Exam 8: Market Failure Versus Government Failure

Explain what a public good is and give an example.What problems are associated with determining what is a public good and how much of a public good should be provided?

Suppose a public good that is worth $1 billion is not produced by the market, and so the government provides it, but at a cost of $3 billion. This attempt to correct a market failure has:

This table shows the marginal benefits from widgets obtained by the only three people who value them. Marginal Value to Number of widgets Helen Ingrid Jane 1 \ 10 \ 8 \ 6 2nd \ 4 \ 3 \ 2 3rd \ 2 \ 1 \ 1 Suppose widgets cost $8.50 to produce. If widgets are a public good, how many will be produced by market incentives, and is that the right (efficient)number?

If a negative externality exists in the market for dirt bikes and that market is perfectly competitive:

If markets are perfectly competitive and production of a good results in water pollution, the imposition of a tax on the good will:

Adverse selection problems can occur when buyers and sellers have different amounts of information about a good for sale.

Direct regulation is inefficient because:

Demonstrate graphically and explain verbally how constructing the market demand for a public good is different than constructing the market demand for a private good.

An effluent fee is an example of:

When you purchase and eat a hamburger, no one else can eat the same hamburger. When you download a file on the Internet, the file is still available for others to download. Economists explain this difference between hamburgers and computer files by saying that the hamburger is:

What is Pareto optimality? What are the three criticisms of using perfect competition as a benchmark to evaluate the society's goals?

If medical insurers could use information contained in DNA to predict the likelihood of major medical illnesses, the most likely outcome is that:

To address the problems created by negative externalities, economists prefer programs that:

A government failure occurs when the government intervention in the market that was intended to correct a market failure actually makes the situation worse.Such a failure could occur for one or more of the following reasons:

When negative externalities exist in the production of a good, the marginal social cost of producing the good:

A policy is considered optimal if it:

The following table shows four firms, the amount each pollutes, the marginal cost for each firm to clean up pollution, and the total cost to each firm of eliminating all pollution. Firm Total Discharge (in tons) Marginal Cost of Cleanup (per tan) Total Cost of Cleanup A 60 \ 5.00 \ 300 B 70 \ 8.00 \ 560 C 80 \ 7.50 \ 600 D 90 \ 4.00 \ 360 The total discharge of these four companies is 300 tons. Assume there is no one else who pollutes. If the goal of the government is to reduce pollution by 50 percent, the cheapest way would be to have:

Externalities can be either positive or negative.

Which of the following is an argument an economist would use to argue against market regulation designed to protect consumers?

If a positive externality is to be taken full advantage of, the: