Question 1

If a production process generates pollution, then a competitive market will

Accepted Answer

A) produce more of the good than is socially optimal. 
B) produce less of the good than is socially optimal. 
C) produce the socially optimal quantity of that good. 
D) produce zero output. 
A) produce more of the good than is socially optimal. 
B) produce less of the good than is socially optimal. 
C) produce the socially optimal quantity of that good. 
D) produce zero output.

Question 2

When the government charges an output tax to eliminate an externality, it forces the manufacturer to ________ the negative externality.

Accepted Answer

A) charge customers for 
B) internalize 
C) stop producing 
D) increase the production of 
A) charge customers for 
B) internalize 
C) stop producing 
D) increase the production of

Question 3

Environmental CSR that is undertaken to reduce negative externalities might be

Accepted Answer

A) altruistic. 
B) strategic. 
C) undertaken because of Internet-based scrutiny. 
D) All of the above. 
A) altruistic. 
B) strategic. 
C) undertaken because of Internet-based scrutiny. 
D) All of the above.

Question 4

Which of the following is NOT a common property?

Accepted Answer

A) A city park 
B) A main street 
C) A public beach 
D) A movie screening 
A) A city park 
B) A main street 
C) A public beach 
D) A movie screening

Question 5

In a competitive market, a negative externality creates a deadweight loss because

Accepted Answer

A) the cost of the externality is double counted. 
B) a harm is generated. 
C) price equals social marginal cost. 
D) price equals private marginal cost. 
A) the cost of the externality is double counted. 
B) a harm is generated. 
C) price equals social marginal cost. 
D) price equals private marginal cost.

Question 6

Regulation

Accepted Answer

A) always increases consumer surplus. 
B) passes the cost-benefit test. 
C) solves market failures of all size. 
D) None of the above. 
A) always increases consumer surplus. 
B) passes the cost-benefit test. 
C) solves market failures of all size. 
D) None of the above.

Question 7

If a government policy increases benefits to the unemployed without having a detrimental effect on any other constituent, the policy is

Accepted Answer

A) a Pareto improvement. 
B) redistributive. 
C) regressive. 
D) a positive externality effect. 
A) a Pareto improvement. 
B) redistributive. 
C) regressive. 
D) a positive externality effect.

Question 8

A cable company can add a subscriber for ________ and a market failure occurs because the price charged ________.

Accepted Answer

A) nearly zero marginal cost; exceeds marginal cost 
B) less than average cost; reduces consumer surplus 
C) nearly zero marginal cost; is extortionist 
D) average variable cost; increases producer surplus 
A) nearly zero marginal cost; exceeds marginal cost 
B) less than average cost; reduces consumer surplus 
C) nearly zero marginal cost; is extortionist 
D) average variable cost; increases producer surplus

Question 9

A main rationale for government intervention in markets ________ and ________.

Accepted Answer

A) is to reduce producer surplus; redistribute wealth 
B) concerns the creation of public goods; reduces free-riding 
C) is to correct market failures; increase surplus 
D) There is never an economic rationale for government intervention. 
A) is to reduce producer surplus; redistribute wealth 
B) concerns the creation of public goods; reduces free-riding 
C) is to correct market failures; increase surplus 
D) There is never an economic rationale for government intervention.

Question 10

When discussing rules that governments use to intervene in a market, we can take a(n)________ approach where we discuss what governments should do, or a ________ approach where we discuss what governments actually do.

Accepted Answer

A) normative; positive 
B) positive; normative 
C) optimistic; cynical 
D) bipartisan; normative 
A) normative; positive 
B) positive; normative 
C) optimistic; cynical 
D) bipartisan; normative

Question 11

If a production process creates positive externalities, a competitive market produces too few positive externalities because the producer

Accepted Answer

A) does not pay all the costs of the externalities. 
B) does not receive compensation for the externalities. 
C) Both A and B. 
D) None of the above. 
A) does not pay all the costs of the externalities. 
B) does not receive compensation for the externalities. 
C) Both A and B. 
D) None of the above.

Question 12

If the government regulates the price a monopoly can charge, and the price ceiling is set below what the competitive market price would be, then

Accepted Answer

A) there will be excess supply. 
B) there will be excess demand. 
C) producer surplus is maximized. 
D) consumer surplus is maximized. 
A) there will be excess supply. 
B) there will be excess demand. 
C) producer surplus is maximized. 
D) consumer surplus is maximized.

Question 13

If a production process generates pollution, then a competitive market will produce more of the good than is socially optimal because

Accepted Answer

A) firms take all costs into consideration. 
B) firms incur all costs of production but ignore some of them. 
C) firms ignore the costs of production that they do not incur. 
D) firms set price equal to social marginal cost. 
A) firms take all costs into consideration. 
B) firms incur all costs of production but ignore some of them. 
C) firms ignore the costs of production that they do not incur. 
D) firms set price equal to social marginal cost.

Question 14

One way a government can eliminate a market failure

Accepted Answer

A) is to regulate the price so that it equals marginal cost. 
B) is to implement a price floor equal to marginal cost. 
C) is to regulate the price so that it is below average cost. 
D) None of the above solutions will eliminate a market failure. 
A) is to regulate the price so that it equals marginal cost. 
B) is to implement a price floor equal to marginal cost. 
C) is to regulate the price so that it is below average cost. 
D) None of the above solutions will eliminate a market failure.

Question 15

In the U.S., the ________ and the ________ prohibit firms from explicitly agreeing to take actions that reduce competition.

Accepted Answer

A) Department of Justice Act; Federal Trade Commission Act 
B) Sherman Antitrust Act; Federal Trade Commission Act 
C) Per Se Act; Sherman Antitrust Act 
D) Pareto Act; Anti-Cartel Act 
A) Department of Justice Act; Federal Trade Commission Act 
B) Sherman Antitrust Act; Federal Trade Commission Act 
C) Per Se Act; Sherman Antitrust Act 
D) Pareto Act; Anti-Cartel Act

Question 16

If a production process creates pollution, a competitive market produces excessive pollution because

Accepted Answer

A) the firms do not include the social cost of the pollution in their profit-maximizing decisions. 
B) the firms place too high a price on society's cost of inflation. 
C) people are not injured by the pollution. 
D) zero pollution is optimal. 
A) the firms do not include the social cost of the pollution in their profit-maximizing decisions. 
B) the firms place too high a price on society's cost of inflation. 
C) people are not injured by the pollution. 
D) zero pollution is optimal.

Question 17

Regulation might NOT increase total surplus because

Accepted Answer

A) the costs of the regulation might outweigh the benefits. 
B) it may not be possible to gather the information necessary to set prices correctly. 
C) regulators might get captured by the industry. 
D) All of the above. 
A) the costs of the regulation might outweigh the benefits. 
B) it may not be possible to gather the information necessary to set prices correctly. 
C) regulators might get captured by the industry. 
D) All of the above.

Question 18

Markets tend to produce too little of an excludable public good because

Accepted Answer

A) transaction costs are high. 
B) of the lack of rivalry. 
C) these goods are depletable. 
D) All of the above. 
A) transaction costs are high. 
B) of the lack of rivalry. 
C) these goods are depletable. 
D) All of the above.

Question 19

An exclusive deal is

Accepted Answer

A) always illegal. 
B) welfare reducing. 
C) one where a firm will only sell to a customer if the customer agrees not to buy anything from the firm's rivals. 
D) All of the above. 
A) always illegal. 
B) welfare reducing. 
C) one where a firm will only sell to a customer if the customer agrees not to buy anything from the firm's rivals. 
D) All of the above.

Question 20

Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's Theorem, the optimal level of trash in the park can be achieved if

Accepted Answer

A) Al is fined by the government. 
B) Al has the right to leave trash and Bert cannot do anything about it. 
C) Al has the right to leave trash and Bert can pay him to limit his dumping. 
D) Bert moves. 
A) Al is fined by the government. 
B) Al has the right to leave trash and Bert cannot do anything about it. 
C) Al has the right to leave trash and Bert can pay him to limit his dumping. 
D) Bert moves.

If a production process generates pollution, then a competitive market will

When the government charges an output tax to eliminate an externality, it forces the manufacturer to ________ the negative externality.

Environmental CSR that is undertaken to reduce negative externalities might be

Which of the following is NOT a common property?

In a competitive market, a negative externality creates a deadweight loss because

Regulation

If a government policy increases benefits to the unemployed without having a detrimental effect on any other constituent, the policy is

A cable company can add a subscriber for and a market failure occurs because the price charged .

A main rationale for government intervention in markets and .

When discussing rules that governments use to intervene in a market, we can take a(n) approach where we discuss what governments should do, or a approach where we discuss what governments actually do.

If a production process creates positive externalities, a competitive market produces too few positive externalities because the producer

If the government regulates the price a monopoly can charge, and the price ceiling is set below what the competitive market price would be, then

If a production process generates pollution, then a competitive market will produce more of the good than is socially optimal because

One way a government can eliminate a market failure

In the U.S., the and the prohibit firms from explicitly agreeing to take actions that reduce competition.

If a production process creates pollution, a competitive market produces excessive pollution because

Regulation might NOT increase total surplus because

Markets tend to produce too little of an excludable public good because

An exclusive deal is

Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's Theorem, the optimal level of trash in the park can be achieved if

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Global Business

Filters

Exam 16: Government and Business

If a production process generates pollution, then a competitive market will

When the government charges an output tax to eliminate an externality, it forces the manufacturer to ________ the negative externality.

Environmental CSR that is undertaken to reduce negative externalities might be

Which of the following is NOT a common property?

In a competitive market, a negative externality creates a deadweight loss because

Regulation

If a government policy increases benefits to the unemployed without having a detrimental effect on any other constituent, the policy is

A cable company can add a subscriber for ________ and a market failure occurs because the price charged ________.

A main rationale for government intervention in markets ________ and ________.

When discussing rules that governments use to intervene in a market, we can take a(n)________ approach where we discuss what governments should do, or a ________ approach where we discuss what governments actually do.

If a production process creates positive externalities, a competitive market produces too few positive externalities because the producer

If the government regulates the price a monopoly can charge, and the price ceiling is set below what the competitive market price would be, then

If a production process generates pollution, then a competitive market will produce more of the good than is socially optimal because

One way a government can eliminate a market failure

In the U.S., the ________ and the ________ prohibit firms from explicitly agreeing to take actions that reduce competition.

If a production process creates pollution, a competitive market produces excessive pollution because

Regulation might NOT increase total surplus because

Markets tend to produce too little of an excludable public good because

An exclusive deal is

Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's Theorem, the optimal level of trash in the park can be achieved if

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Global Business

Filters

A cable company can add a subscriber for and a market failure occurs because the price charged .

A main rationale for government intervention in markets and .

When discussing rules that governments use to intervene in a market, we can take a(n) approach where we discuss what governments should do, or a approach where we discuss what governments actually do.

In the U.S., the and the prohibit firms from explicitly agreeing to take actions that reduce competition.