Exam 16: Governments Role in Economic Efficiency

-Suppose that production of the product in Figure 14-2 imposes a cost on society of $7.00 per unit.If the free market equilibrium is at the intersection of demand curve D and supply curve S,what should the government do to internalize the externality?

Using anti-trust law to break up a monopoly

The Sherman Antitrust Act prohibits price fixing by competitors,monopolization of a market,and attempts to monopolize a market.

Higher education creates

If a good is excludable and nonrival,

A monopolist that price discriminates

A firm is said to have monopoly power

Private markets are most likely to produce goods that are

In a single-price monopoly market

Which of the following conditions is necessary in order for the private market to efficiently solve an externality problem?

If consumption of a good by one person imposes costs on a party other than the producer,

Economies with poorly defined property rights are often inefficient because

A subsidy equal to the marginal private benefit of a good can be used to make a market with a positive externality efficient.

Pollution is a form of market failure called a negative externality.

According to the Coase Theorem

If consumption of a good creates positive externalities,then

Contracts tend to increase the level of specialization in an economy.

Both positive externalities and negative externalities produce inefficiency.

Anti-trust law

If consumption of a good creates positive externalities,then