Question 1

Critics argue that society is depleting its energy resources far too quickly.The most likely explanation for this behavior is that

Accepted Answer

A) firms try to avoid making irreversible decisions about resource depletion. 
B) investors expect interest rates to fall continuously in the future. 
C) individuals tend to value their own well-being more highly than the well-being of future generations. 
D) people do not have what Pigou called a "defective telescopic faculty." 
A) firms try to avoid making irreversible decisions about resource depletion. 
B) investors expect interest rates to fall continuously in the future. 
C) individuals tend to value their own well-being more highly than the well-being of future generations. 
D) people do not have what Pigou called a "defective telescopic faculty."

Question 2

A public good is

Accepted Answer

A) any good provided by government. 
B) a good that can be most cheaply provided by government, though it may in fact be provided by private enterprise. 
C) a good whose benefits cannot readily be restricted to a small group of people. 
D) a good whose benefits cannot be enjoyed by an individual alone. 
A) any good provided by government. 
B) a good that can be most cheaply provided by government, though it may in fact be provided by private enterprise. 
C) a good whose benefits cannot readily be restricted to a small group of people. 
D) a good whose benefits cannot be enjoyed by an individual alone.

Question 3

Productivity growth tends to affect all industries to the same degree.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an imperfection of market economies?

Accepted Answer

A) They produce inexpensive services but expensive manufactured goods. 
B) They place undue importance on the needs of future generations. 
C) They cannot provide certain goods such as national defense. 
D) They distribute income too unequally. 
A) They produce inexpensive services but expensive manufactured goods. 
B) They place undue importance on the needs of future generations. 
C) They cannot provide certain goods such as national defense. 
D) They distribute income too unequally.

Question 5

In the event of a detrimental externality that affects the public interest, government action is the only solution.

Accepted Answer

A) True 
 B)False

Question 6

During the 1992 presidential campaign, H.Ross Perot made much of the various "special interests" which lobby in Washington, D.C.How might an economist view this? Which specific market breakdown may occur if there is lobbying? Relate your answer to the study of monopoly and oligopoly.

Accepted Answer

Lobbying may be a manifestation of rent

Question 7

Is increased production of a good beneficial to society?

Accepted Answer

A) Yes, because scarcity is such an overriding concern. 
B) Yes, because more is always better. 
C) Maybe, it depends on what is foregone. 
D) No, because increased production does not increase utility. 
A) Yes, because scarcity is such an overriding concern. 
B) Yes, because more is always better. 
C) Maybe, it depends on what is foregone. 
D) No, because increased production does not increase utility.

Question 8

A main cause of the cost disease of personal services is

Accepted Answer

A) the change from an agrarian society to an industrial society. 
B) labor-saving innovations in the service industries. 
C) the unevenness in the growth of productivity in the economy. 
D) massive increases in industrial production at the expense of consumer goods production. 
A) the change from an agrarian society to an industrial society. 
B) labor-saving innovations in the service industries. 
C) the unevenness in the growth of productivity in the economy. 
D) massive increases in industrial production at the expense of consumer goods production.

Question 9

Asymmetric information may cause

Accepted Answer

A) used goods in excellent condition to not be sold. 
B) used goods in poor condition to not be offered for sale. 
C) sellers with goods in excellent condition to accept prices below their willingness to sell. 
D) sellers with goods in excellent condition to ship the goods to other markets. 
A) used goods in excellent condition to not be sold. 
B) used goods in poor condition to not be offered for sale. 
C) sellers with goods in excellent condition to accept prices below their willingness to sell. 
D) sellers with goods in excellent condition to ship the goods to other markets.

Question 10

Many cities have summer pops series in which the local orchestra performs light classical music in a public park.These performances are free in some areas.Apply the concept of a public good to pops performances and explain whether an admission charge is efficient.

Accepted Answer

Pops performances are nondepletable in t

Question 11

Which of the following is not true for a public good?

Accepted Answer

A) Marginal cost of serving public good to one more person is zero. 
B) Free-rider problem arises in case of public goods. 
C) Exclusion is not possible in most of the public goods. 
D) Public goods include only material commodities. 
A) Marginal cost of serving public good to one more person is zero. 
B) Free-rider problem arises in case of public goods. 
C) Exclusion is not possible in most of the public goods. 
D) Public goods include only material commodities.

Question 12

Producers of computer software are plagued with the problem of "pirating," that is, many people copy software legally purchased by others.The industry estimates that for each legal copy of a program, there are two pirated copies in use.The industry wants strict laws for the enforcement of its "intellectual property rights," but enforcement is obviously very difficult.Economists call this problem

Accepted Answer

A) depletability. 
B) externality. 
C) durability. 
D) nonexcludability. 
A) depletability. 
B) externality. 
C) durability. 
D) nonexcludability.

Question 13

Which of the following is not generally considered a failing of market economies?

Accepted Answer

A) Market economies can have severe swings from boom to bust. 
B) Market economies tend to underprovide public goods. 
C) Market economies tend to promote equity at the expense of efficiency. 
D) Market economies can misallocate resources when property rights are ill defined. 
A) Market economies can have severe swings from boom to bust. 
B) Market economies tend to underprovide public goods. 
C) Market economies tend to promote equity at the expense of efficiency. 
D) Market economies can misallocate resources when property rights are ill defined.

Question 14

A potential cause of competitive market failure is symmetric information.

Accepted Answer

A) True 
 B)False

Question 15

Government gives subsidies to encourage production of products with beneficial externalities.

Accepted Answer

A) True 
 B)False

Question 16

If a firm's production creates detrimental externalities, then in a competitive market,

Accepted Answer

A) the firm will produce at an inefficiently high level. 
B) the firm will produce at an inefficiently low level. 
C) the firm will produce until marginal social cost equals marginal benefits. 
D) the firm will produce until marginal benefits exceed marginal social cost. 
A) the firm will produce at an inefficiently high level. 
B) the firm will produce at an inefficiently low level. 
C) the firm will produce until marginal social cost equals marginal benefits. 
D) the firm will produce until marginal benefits exceed marginal social cost.

Question 17

An efficient allocation of resources requires that a product's price equals its average cost.

Accepted Answer

A) True 
 B)False

Question 18

A monopoly price reflects a good's marginal utility.

Accepted Answer

A) True 
 B)False

Question 19

If long-term investments are increasing,

Accepted Answer

A) current consumption must be increasing. 
B) interest rates must be relatively low. 
C) interest rates must be relatively high. 
D) the people must be experiencing a "defective telescopic faculty." 
A) current consumption must be increasing. 
B) interest rates must be relatively low. 
C) interest rates must be relatively high. 
D) the people must be experiencing a "defective telescopic faculty."

Question 20

What are private goods? Mention two important attributes of private goods.

Accepted Answer

A private good is a commodity characteri

Exam 15: The Shortcomings of Free Markets

Critics argue that society is depleting its energy resources far too quickly.The most likely explanation for this behavior is that

A public good is

Productivity growth tends to affect all industries to the same degree.

Which of the following is an imperfection of market economies?

In the event of a detrimental externality that affects the public interest, government action is the only solution.

During the 1992 presidential campaign, H.Ross Perot made much of the various "special interests" which lobby in Washington, D.C.How might an economist view this? Which specific market breakdown may occur if there is lobbying? Relate your answer to the study of monopoly and oligopoly.

Is increased production of a good beneficial to society?

A main cause of the cost disease of personal services is

Asymmetric information may cause

Many cities have summer pops series in which the local orchestra performs light classical music in a public park.These performances are free in some areas.Apply the concept of a public good to pops performances and explain whether an admission charge is efficient.

Which of the following is not true for a public good?

Which of the following is not generally considered a failing of market economies?

A potential cause of competitive market failure is symmetric information.

Government gives subsidies to encourage production of products with beneficial externalities.

If a firm's production creates detrimental externalities, then in a competitive market,

An efficient allocation of resources requires that a product's price equals its average cost.

A monopoly price reflects a good's marginal utility.

If long-term investments are increasing,

What are private goods? Mention two important attributes of private goods.

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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