Exam 15: The Shortcomings of Free Markets

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

It was once common for people to have servants who helped with the cooking and cleaning. Use the cost disease of the personal services dilemma to explain why these services have declined, even though one would expect an increased use in this age of the two-worker household.

If the production of a good generates a detrimental externality, then at that level of production of the good under perfect competition,

Figure 15-1 Figure 15-1 describes conditions in the monopolized weezil industry. In the absence of government intervention, the monopolist will produce an output equal to

What rule must be followed to obtain an efficient allocation of resources?

Individuals cannot buy unemployment insurance for themselves. The most likely reason for this is

Which of the following is not an attempt to remedy and externality?

A main cause of the cost disease of personal services is

For most industrial nations, health-care costs have increased faster than the rate of inflation.

The cost of trash removal goes up, in part at least, because labor productivity in auto manufacturing goes up.

Society would be better off with more products that create beneficial externalities.

An increase in interest rates will generally lead to a(n)____ in present investment and a(n)____ in future income and production.

The most threatening and damaging detrimental externality at issue today is

A public good is

An unregulated market economy provides material wealth but does not generate effective control of environmental damage.

A process through which a firm seeks to obtain earnings without contributing to production, thus wasting valuable resources, is known as

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 a public good?

Which of the following additions to an insurance contract will not act to reduce moral hazard?

One of the reasons why firms pollute the air is that