Question 1

If once vaccinated, a person cannot catch a cold or give a cold to someone else, the marginal social benefit resulting from consumption of the vaccine:

Accepted Answer

A) exceeds the marginal benefit received by consumers of the vaccine. 
B) equals the marginal social cost of producing the vaccine in a competitive equilibrium. 
C) equals the marginal benefit received by consumers of the vaccine in a competitive equilibrium. 
D) is less than the marginal benefit received by consumers of the vaccine. 
A) exceeds the marginal benefit received by consumers of the vaccine. 
B) equals the marginal social cost of producing the vaccine in a competitive equilibrium. 
C) equals the marginal benefit received by consumers of the vaccine in a competitive equilibrium. 
D) is less than the marginal benefit received by consumers of the vaccine.

Question 2

Economists tend to distrust voluntary approaches as a way to deal with externalities. What is their most common concern?

Accepted Answer

A) Voluntary approaches do not make people develop an awareness of the problem that would lead them to make good lifestyle changes. 
B) Voluntary approaches often are perceived as unfair, imposing a heavy burden on the poor. 
C) Voluntary approaches usually require people to ignore their self-interest, and economists do not think people do that well. 
D) Voluntary approaches are often too effective and lead to excessive reduction in the externality. 
A) Voluntary approaches do not make people develop an awareness of the problem that would lead them to make good lifestyle changes. 
B) Voluntary approaches often are perceived as unfair, imposing a heavy burden on the poor. 
C) Voluntary approaches usually require people to ignore their self-interest, and economists do not think people do that well. 
D) Voluntary approaches are often too effective and lead to excessive reduction in the externality.

Question 3

The efficient amount of pollution control is:

Accepted Answer

A) the amount for which the total social benefit equals the total social cost of pollution. 
B) the amount for which the marginal social benefit equals the marginal social cost of pollution. 
C) always zero. 
D) always a 100 percent abatement. 
A) the amount for which the total social benefit equals the total social cost of pollution. 
B) the amount for which the marginal social benefit equals the marginal social cost of pollution. 
C) always zero. 
D) always a 100 percent abatement.

Question 4

A strategy that achieves a goal at the lowest cost in total resources without consideration of who pays those costs is:

Accepted Answer

A) efficient. 
B) inefficient. 
C) impossible. 
D) always the most profitable to the firm. 
A) efficient. 
B) inefficient. 
C) impossible. 
D) always the most profitable to the firm.

Question 5

The Environment Ministry in Japan proposed a new carbon tax to meet Japan's obligations to reduce carbon dioxide emissions under the Kyoto Treaty. The tax would be levied on producers and importers of fossil fuels, and the expectation is that it would be largely passed on to consumers. The rationale for this tax is that it will:

Accepted Answer

A) reduce a negative externality. 
B) reduce a positive externality. 
C) turn a private good into a public good. 
D) turn a public good into a private good. 
A) reduce a negative externality. 
B) reduce a positive externality. 
C) turn a private good into a public good. 
D) turn a public good into a private good.

Question 6

Should all professionals be licensed? Or only some? Discuss the argument for licensing and for the information alternative for one of these professions: 1.medical doctors,2.college professors,3.lawyers,4.auto mechanics,5.beauticians.Then choose one other profession,and briefly indicate how (if at all)the weight of the arguments would change.

Accepted Answer

(This response uses the example of medic

Question 7

Refer to the graph shown. If the marginal cost external to the trade associated with the use of gasoline is $0.10 per gallon, the point on the graph corresponding to the efficient quantity and price is:

Accepted Answer

A) G. 
B) H. 
C) K. 
D) L. 
A) G. 
B) H. 
C) K. 
D) L.

Question 8

This table shows the marginal benefits from widgets obtained by the only three people who value them. $$\begin{array} {  r  } 
 { \text { Marginal Value to } } \quad\quad\
\begin{array} { | c | c | c | c | } 
\hline \text { Number of widgets }& \text { Helen } & \text { Ingrid } & \text { Jane } \
\hline 1 \mathrm { st } & \$ 10 & \$ 8 & \$ 6 \
\hline \text { 2nd } & \$ 4 & \$ 3 & \$ 2 \
\hline \text { 3rd } & \$ 2 & \$ 1 & \$ 1 \
\hline
\end{array}\end{array}$$ Suppose widgets cost $8.50 to produce. If widgets are a private good, how many will be produced by market incentives, and is that the right (efficient)number?

Accepted Answer

A) Zero will be produced, and this is below the socially optimal amount. 
B) One will be produced, and this is the socially optimal amount. 
C) One will be produced, and this is below the socially optimal amount. 
D) Two will be produced, and this is the socially optimal amount. 
A) Zero will be produced, and this is below the socially optimal amount. 
B) One will be produced, and this is the socially optimal amount. 
C) One will be produced, and this is below the socially optimal amount. 
D) Two will be produced, and this is the socially optimal amount.

Question 9

Government may not have an incentive to correct a market failure because:

Accepted Answer

A) government doesn't have the information it needs to correct the market failure. 
B) government reflects politics, which reflects political pressure to benefit special interest groups. 
C) policy makers fear that intervention will lead to a Pareto optimal outcome. 
D) the benefit of correcting the market failure might exceed the cost of correcting the market failure. 
A) government doesn't have the information it needs to correct the market failure. 
B) government reflects politics, which reflects political pressure to benefit special interest groups. 
C) policy makers fear that intervention will lead to a Pareto optimal outcome. 
D) the benefit of correcting the market failure might exceed the cost of correcting the market failure.

Question 10

Milton Friedman argues that medical licensure benefits doctors because it:

Accepted Answer

A) allows them to restrict supply, increase prices, and significantly increase their incomes. 
B) protects them from malpractice suits. 
C) ensures that they will not have to compete against one another for patients. 
D) prevents other doctors from advertising and stealing their patients. 
A) allows them to restrict supply, increase prices, and significantly increase their incomes. 
B) protects them from malpractice suits. 
C) ensures that they will not have to compete against one another for patients. 
D) prevents other doctors from advertising and stealing their patients.

Question 11

What are the arguments for and against government intervention to deal with information problems?

Accepted Answer

The argument against intervention to cor

Question 12

If employers were made responsible for injuries suffered by employees while working at home:

Accepted Answer

A) there might be an adverse selection problem since employees have better information about the safety conditions of their own homes than employers do. 
B) employers would never permit employees to work at home. 
C) more employees would be able to work safely at home. 
D) there might be an adverse selection problem since employers have better information about the safety conditions of their employees than the employees have themselves. 
A) there might be an adverse selection problem since employees have better information about the safety conditions of their own homes than employers do. 
B) employers would never permit employees to work at home. 
C) more employees would be able to work safely at home. 
D) there might be an adverse selection problem since employers have better information about the safety conditions of their employees than the employees have themselves.

Question 13

The optimal quantity of pollution control occurs at the point where the:

Accepted Answer

A) level of pollution is reduced to zero. 
B) marginal social benefit is at its maximum. 
C) marginal social cost equals the marginal social benefit of pollution. 
D) total benefit equals the total cost of pollution. 
A) level of pollution is reduced to zero. 
B) marginal social benefit is at its maximum. 
C) marginal social cost equals the marginal social benefit of pollution. 
D) total benefit equals the total cost of pollution.

Question 14

How do economists explain the value firms and consumers place on brand names?

Accepted Answer

A) Brand names show that firms can easily manipulate consumers. 
B) Brand names are a way firms can provide information about quality to consumers. 
C) Brand names are a way of turning private goods into public goods, increasing their value to both seller and buyer. 
D) Brand names are an example of adverse selection, by which producers advertise the options to consumers. 
A) Brand names show that firms can easily manipulate consumers. 
B) Brand names are a way firms can provide information about quality to consumers. 
C) Brand names are a way of turning private goods into public goods, increasing their value to both seller and buyer. 
D) Brand names are an example of adverse selection, by which producers advertise the options to consumers.

Question 15

Refer to the graph shown, which shows the demand and supply for a new vaccine against the common cold. Once vaccinated, a person cannot catch a cold or give a cold to someone else. The socially efficient level of output is:

Accepted Answer

A) less than Q0. 
B) greater than or less than Q0 depending on the income elasticity of demand and the effectiveness of the vaccine. 
C) greater than Q0. 
D) equal to Q0. 
A) less than Q0. 
B) greater than or less than Q0 depending on the income elasticity of demand and the effectiveness of the vaccine. 
C) greater than Q0. 
D) equal to Q0.

Question 16

In economics, the term "signaling" refers to a way of lessening the problem of:

Accepted Answer

A) free riders. 
B) negative externalities. 
C) bad information by all market participants. 
D) unequal information between buyers and sellers. 
A) free riders. 
B) negative externalities. 
C) bad information by all market participants. 
D) unequal information between buyers and sellers.

Question 17

Why can imperfect information lead to market failure?

Accepted Answer

If buyers have imperfect information,the

Exam 8: Market Failure Versus Government Failure

If once vaccinated, a person cannot catch a cold or give a cold to someone else, the marginal social benefit resulting from consumption of the vaccine:

Economists tend to distrust voluntary approaches as a way to deal with externalities. What is their most common concern?

The efficient amount of pollution control is:

A strategy that achieves a goal at the lowest cost in total resources without consideration of who pays those costs is:

Refer to the graph shown. If the marginal cost external to the trade associated with the use of gasoline is $0.10 per gallon, the point on the graph corresponding to the efficient quantity and price is:

Government may not have an incentive to correct a market failure because:

Milton Friedman argues that medical licensure benefits doctors because it:

What are the arguments for and against government intervention to deal with information problems?

If employers were made responsible for injuries suffered by employees while working at home:

The optimal quantity of pollution control occurs at the point where the:

How do economists explain the value firms and consumers place on brand names?

Refer to the graph shown, which shows the demand and supply for a new vaccine against the common cold. Once vaccinated, a person cannot catch a cold or give a cold to someone else. The socially efficient level of output is:

In economics, the term "signaling" refers to a way of lessening the problem of:

Why can imperfect information lead to market failure?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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