Question 1

Competitive markets tend to produce an inefficiently large amount of beneficial externalities.

Accepted Answer

A) True 
 B)False

Question 2

A private good is characterized by excludability and depletability.

Accepted Answer

A) True 
 B)False

Question 3

Figure 15-1  
-Figure 15-1 describes conditions in the monopolized weezil industry.If the government replaces the monopolist with perfectly competitive firms and forces these firms to take account of all the costs and benefits they impose on society, the industry will produce an output equal to

Accepted Answer

A) W. 
B) X. 
C) Y. 
D) Z. 
A) W. 
B) X. 
C) Y. 
D) Z.

Question 4

Due to Pigou's "defective telescopic faculty," a market economy is inefficient in allocating resources between the present and the future.

Accepted Answer

A) True 
 B)False

Question 5

Moral hazard is best described as

Accepted Answer

A) an action by an individual that endangers others. 
B) an action that puts one's salvation at risk. 
C) the presence of insurance increasing risk-taking behavior. 
D) vigilance by individuals to keep total insurance claims at a minimum to keep rates low. 
A) an action by an individual that endangers others. 
B) an action that puts one's salvation at risk. 
C) the presence of insurance increasing risk-taking behavior. 
D) vigilance by individuals to keep total insurance claims at a minimum to keep rates low.

Question 6

Governments can most effectively encourage a firm to produce the efficient level of output of a good whose production causes a beneficial externality by

Accepted Answer

A) increasing the demand at every price for the good. 
B) subsidizing the production of the good. 
C) taxing the production of the good. 
D) imposing a price ceiling on the good. 
A) increasing the demand at every price for the good. 
B) subsidizing the production of the good. 
C) taxing the production of the good. 
D) imposing a price ceiling on the good.

Question 7

Figure 15-1  
-When there are beneficial externalities in a market,

Accepted Answer

A) marginal social cost is above marginal private cost. 
B) marginal social benefit is above marginal private benefit. 
C) marginal social benefit is below marginal private benefit. 
D) marginal social cost is below marginal private cost. 
A) marginal social cost is above marginal private cost. 
B) marginal social benefit is above marginal private benefit. 
C) marginal social benefit is below marginal private benefit. 
D) marginal social cost is below marginal private cost.

Question 8

If a detrimental externality is being produced in the course of producing a good, then

Accepted Answer

A) P > MSC. B) MSC < MPC. C) incidental costs are negative. D) output is inefficiently large. A) P > MSC. B) MSC < MPC. C) incidental costs are negative. D) output is inefficiently large.

Question 9

Most Americans would voluntarily support defense without required taxation.

Accepted Answer

A) True 
 B)False

Question 10

An example of a beneficial externality is

Accepted Answer

A) a vaccination to prevent a communicable disease. 
B) loud music from a cool house party. 
C) a sandwich shop that adds a free pickle with each order. 
D) a pasture that all ranchers can freely graze their cattle on. 
A) a vaccination to prevent a communicable disease. 
B) loud music from a cool house party. 
C) a sandwich shop that adds a free pickle with each order. 
D) a pasture that all ranchers can freely graze their cattle on.

Exam 15: The Shortcomings of Free Markets

Competitive markets tend to produce an inefficiently large amount of beneficial externalities.

A private good is characterized by excludability and depletability.

Figure 15-1 -Figure 15-1 describes conditions in the monopolized weezil industry.If the government replaces the monopolist with perfectly competitive firms and forces these firms to take account of all the costs and benefits they impose on society, the industry will produce an output equal to

Due to Pigou's "defective telescopic faculty," a market economy is inefficient in allocating resources between the present and the future.

Moral hazard is best described as

Governments can most effectively encourage a firm to produce the efficient level of output of a good whose production causes a beneficial externality by

Figure 15-1 -When there are beneficial externalities in a market,

If a detrimental externality is being produced in the course of producing a good, then

Most Americans would voluntarily support defense without required taxation.

An example of a beneficial externality is

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

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