Exam 6: Market Efficiency and Market Failure

FIGURE 6-3 -Refer to Figure 6-3. What area (bounded by letters) represents the associated efficiency loss resulting when there are external benefits associated with education?

What is the satisfaction that Sheldon gets from playing a new video game referred to as?

Which of the following goods is least likely to be provided by the private sector?

Under what circumstances will people or firms "internalize externalities"?

Leanne, a local taxpayer, and Crystal, a visitor from out of town, both attend a city-sponsored Canada Day fireworks display at Prospect Park. Which of the following best describes Crystal?

Total utility decreases as consumption increases.

Consumer surplus equals the quantity supplied minus the quantity demanded.

FIGURE 6-2 -Refer to Figure 6-2. Currently Q₀ of electrical power is being produced. The demand curve is represented by D, and the current market supply is represented by S₀. It is discovered that the Rocky Mountain Electrical Co-op and Power Company is discharging waste into the area water supply. As a result, S₁ represents the supply curve with external costs included. Which of the following price levels would represent the True internalized cost of production at that level of output (Q₀)?

If the world supply of diamonds decreases, diamonds become more valuable, and therefore, the consumer surplus derived from diamonds increases.

Joe's marginal utility from cake is 200 and his marginal utility from cookies is 100. Joe has a limited budget and spends all of it on these two goods. If the price of a cake is $5 and the price of a package of cookies is $5, what should Joe do to achieve consumer equilibrium?

How are public goods characterized?

If mining companies are able to shift some of their production costs onto outside parties, the actual output of mines is likely to fall short of society's ideal.

If Baxter is willing to pay $10 for a haircut and actually pays $10 for a haircut, his consumer surplus is $20.

What does the area between the market price and the supply curve provide a measure of?

Producer surplus from a unit of output is the difference between the market price and the seller's cost of producing that unit.

Which of the following statements describes the best way to internalize a positive externality?

What are external costs?

What results from a per-unit tax on output in a market?

When making a decision between purchasing two goods, what does a consumer compare in order to reach consumer equilibrium?

If there are significant external costs associated with the production of a product, it can be said that the private cost of production to the firm understates the cost to society associated with this product. In order to move towards efficiency, what should happen to output?