Question 1

What distinguishes public goods from private goods?

Accepted Answer

Public goods are both nonrival in consum

Question 2

In order to reach consumer equilibrium, which of the following consumption choices must be made?

Accepted Answer

A)  The total utility per dollar spent on Good X must equal the total utility per dollar spent on Good Y. 
B)  The total utility of Good X must equal the total utility of Good Y. 
C)  The marginal utility of Good X must equal the marginal utility of Good Y. 
D)  The marginal utility per dollar spent on Good X must equal the marginal utility per dollar spent on Good Y. 
A)  The total utility per dollar spent on Good X must equal the total utility per dollar spent on Good Y. 
B)  The total utility of Good X must equal the total utility of Good Y. 
C)  The marginal utility of Good X must equal the marginal utility of Good Y. 
D)  The marginal utility per dollar spent on Good X must equal the marginal utility per dollar spent on Good Y.

Question 3

Consumer surplus increases whenever the price of a good increases due to a leftward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of a positive externality?

Accepted Answer

A)  beautiful trees on property along a parkway 
B)  airport noise 
C)  pollution in a resort lake 
D)  a busy freeway 
A)  beautiful trees on property along a parkway 
B)  airport noise 
C)  pollution in a resort lake 
D)  a busy freeway

Question 5

Which of the following best describes goods where a free-rider problem exists?

Accepted Answer

A)  They tend to be underproduced. 
B)  They tend to be overproduced. 
C)  They tend to be high-priced and available only to the rich. 
D)  They tend to be low priced and available only to the poor. 
A)  They tend to be underproduced. 
B)  They tend to be overproduced. 
C)  They tend to be high-priced and available only to the rich. 
D)  They tend to be low priced and available only to the poor.

Question 6

Positive externalities lead to an underallocation of resources in that area relative to that which is socially desirable.

Accepted Answer

A) True 
 B)False

Question 7

Admission to Disney World is an example of a private good from which nonpaying individuals can be excluded.

Accepted Answer

A) True 
 B)False

Question 8

TABLE 6-1
Henry demands jazz CDs according to the following demand schedule:
  
-Refer to Table 6-1. If the price of jazz CDs equals $20, what is the consumer surplus Henry receives from purchasing jazz CDs?

Accepted Answer

A)  $10 
B)  $15 
C)  $20 
D)  $55 
A)  $10 
B)  $15 
C)  $20 
D)  $55

Question 9

When city beautification programs are funded privately, which of the following is likely to result?

Accepted Answer

A)  The private costs exceed the marginal benefits of the beautification programs. 
B)  Only contributing citizens are likely to benefit from a more beautiful city. 
C)  Both free riders and contributing citizens are likely to benefit from a more beautiful city. 
D)  An overallocation of resources toward the beautification project is likely to occur relative to what is socially efficient. 
A)  The private costs exceed the marginal benefits of the beautification programs. 
B)  Only contributing citizens are likely to benefit from a more beautiful city. 
C)  Both free riders and contributing citizens are likely to benefit from a more beautiful city. 
D)  An overallocation of resources toward the beautification project is likely to occur relative to what is socially efficient.

Question 10

Consumer surplus increases whenever the price of a good decreases due to a rightward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 11

Consider two goods-one that generates external benefits and another that generates external costs. What would a competitive market economy tend to produce?

Accepted Answer

A)  too little of both goods, relative to the social optimum 
B)  too much of the good that generates external benefits relative to the social optimum, and too little of the good that generates external costs 
C)  too little of the good that generates external benefits relative to the social optimum, and too much of the good that generates external costs 
D)  too much of both goods, relative to the social optimum 
A)  too little of both goods, relative to the social optimum 
B)  too much of the good that generates external benefits relative to the social optimum, and too little of the good that generates external costs 
C)  too little of the good that generates external benefits relative to the social optimum, and too much of the good that generates external costs 
D)  too much of both goods, relative to the social optimum

Question 12

What do economists use the term externalities to refer to?

Accepted Answer

A)  the shipment of goods and services to foreign nations 
B)  the importation of goods and services from foreign nations 
C)  benefits or costs of actions that spill over onto third parties 
D)  management decisions made outside of one's own department or division 
A)  the shipment of goods and services to foreign nations 
B)  the importation of goods and services from foreign nations 
C)  benefits or costs of actions that spill over onto third parties 
D)  management decisions made outside of one's own department or division

Question 13

Which of the following best describes what occurs when a good is nonrivalrous in consumption?

Accepted Answer

A)  Consumption by an additional individual does not prevent others from benefiting from a public good. 
B)  Individuals who refuse to pay for a public good can be excluded from benefiting from it. 
C)  Consumption by an additional individual will significantly reduce the benefits derived by others from a public good. 
D)  Individuals who refuse to pay for a public good cannot be excluded from benefiting from it. 
A)  Consumption by an additional individual does not prevent others from benefiting from a public good. 
B)  Individuals who refuse to pay for a public good can be excluded from benefiting from it. 
C)  Consumption by an additional individual will significantly reduce the benefits derived by others from a public good. 
D)  Individuals who refuse to pay for a public good cannot be excluded from benefiting from it.

Question 14

Which of the following defines a common resource?

Accepted Answer

A)  They are nonexcludable and nonrivalrous. 
B)  They are excludable and rivalrous. 
C)  They are excludable and nonrivalrous. 
D)  They are nonexcludable and rivalrous. 
A)  They are nonexcludable and nonrivalrous. 
B)  They are excludable and rivalrous. 
C)  They are excludable and nonrivalrous. 
D)  They are nonexcludable and rivalrous.

Question 15

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 $30, 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 16

Explain why broadcast television is considered a public good.

Accepted Answer

Broadcast television

Question 17

FIGURE 6-1
  
-Refer to Figure 6-1. What area identifies the producer surplus created when the market price equals P₂?

Accepted Answer

A)  area D 
B)  area B + E 
C)  area C + D+ F 
D)  area A + B + E 
A)  area D 
B)  area B + E 
C)  area C + D+ F 
D)  area A + B + E

Question 18

FIGURE 6-2
  
-Refer to Figure 6-2. If the all the costs of production are internalized, what will the equilibrium price and quantity be?

Accepted Answer

A)  P₁ and Q₀ 
B)  P₀ and Q₀ 
C)  P₂ and Q₁ 
D)  P₀ and Q₀. 
A)  P₁ and Q₀ 
B)  P₀ and Q₀ 
C)  P₂ and Q₁ 
D)  P₀ and Q₀.

Question 19

Marginal utility decreases as more and more of a good is consumed.

Accepted Answer

A) True 
 B)False

Question 20

What are the external costs associated with cellular phone usage in automobiles? What are the external benefits?

Accepted Answer

The external costs associated with cellu

What distinguishes public goods from private goods?

In order to reach consumer equilibrium, which of the following consumption choices must be made?

Consumer surplus increases whenever the price of a good increases due to a leftward shift of the supply curve.

Which of the following is an example of a positive externality?

Which of the following best describes goods where a free-rider problem exists?

Positive externalities lead to an underallocation of resources in that area relative to that which is socially desirable.

Admission to Disney World is an example of a private good from which nonpaying individuals can be excluded.

TABLE 6-1 Henry demands jazz CDs according to the following demand schedule: -Refer to Table 6-1. If the price of jazz CDs equals $20, what is the consumer surplus Henry receives from purchasing jazz CDs?

When city beautification programs are funded privately, which of the following is likely to result?

Consumer surplus increases whenever the price of a good decreases due to a rightward shift of the supply curve.

Consider two goods-one that generates external benefits and another that generates external costs. What would a competitive market economy tend to produce?

What do economists use the term externalities to refer to?

Which of the following best describes what occurs when a good is nonrivalrous in consumption?

Which of the following defines a common resource?

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 $30, what is the total consumer surplus for the community equal to?

Explain why broadcast television is considered a public good.

FIGURE 6-1 -Refer to Figure 6-1. What area identifies the producer surplus created when the market price equals P₂?

FIGURE 6-2 -Refer to Figure 6-2. If the all the costs of production are internalized, what will the equilibrium price and quantity be?

Marginal utility decreases as more and more of a good is consumed.

What are the external costs associated with cellular phone usage in automobiles? What are the external benefits?

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 distinguishes public goods from private goods?

In order to reach consumer equilibrium, which of the following consumption choices must be made?

Consumer surplus increases whenever the price of a good increases due to a leftward shift of the supply curve.

Which of the following is an example of a positive externality?

Which of the following best describes goods where a free-rider problem exists?

Positive externalities lead to an underallocation of resources in that area relative to that which is socially desirable.

Admission to Disney World is an example of a private good from which nonpaying individuals can be excluded.

TABLE 6-1 Henry demands jazz CDs according to the following demand schedule: -Refer to Table 6-1. If the price of jazz CDs equals $20, what is the consumer surplus Henry receives from purchasing jazz CDs?

When city beautification programs are funded privately, which of the following is likely to result?

Consumer surplus increases whenever the price of a good decreases due to a rightward shift of the supply curve.

Consider two goods-one that generates external benefits and another that generates external costs. What would a competitive market economy tend to produce?

What do economists use the term externalities to refer to?

Which of the following best describes what occurs when a good is nonrivalrous in consumption?

Which of the following defines a common resource?

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 $30, what is the total consumer surplus for the community equal to?

Explain why broadcast television is considered a public good.

FIGURE 6-1 -Refer to Figure 6-1. What area identifies the producer surplus created when the market price equals P₂?

FIGURE 6-2 -Refer to Figure 6-2. If the all the costs of production are internalized, what will the equilibrium price and quantity be?

Marginal utility decreases as more and more of a good is consumed.

What are the external costs associated with cellular phone usage in automobiles? What are the external benefits?

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