Question 1

At the optimal quantity of a public good,

Accepted Answer

A) marginal benefit exceeds marginal cost by the greatest amount. 
B) total benefit equals total cost. 
C) marginal benefit equals marginal cost. 
D) marginal benefit is zero. 
A) marginal benefit exceeds marginal cost by the greatest amount. 
B) total benefit equals total cost. 
C) marginal benefit equals marginal cost. 
D) marginal benefit is zero.

Question 2

Nonrivalry and nonexcludability are the main characteristics of

Accepted Answer

A) consumption goods. 
B) capital goods. 
C) private goods. 
D) public goods. 
A) consumption goods. 
B) capital goods. 
C) private goods. 
D) public goods.

Question 3

Market failures refer to those situations where the sellers are not producing as much as the buyers are wanting to buy.

Accepted Answer

A) True 
 B)False

Question 4

The licensing and regulation of financial advisers is one way by which the government tries to deal with the problem of inadequate information that financial firms have about their customers.

Accepted Answer

A) True 
 B)False

Question 5

Producer surplus is the difference between

Accepted Answer

A) the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B) the quantity supplied and quantity demanded at an above equilibrium price. 
C) the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D) the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. 
A) the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B) the quantity supplied and quantity demanded at an above equilibrium price. 
C) the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D) the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.

Question 6

Professional buyers of antiques often have more information about the value of antique objects than do the sellers.This illustrates

Accepted Answer

A) the principal-agent problem. 
B) the moral hazard problem. 
C) the free-rider problem. 
D) asymmetric information. 
A) the principal-agent problem. 
B) the moral hazard problem. 
C) the free-rider problem. 
D) asymmetric information.

Question 7

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Accepted Answer

A) True 
 B)False

Question 8

The 2010 Health Care Reform Law, also known as "Obamacare," includes a part known as universal coverage which requires everyone to have health insurance.One reason for this is to address the problem of

Accepted Answer

A) moral hazard. 
B) externalities. 
C) adverse selection. 
D) public goods. 
A) moral hazard. 
B) externalities. 
C) adverse selection. 
D) public goods.

Question 9

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

Accepted Answer

A) reverse wealth problem. 
B) negative externality problem. 
C) adverse selection problem. 
D) moral hazard problem. 
A) reverse wealth problem. 
B) negative externality problem. 
C) adverse selection problem. 
D) moral hazard problem.

Question 10

A significant amount of positive consumer surplus is the reason why sometimes a shopper regrets having bought a particular item.

Accepted Answer

A) True 
 B)False

Question 11

At equilibrium in a market for a product, the total revenues received by sellers equal the

Accepted Answer

A) market producer surplus. 
B) total amount spent by buyers on the product. 
C) total profits of sellers. 
D) market consumer surplus. 
A) market producer surplus. 
B) total amount spent by buyers on the product. 
C) total profits of sellers. 
D) market consumer surplus.

Question 12

When economic efficiency is attained, it implies all of the following, except

Accepted Answer

A) per-unit cost of output produced is at minimum. 
B) allocative efficiency is achieved. 
C) total consumer and producer surplus is at a maximum. 
D) the gap between marginal benefits and marginal costs of production is at maximum. 
A) per-unit cost of output produced is at minimum. 
B) allocative efficiency is achieved. 
C) total consumer and producer surplus is at a maximum. 
D) the gap between marginal benefits and marginal costs of production is at maximum.

Question 13

In a situation where an externality occurs, the "third party" refers to those who

Accepted Answer

A) buy the product from others. 
B) produce the product for others. 
C) trade the product with others outside the nation or community. 
D) are not directly involved in the transaction or activity. 
A) buy the product from others. 
B) produce the product for others. 
C) trade the product with others outside the nation or community. 
D) are not directly involved in the transaction or activity.

Question 14

In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who are able to acquire the largest net benefit from using the scarce resource "clean air."

Accepted Answer

A) True 
 B)False

Question 15

Because of the free-rider problem,

Accepted Answer

A) the market demand for a public good is overstated. 
B) the market demand for a public good is nonexistent or understated. 
C) government has increasingly yielded to the private sector in producing public goods. 
D) public goods often create serious negative externalities. 
A) the market demand for a public good is overstated. 
B) the market demand for a public good is nonexistent or understated. 
C) government has increasingly yielded to the private sector in producing public goods. 
D) public goods often create serious negative externalities.

Question 16

Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following, except

Accepted Answer

A) subsiding the buyers of the product. 
B) taxing the sellers of the product. 
C) subsidizing the sellers of the product. 
D) providing the product itself. 
A) subsiding the buyers of the product. 
B) taxing the sellers of the product. 
C) subsidizing the sellers of the product. 
D) providing the product itself.

Question 17

The market demand curve for a public good

Accepted Answer

A) is derived in the same manner as demand curves for private goods. 
B) is derived by horizontally summing all individual demand curves. 
C) shows the total value that all individuals place on each additional unit of the good. 
D) shows the total number of units that would be produced by the public sector at each possible price. 
A) is derived in the same manner as demand curves for private goods. 
B) is derived by horizontally summing all individual demand curves. 
C) shows the total value that all individuals place on each additional unit of the good. 
D) shows the total number of units that would be produced by the public sector at each possible price.

Question 18

Along a supply curve, product price and producer surplus are inversely related.

Accepted Answer

A) True 
 B)False

Question 19

In dealing with market failures, the government always bases its decisions on economic analysis of marginal cost and marginal benefit.

Accepted Answer

A) True 
 B)False

Question 20

Where there is asymmetric information between buyers and sellers,

Accepted Answer

A) product shortages will occur at the equilibrium price. 
B) product surpluses will occur at the equilibrium price. 
C) markets can produce inefficient outcomes. 
D) markets will fail due to the "free-rider problem." 
A) product shortages will occur at the equilibrium price. 
B) product surpluses will occur at the equilibrium price. 
C) markets can produce inefficient outcomes. 
D) markets will fail due to the "free-rider problem."

Exam 4: Market Failures: Public Goods and Externalities

At the optimal quantity of a public good,

Nonrivalry and nonexcludability are the main characteristics of

Market failures refer to those situations where the sellers are not producing as much as the buyers are wanting to buy.

The licensing and regulation of financial advisers is one way by which the government tries to deal with the problem of inadequate information that financial firms have about their customers.

Producer surplus is the difference between

Professional buyers of antiques often have more information about the value of antique objects than do the sellers.This illustrates

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

The 2010 Health Care Reform Law, also known as "Obamacare," includes a part known as universal coverage which requires everyone to have health insurance.One reason for this is to address the problem of

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

A significant amount of positive consumer surplus is the reason why sometimes a shopper regrets having bought a particular item.

At equilibrium in a market for a product, the total revenues received by sellers equal the

When economic efficiency is attained, it implies all of the following, except

In a situation where an externality occurs, the "third party" refers to those who

In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who are able to acquire the largest net benefit from using the scarce resource "clean air."

Because of the free-rider problem,

Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following, except

The market demand curve for a public good

Along a supply curve, product price and producer surplus are inversely related.

In dealing with market failures, the government always bases its decisions on economic analysis of marginal cost and marginal benefit.

Where there is asymmetric information between buyers and sellers,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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