Question 1

What kinds of goods are nonrivalrous in consumption and are unable to exclude nonpaying consumers from using the goods?

Accepted Answer

A)  private 
B)  durable 
C)  public 
D)  nondurable 
A)  private 
B)  durable 
C)  public 
D)  nondurable

Question 2

When is an externality present?

Accepted Answer

A)  when the private marginal cost of an activity exceeds the private marginal benefit 
B)  when the social marginal cost of an activity exceeds the private marginal cost 
C)  when the social marginal cost of an activity exceeds the social marginal benefit 
D)  when the social marginal benefit of an activity is less than the private marginal benefit 
A)  when the private marginal cost of an activity exceeds the private marginal benefit 
B)  when the social marginal cost of an activity exceeds the private marginal cost 
C)  when the social marginal cost of an activity exceeds the social marginal benefit 
D)  when the social marginal benefit of an activity is less than the private marginal benefit

Question 3

Suppose the total utility of two slices of pizza is 10, the total utility of three slices is 14, and the total utility of four slices is 20. What is the marginal utility of the third and fourth slices?

Accepted Answer

A)  It is 2 for the third slice and 3 for the fourth slice. 
B)  It is 10 for the third slice and 14 for the fourth slice. 
C)  It is 14 for the third slice and 20 for the fourth slice. 
D)  It is 4 for the third slice and 6 for the fourth slice. 
A)  It is 2 for the third slice and 3 for the fourth slice. 
B)  It is 10 for the third slice and 14 for the fourth slice. 
C)  It is 14 for the third slice and 20 for the fourth slice. 
D)  It is 4 for the third slice and 6 for the fourth slice.

Question 4

What is a public good?

Accepted Answer

A)  a good or service that is consumed by private individuals and financed by private contributions 
B)  any good or service that is produced by the government 
C)  a good or service for which it is relatively easy to exclude nonpaying customers from consumption 
D)  a good or service that is consumed by both the paying and nonpaying customers 
A)  a good or service that is consumed by private individuals and financed by private contributions 
B)  any good or service that is produced by the government 
C)  a good or service for which it is relatively easy to exclude nonpaying customers from consumption 
D)  a good or service that is consumed by both the paying and nonpaying customers

Question 5

What will a corrective tax equal to the external cost imposed on polluters result in?

Accepted Answer

A)  It will increase the level of pollution. 
B)  It will force polluters to internalize the external cost resulting from their actions. 
C)  It will eliminate all pollution. 
D)  It will usually have no impact whatsoever on pollution levels, but will generate tax revenue for the government. 
A)  It will increase the level of pollution. 
B)  It will force polluters to internalize the external cost resulting from their actions. 
C)  It will eliminate all pollution. 
D)  It will usually have no impact whatsoever on pollution levels, but will generate tax revenue for the government.

Question 6

According to an economist, what does the word "utility" mean?

Accepted Answer

A)  usefulness 
B)  satisfaction 
C)  efficiency 
D)  demand 
A)  usefulness 
B)  satisfaction 
C)  efficiency 
D)  demand

Question 7

London Mayor Anne Marie DeCicco believes strongly that education provides great benefits to the community and urges the provincial government to provide the city with more money. What does this say about Mayor DeCicco?

Accepted Answer

A)  She believes that there are positive external benefits associated with education. 
B)  She believes that there are nontrivial external costs associated with education. 
C)  She believes that since teachers are overpaid, the city needs more money to hire enough teachers for its classrooms. 
D)  She believes that public schools provide a higher quality education than private schools. 
A)  She believes that there are positive external benefits associated with education. 
B)  She believes that there are nontrivial external costs associated with education. 
C)  She believes that since teachers are overpaid, the city needs more money to hire enough teachers for its classrooms. 
D)  She believes that public schools provide a higher quality education than private schools.

Question 8

In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will NOT happen?

Accepted Answer

A)  Negative externalities will be observed. 
B)  Output of the good being produced will be too low. 
C)  Prices will be too low relative to the social optimum. 
D)  Inefficiencies will occur. 
A)  Negative externalities will be observed. 
B)  Output of the good being produced will be too low. 
C)  Prices will be too low relative to the social optimum. 
D)  Inefficiencies will occur.

Question 9

TABLE 6-5
  
-Refer to Table 6-5. The table shows Bennett's total utility from each bag of potato chips and can of soda pop that he consumes. If Bennett increases his consumption of potato chips from three bags to four bags, what is his marginal utility from the fourth bag?

Accepted Answer

A)  7 
B)  8 
C)  48 
D)  55 
A)  7 
B)  8 
C)  48 
D)  55

Question 10

Why does education lead to external benefits?

Accepted Answer

A)  Little pollution is created when educating people. 
B)  People who become better educated get better jobs. 
C)  Better educated people are more motivated to succeed. 
D)  Better educated people commit less crimes. 
A)  Little pollution is created when educating people. 
B)  People who become better educated get better jobs. 
C)  Better educated people are more motivated to succeed. 
D)  Better educated people commit less crimes.

Question 11

If the world supply of diamonds increases, the market price of diamonds decreases and the consumer surplus derived by diamond consumers increases.

Accepted Answer

A) True 
 B)False

Question 12

Producer surplus is always the total area below the demand curve and above the supply curve.

Accepted Answer

A) True 
 B)False

Question 13

The schedule below represents the willingness of a typical consumer to pay for wine in a year. Suppose there are 10 000 identical consumers in the community. TABLE 6-3
  
-Refer to Table 6-3. If the market price of wine is $20, what is the total consumer surplus for the community equal to?

Accepted Answer

A)  $20 000 
B)  $30 000 
C)  $50 000 
D)  $60 000 
A)  $20 000 
B)  $30 000 
C)  $50 000 
D)  $60 000

Question 14

Which of the following is the best example of a private good?

Accepted Answer

A)  a local park 
B)  a can of soda 
C)  a television program broadcast unscrambled over the airwaves 
D)  an outdoor fireworks display 
A)  a local park 
B)  a can of soda 
C)  a television program broadcast unscrambled over the airwaves 
D)  an outdoor fireworks display

Question 15

Why does the presence of negative externalities lead to a misallocation of societal resources?

Accepted Answer

A)  because whenever external costs are imposed on outside parties, the good should not be produced at all 
B)  because the government always intervenes in markets when negative externalities are present 
C)  because less of the good than is ideal for society is produced 
D)  because there are some costs associated with production that the producer fails to take into consideration 
A)  because whenever external costs are imposed on outside parties, the good should not be produced at all 
B)  because the government always intervenes in markets when negative externalities are present 
C)  because less of the good than is ideal for society is produced 
D)  because there are some costs associated with production that the producer fails to take into consideration

Question 16

How are the total social costs of production defined?

Accepted Answer

A)  private costs plus private benefits 
B)  private benefits minus private costs 
C)  private costs plus external costs 
D)  private costs minus external costs 
A)  private costs plus private benefits 
B)  private benefits minus private costs 
C)  private costs plus external costs 
D)  private costs minus external costs

Question 17

Marginal utility is the overall satisfaction derived from the consumption of a certain number of units of a good or service.

Accepted Answer

A) True 
 B)False

Question 18

TABLE 6-5
  
-Refer to Table 6-5. The table shows Bennett's total utility from each bag of potato chips and can of soda pop that he consumes. What is the total utility that Bennett receives from four bags of potato chips?

Accepted Answer

A)  7 
B)  8 
C)  48 
D)  55 
A)  7 
B)  8 
C)  48 
D)  55

Question 19

Which of the following is the best example of a public good?

Accepted Answer

A)  telephone service 
B)  an amusement park 
C)  city street lights 
D)  a national system of healthcare 
A)  telephone service 
B)  an amusement park 
C)  city street lights 
D)  a national system of healthcare

Question 20

Why does producer surplus arise?

Accepted Answer

A)  Consumers buy less of some commodities than they need. 
B)  Sellers' costs of production for some goods are less than the market price. 
C)  Producers make more off some commodities than the consumers desire. 
D)  Sellers manufacture more units of a good than consumers are willing to purchase. 
A)  Consumers buy less of some commodities than they need. 
B)  Sellers' costs of production for some goods are less than the market price. 
C)  Producers make more off some commodities than the consumers desire. 
D)  Sellers manufacture more units of a good than consumers are willing to purchase.

What kinds of goods are nonrivalrous in consumption and are unable to exclude nonpaying consumers from using the goods?

When is an externality present?

Suppose the total utility of two slices of pizza is 10, the total utility of three slices is 14, and the total utility of four slices is 20. What is the marginal utility of the third and fourth slices?

What is a public good?

What will a corrective tax equal to the external cost imposed on polluters result in?

According to an economist, what does the word "utility" mean?

London Mayor Anne Marie DeCicco believes strongly that education provides great benefits to the community and urges the provincial government to provide the city with more money. What does this say about Mayor DeCicco?

In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will NOT happen?

TABLE 6-5 -Refer to Table 6-5. The table shows Bennett's total utility from each bag of potato chips and can of soda pop that he consumes. If Bennett increases his consumption of potato chips from three bags to four bags, what is his marginal utility from the fourth bag?

Why does education lead to external benefits?

If the world supply of diamonds increases, the market price of diamonds decreases and the consumer surplus derived by diamond consumers increases.

Producer surplus is always the total area below the demand curve and above the supply curve.

The schedule below represents the willingness of a typical consumer to pay for wine in a year. Suppose there are 10 000 identical consumers in the community. TABLE 6-3 -Refer to Table 6-3. If the market price of wine is $20, what is the total consumer surplus for the community equal to?

Which of the following is the best example of a private good?

Why does the presence of negative externalities lead to a misallocation of societal resources?

How are the total social costs of production defined?

Marginal utility is the overall satisfaction derived from the consumption of a certain number of units of a good or service.

TABLE 6-5 -Refer to Table 6-5. The table shows Bennett's total utility from each bag of potato chips and can of soda pop that he consumes. What is the total utility that Bennett receives from four bags of potato chips?

Which of the following is the best example of a public good?

Why does producer surplus arise?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

The Environment

Filters

Exam 6: Market Efficiency and Market Failure

What kinds of goods are nonrivalrous in consumption and are unable to exclude nonpaying consumers from using the goods?

When is an externality present?

Suppose the total utility of two slices of pizza is 10, the total utility of three slices is 14, and the total utility of four slices is 20. What is the marginal utility of the third and fourth slices?

What is a public good?

What will a corrective tax equal to the external cost imposed on polluters result in?

According to an economist, what does the word "utility" mean?

London Mayor Anne Marie DeCicco believes strongly that education provides great benefits to the community and urges the provincial government to provide the city with more money. What does this say about Mayor DeCicco?

In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will NOT happen?

TABLE 6-5 -Refer to Table 6-5. The table shows Bennett's total utility from each bag of potato chips and can of soda pop that he consumes. If Bennett increases his consumption of potato chips from three bags to four bags, what is his marginal utility from the fourth bag?

Why does education lead to external benefits?

If the world supply of diamonds increases, the market price of diamonds decreases and the consumer surplus derived by diamond consumers increases.

Producer surplus is always the total area below the demand curve and above the supply curve.

The schedule below represents the willingness of a typical consumer to pay for wine in a year. Suppose there are 10 000 identical consumers in the community. TABLE 6-3 -Refer to Table 6-3. If the market price of wine is $20, what is the total consumer surplus for the community equal to?

Which of the following is the best example of a private good?

Why does the presence of negative externalities lead to a misallocation of societal resources?

How are the total social costs of production defined?

Marginal utility is the overall satisfaction derived from the consumption of a certain number of units of a good or service.

TABLE 6-5 -Refer to Table 6-5. The table shows Bennett's total utility from each bag of potato chips and can of soda pop that he consumes. What is the total utility that Bennett receives from four bags of potato chips?

Which of the following is the best example of a public good?

Why does producer surplus arise?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

The Environment

Filters