Question 1

The free rider problem occurs when

Accepted Answer

A) individual gainers will not contribute the side payment needed for an efficient outcome 
B) those harmed will not contribute the side payment needed for an efficient outcome 
C) side payments are not necessary for an efficient outcome 
D) the marginal cost of arranging a side payment is zero 
E) the total cost of arranging a side payment is zero 
A) individual gainers will not contribute the side payment needed for an efficient outcome 
B) those harmed will not contribute the side payment needed for an efficient outcome 
C) side payments are not necessary for an efficient outcome 
D) the marginal cost of arranging a side payment is zero 
E) the total cost of arranging a side payment is zero

Question 2

Individuals in countries with __________ often spend considerable time trying to secure resources from others.

Accepted Answer

A) free riders 
B) no criminal law 
C) poorly defined property rights 
D) side payments 
E) Pareto efficiency 
A) free riders 
B) no criminal law 
C) poorly defined property rights 
D) side payments 
E) Pareto efficiency

Question 3

A pure public good is one that is

Accepted Answer

A) rival and excludable 
B) rival and nonexcludable 
C) nonrival but excludable 
D) nonrival and nonexcludable 
E) provided by a government agency 
A) rival and excludable 
B) rival and nonexcludable 
C) nonrival but excludable 
D) nonrival and nonexcludable 
E) provided by a government agency

Question 4

Property law

Accepted Answer

A) helps to ensure that only voluntary exchanges occur 
B) tends to decrease the level of economic efficiency 
C) helps define ownership rights to resources 
D) establishes property taxes 
E) helps to distribute government property 
A) helps to ensure that only voluntary exchanges occur 
B) tends to decrease the level of economic efficiency 
C) helps define ownership rights to resources 
D) establishes property taxes 
E) helps to distribute government property

Question 5

If a person who does not pay for a good can be prevented from consuming it,

Accepted Answer

A) that good is said to be excludable 
B) that good is said to be nonexcludable 
C) consumption of that good creates a positive externality 
D) production of that good creates a negative externality 
E) that good is called a pure public good 
A) that good is said to be excludable 
B) that good is said to be nonexcludable 
C) consumption of that good creates a positive externality 
D) production of that good creates a negative externality 
E) that good is called a pure public good

Question 6

Involuntary exchanges,such as robbery,

Accepted Answer

A) represent potential Pareto improvements 
B) are positive externalities 
C) are not Pareto improvements 
D) are antitrust violations 
E) may be Pareto improvements 
A) represent potential Pareto improvements 
B) are positive externalities 
C) are not Pareto improvements 
D) are antitrust violations 
E) may be Pareto improvements

Question 7

Monopoly is a prime example of a market failure that leaves potential Pareto improvements unexploited.This is demonstrated by the fact that

Accepted Answer

A) monopolies produce public goods rather than private goods 
B) monopolies substitute excludability for rivalry 
C) monopolies substitute rivalry for excludability 
D) the price in a monopolized market is less than the marginal cost of production 
E) the price in a monopolized market exceeds the marginal cost of production 
A) monopolies produce public goods rather than private goods 
B) monopolies substitute excludability for rivalry 
C) monopolies substitute rivalry for excludability 
D) the price in a monopolized market is less than the marginal cost of production 
E) the price in a monopolized market exceeds the marginal cost of production

Question 8

A pure private good is one

Accepted Answer

A) that is nonrival and nonexcludable 
B) that is rival but excludable 
C) that is rival and excludable 
D) that is nonrival but excludable 
E) one whose production imposes a cost on third parties 
A) that is nonrival and nonexcludable 
B) that is rival but excludable 
C) that is rival and excludable 
D) that is nonrival but excludable 
E) one whose production imposes a cost on third parties

Question 9

By making involuntary exchanges illegal,

Accepted Answer

A) criminal law eliminates such exchanges 
B) tort law contributes to economic efficiency 
C) criminal law channels energies into activities that benefit everyone 
D) criminal law reduces producer surplus while increasing consumer surplus 
E) antitrust law contributes to monopolization of markets 
A) criminal law eliminates such exchanges 
B) tort law contributes to economic efficiency 
C) criminal law channels energies into activities that benefit everyone 
D) criminal law reduces producer surplus while increasing consumer surplus 
E) antitrust law contributes to monopolization of markets

Question 10

If a monopoly arises as a natural monopoly

Accepted Answer

A) using anti-trust law to break it up is a poor remedy 
B) anti-trust law should be used to break it up 
C) that is most likely due to a patent or copyright 
D) it will evolve into a perfectly competitive market in the long run 
E) it should be encouraged,because it is "natural" 
A) using anti-trust law to break it up is a poor remedy 
B) anti-trust law should be used to break it up 
C) that is most likely due to a patent or copyright 
D) it will evolve into a perfectly competitive market in the long run 
E) it should be encouraged,because it is "natural"

Question 11

If an externality is created by a single person or firm,and affects only a single person or firm,then

Accepted Answer

A) it is referred to as a single externality 
B) the inefficiency caused by that externality may be resolved by those two parties 
C) the externality takes the form of a side payment 
D) Pareto efficiency is guaranteed 
E) fairness dictates that the externality be removed 
A) it is referred to as a single externality 
B) the inefficiency caused by that externality may be resolved by those two parties 
C) the externality takes the form of a side payment 
D) Pareto efficiency is guaranteed 
E) fairness dictates that the externality be removed

Question 12

When breaking up a natural monopoly is not advisable

Accepted Answer

A) it should be left alone 
B) government regulation should be used to set marginal revenue equal to marginal cost 
C) government regulation should be used to set price equal to marginal revenue 
D) government regulation should be used to set marginal cost equal to long-run average total cost. 
E) public ownership and operation may improve efficiency 
A) it should be left alone 
B) government regulation should be used to set marginal revenue equal to marginal cost 
C) government regulation should be used to set price equal to marginal revenue 
D) government regulation should be used to set marginal cost equal to long-run average total cost. 
E) public ownership and operation may improve efficiency

Question 13

A movie at the movie theater is an example of a good that is

Accepted Answer

A) both non-rival and non-excludable 
B) both rival and excludable 
C) rival but non-excludable 
D) non-rival but excludable 
E) rival but whose consumption creates negative externalities 
A) both non-rival and non-excludable 
B) both rival and excludable 
C) rival but non-excludable 
D) non-rival but excludable 
E) rival but whose consumption creates negative externalities

Question 14

Which of the following helps encourage specialization?

Accepted Answer

A) property law 
B) criminal law 
C) contract law 
D) tort law 
E) constitutional law 
A) property law 
B) criminal law 
C) contract law 
D) tort law 
E) constitutional law

Question 15

When a positive externality exists,the marginal social demand curve

Accepted Answer

A) is the same as the market supply curve 
B) is the same as the market demand curve 
C) lies below the market demand curve 
D) lies above the market demand curve 
E) lies below the market supply curve. 
A) is the same as the market supply curve 
B) is the same as the market demand curve 
C) lies below the market demand curve 
D) lies above the market demand curve 
E) lies below the market supply curve.

Question 16

Using average cost pricing,regulators of a natural monopoly

Accepted Answer

A) force the firm's economic profit to zero 
B) maximize the firm's economic profit 
C) achieve Pareto efficiency 
D) set price equal to cost where the LRATC curve crosses the demand curve 
E) set price equal to marginal cost where the MC curve crosses the demand curve 
A) force the firm's economic profit to zero 
B) maximize the firm's economic profit 
C) achieve Pareto efficiency 
D) set price equal to cost where the LRATC curve crosses the demand curve 
E) set price equal to marginal cost where the MC curve crosses the demand curve

Question 17

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

Accepted Answer

A) air pollution 
B) littering in a public park 
C) buying a new automobile 
D) planting a nice garden in front of your neighbor's house 
E) pollution of a stream 
A) air pollution 
B) littering in a public park 
C) buying a new automobile 
D) planting a nice garden in front of your neighbor's house 
E) pollution of a stream

Question 18

A market with a negative externality

Accepted Answer

A) will be regulated by the government 
B) is an example of a natural monopoly 
C) will be Pareto efficient,as long as bargaining costs are high enough 
D) will produce less than the efficient quantity,thereby creating a welfare loss 
E) will produce more than the efficient quantity,thereby creating a welfare loss 
A) will be regulated by the government 
B) is an example of a natural monopoly 
C) will be Pareto efficient,as long as bargaining costs are high enough 
D) will produce less than the efficient quantity,thereby creating a welfare loss 
E) will produce more than the efficient quantity,thereby creating a welfare loss

Question 19

Because there are positive externalities from higher education,

Accepted Answer

A) the private market would provide too little of it 
B) the private market would provide too much of it 
C) the government should impose a tax on college students 
D) the government should impose a tax on students' families 
E) higher education should not be produced 
A) the private market would provide too little of it 
B) the private market would provide too much of it 
C) the government should impose a tax on college students 
D) the government should impose a tax on students' families 
E) higher education should not be produced

Question 20

An economic function of criminal law is to

Accepted Answer

A) reduce opportunities for Pareto improvements 
B) reduce the number of involuntary exchanges 
C) define property rights 
D) increase prices in the economy 
E) protect involuntary exchanges in the economy 
A) reduce opportunities for Pareto improvements 
B) reduce the number of involuntary exchanges 
C) define property rights 
D) increase prices in the economy 
E) protect involuntary exchanges in the economy

The free rider problem occurs when

Individuals in countries with __________ often spend considerable time trying to secure resources from others.

A pure public good is one that is

Property law

If a person who does not pay for a good can be prevented from consuming it,

Involuntary exchanges,such as robbery,

Monopoly is a prime example of a market failure that leaves potential Pareto improvements unexploited.This is demonstrated by the fact that

A pure private good is one

By making involuntary exchanges illegal,

If a monopoly arises as a natural monopoly

If an externality is created by a single person or firm,and affects only a single person or firm,then

When breaking up a natural monopoly is not advisable

A movie at the movie theater is an example of a good that is

Which of the following helps encourage specialization?

When a positive externality exists,the marginal social demand curve

Using average cost pricing,regulators of a natural monopoly

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

A market with a negative externality

Because there are positive externalities from higher education,

An economic function of criminal law is to

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Comparative Advantage and the Gains From International Trade

Filters

Exam 16: Governments Role in Economic Efficiency

The free rider problem occurs when

Individuals in countries with __________ often spend considerable time trying to secure resources from others.

A pure public good is one that is

Property law

If a person who does not pay for a good can be prevented from consuming it,

Involuntary exchanges,such as robbery,

Monopoly is a prime example of a market failure that leaves potential Pareto improvements unexploited.This is demonstrated by the fact that

A pure private good is one

By making involuntary exchanges illegal,

If a monopoly arises as a natural monopoly

If an externality is created by a single person or firm,and affects only a single person or firm,then

When breaking up a natural monopoly is not advisable

A movie at the movie theater is an example of a good that is

Which of the following helps encourage specialization?

When a positive externality exists,the marginal social demand curve

Using average cost pricing,regulators of a natural monopoly

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

A market with a negative externality

Because there are positive externalities from higher education,

An economic function of criminal law is to

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Comparative Advantage and the Gains From International Trade

Filters