S to S2 in diagram (b).We can conclude that the government is correcting for:

Accepted Answer

A) negative externalities in diagram (a) and positive externalities in diagram (b). 
B) positive externalities in diagram (a) and negative externalities in diagram (a). 
C) negative externalities in both diagrams. 
D) positive externalities in both diagrams. 
A) negative externalities in diagram (a) and positive externalities in diagram (b). 
B) positive externalities in diagram (a) and negative externalities in diagram (a). 
C) negative externalities in both diagrams. 
D) positive externalities in both diagrams.

Question 9

The following information is for a public good.Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.If this good were a private good instead of a public one, the total quantity demanded at a $3 market price would be:

Accepted Answer

A) 2 units. 
B) 3 units. 
C) 6 units. 
D) 4 units. 
A) 2 units. 
B) 3 units. 
C) 6 units. 
D) 4 units.

Question 10

The graphs below refer to two separate product markets.Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) and from S to S2 in diagram (b).The shift of the supply curve from S to S1 in diagram (a) might be caused by a per unit:

Accepted Answer

A) subsidy paid to the producers of this product. 
B) tax on the producers of this product. 
C) subsidy paid to the buyers of this product. 
D) tax on the buyers of this product. 
A) subsidy paid to the producers of this product. 
B) tax on the producers of this product. 
C) subsidy paid to the buyers of this product. 
D) tax on the buyers of this product.

Question 11

One condition for individual bargaining to occur according to the Coase Theorem is that there must be:

Accepted Answer

A) clearly defined property rights. 
B) many people affected and involved. 
C) government intervention to establish bargaining. 
D) government creation of a market for externalities. 
A) clearly defined property rights. 
B) many people affected and involved. 
C) government intervention to establish bargaining. 
D) government creation of a market for externalities.

Question 12

The following information is for a public good.Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.The collective willingness of this society to pay for the 2nd unit of this public good is:

Accepted Answer

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

Question 13

Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.If the government wishes to establish an optimal allocation of resources in this market, it should:

Accepted Answer

A) not intervene because the market outcome is optimal. 
B) subsidize consumers so that the market demand curve shifts leftward. 
C) subsidize producers so that the market supply curve shifts leftward (upward). 
D) tax producers so that the market supply curve shifts leftward (upward). 
A) not intervene because the market outcome is optimal. 
B) subsidize consumers so that the market demand curve shifts leftward. 
C) subsidize producers so that the market supply curve shifts leftward (upward). 
D) tax producers so that the market supply curve shifts leftward (upward).

Exam 4: B: Market Failures: Public Goods and Externalities

Consumer surplus and the market price are positively related.

The marginal benefit to society of reducing pollution declines with increases in pollution moderation because of the law of:

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good.Also, assume that the marginal cost of the third unit is $17.We can conclude that:

A demand curve for a public good is determined by:

Examples of quasi-public goods include:

Productive efficiency means that the society is producing the combination of the output most desirable by consumers.

The graphs below refer to two separate product markets.Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1in diagram (a) and from S to S2 in diagram (b).We can conclude that the government is correcting for:

One condition for individual bargaining to occur according to the Coase Theorem is that there must be:

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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