Exam 4: Markets in Action

An externality is:

From the standpoint of economic efficiency, competitive markets provide:

Albert and Betty hire Christine and David to play music at their wedding. Elizabeth, who lives behind the church, cannot study because of the loud music. The third party is:

Exhibit 4-2  Supply and demand curves In Exhibit 4-2, a decrease in quantity demanded would cause a movement from which equilibrium point to another, other things being equal?

For a public good, only one user can consume the good.

Sometimes the government deals with externalities by creating laws to regulate behavior instead of using taxes to correct the market failure. So, requiring auto manufacturers to install a device called a catalytic converter which removes some toxins from exhaust may be preferable to a gas tax that reduces driving levels. This route is often preferred because:

Collusive action among producers creates higher prices for consumers because it:

Exhibit 4-4  Supply and demand curves for good X Which of the graphs in Exhibit 4-4 represents a decrease in the price of a factor of production?

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

Much of the nation's coal is extracted by strip mining. This process leaves a huge barren hole in the ground when complete, and the cost of replanting the trees is approximately $10 per ton of coal. Burning the coal for electricity causes air pollution. No one knows how much damage the air pollution causes, but we know that for another $10 per ton the power plant can be outfitted with a pollution control device. What is one measure of the true social cost of coal fired electricity, in dollars per ton?

Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:

Which of the following would be a private cost to a cigarette manufacturer?

If the cost of fertilizer rises, then the price of corn will:

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:

Exhibit 4-2  Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₃. Changes in market conditions result in a new equilibrium at E₄. This change is stated as a(n):

An economic justification for government providing public goods and services is that many people can benefit regardless of whether they pay or not.

Which of the following is a public good?

A market consequence of the establishment of a price floor program is that price will be:

Assume no price ceiling exists and a market is in equilibrium. Then a price ceiling is established which is below the market equilibrium. What would result?