Question 1

Because the benefits derived from an activity decline as it is expanded,it is generally wise to

Accepted Answer

A) undertake all actions that generate benefits. 
B) expend the smallest possible amount of resources on this type of activity. 
C) avoid any activity with this characteristic. 
D) stop the activity before perfection is reached.. 
A) undertake all actions that generate benefits. 
B) expend the smallest possible amount of resources on this type of activity. 
C) avoid any activity with this characteristic. 
D) stop the activity before perfection is reached..

Question 2

When consumers cannot tell the difference at the time of sale between high-quality products and those with defects,strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market.Economists call this

Accepted Answer

A) the curse of advertising. 
B) the imperfect information problem. 
C) the brand name problem. 
D) an open-access resource. 
A) the curse of advertising. 
B) the imperfect information problem. 
C) the brand name problem. 
D) an open-access resource.

Question 3

As more and more resources are dedicated to an activity

Accepted Answer

A) the benefits will increase proportionately. 
B) the benefits will become smaller and smaller while the costs will rise. 
C) the demand for that activity will increase. 
D) the costs will be offset by the benefits received from the activity. 
A) the benefits will increase proportionately. 
B) the benefits will become smaller and smaller while the costs will rise. 
C) the demand for that activity will increase. 
D) the costs will be offset by the benefits received from the activity.

Question 4

Suppose paper pulp mills are permitted to emit harmful pollutants,free of charge,into the air.How will the price and output of paper in a competitive market compare with their values under conditions of ideal economic efficiency?

Accepted Answer

A) The price will be too high,and the output will be too large. 
B) The price will be too low,and the output will be too large. 
C) The price will be too low,and the output will be too small. 
D) The price will be too high,and the output will be too small. 
A) The price will be too high,and the output will be too large. 
B) The price will be too low,and the output will be too large. 
C) The price will be too low,and the output will be too small. 
D) The price will be too high,and the output will be too small.

Question 5

If an economic action generates more costs than benefits,the action

Accepted Answer

A) by definition increases the nation's economic welfare. 
B) should not be undertaken from an efficiency standpoint. 
C) should be subsidized by the government in order to make sure that it is undertaken. 
D) is desirable from a public welfare standpoint even though many individuals will be harmed. 
A) by definition increases the nation's economic welfare. 
B) should not be undertaken from an efficiency standpoint. 
C) should be subsidized by the government in order to make sure that it is undertaken. 
D) is desirable from a public welfare standpoint even though many individuals will be harmed.

Question 6

Does economic efficiency indicate that all pollution should be eliminated?

Accepted Answer

A) Yes,pollution is bad;it harms both people and the environment,and therefore,it should be eliminated. 
B) No,at some point,the benefits of still lower levels of pollution will not be worth the additional cost. 
C) No,pollution does not harm most people,and therefore,we should not worry about it. 
D) Partially,pollution caused by business firms should be eliminated,but people should still be allowed to pollute if they want. 
A) Yes,pollution is bad;it harms both people and the environment,and therefore,it should be eliminated. 
B) No,at some point,the benefits of still lower levels of pollution will not be worth the additional cost. 
C) No,pollution does not harm most people,and therefore,we should not worry about it. 
D) Partially,pollution caused by business firms should be eliminated,but people should still be allowed to pollute if they want.

Question 7

Which of the following would be a protective function of government?

Accepted Answer

A) providing national defense 
B) undertaking income redistribution 
C) providing national parks 
D) monopolizing mail delivery 
A) providing national defense 
B) undertaking income redistribution 
C) providing national parks 
D) monopolizing mail delivery

Question 8

Which of the following is most consistent with the idea that if it's worth doing,it's worth doing imperfectly?

Accepted Answer

A) When Noelle cleaned her apartment,she didn't clean under the refrigerator. 
B) Nick is so disorganized that he spends 15 minutes every day trying to find his glasses. 
C) The senator stated,"No price is too high to save a life!" 
D) Ford's new policy is to make every car completely safe. 
A) When Noelle cleaned her apartment,she didn't clean under the refrigerator. 
B) Nick is so disorganized that he spends 15 minutes every day trying to find his glasses. 
C) The senator stated,"No price is too high to save a life!" 
D) Ford's new policy is to make every car completely safe.

Question 9

Is your economics textbook a public or private good? If you conclude that it is a private good,why do we have copyright laws?

Accepted Answer

To a student,the book seems close to a p

Question 10

A sound legal system that protects individuals and their property,

Accepted Answer

A) cannot be expected until markets are already working well. 
B) is vital to the smooth operation of markets. 
C) is normally found in most economies of the world. 
D) is helpful for the rich,but harmful to the economic well-being of others. 
A) cannot be expected until markets are already working well. 
B) is vital to the smooth operation of markets. 
C) is normally found in most economies of the world. 
D) is helpful for the rich,but harmful to the economic well-being of others.

Question 11

Compared to ideal economic efficiency,when the production of a good generates external benefits,competitive markets will likely result in an output that is too

Accepted Answer

A) large and a price that is too high. 
B) large and a price that is too low. 
C) small and a price that is too high. 
D) small and a price that is too low. 
A) large and a price that is too high. 
B) large and a price that is too low. 
C) small and a price that is too high. 
D) small and a price that is too low.

Question 12

When production of a good generates external costs,the

Accepted Answer

A) demand curve for the good will overstate the true social benefits from consumption of the good. 
B) demand curve for the good will understate the true social benefits from consumption of the good. 
C) supply curve for the good will overstate the true social cost of producing the good. 
D) supply curve for the good will understate the true social cost of producing the good. 
A) demand curve for the good will overstate the true social benefits from consumption of the good. 
B) demand curve for the good will understate the true social benefits from consumption of the good. 
C) supply curve for the good will overstate the true social cost of producing the good. 
D) supply curve for the good will understate the true social cost of producing the good.

Question 13

In a market that lacks sufficient competition,

Accepted Answer

A) output will generally be less than the output that is ideal from the standpoint of economic efficiency. 
B) output will generally be greater than the output that is ideal from the standpoint of economic efficiency. 
C) price will generally be less than the price that would result if the market was competitive. 
D) profit rates will generally be so low that government subsidies will be necessary to ensure that the firms remain in business. 
A) output will generally be less than the output that is ideal from the standpoint of economic efficiency. 
B) output will generally be greater than the output that is ideal from the standpoint of economic efficiency. 
C) price will generally be less than the price that would result if the market was competitive. 
D) profit rates will generally be so low that government subsidies will be necessary to ensure that the firms remain in business.

Question 14

When the consumption of a good generates an external benefit,

Accepted Answer

A) the private benefit consumers receive from the good will be higher than the true social benefit. 
B) too much of the good will tend to be produced from the viewpoint of economic efficiency. 
C) the community generally suffers an exactly offsetting external cost from the production of the good. 
D) the market demand curve will understate the total benefits derived from consumption of the good,and as a result,too little of it will be produced and consumed. 
A) the private benefit consumers receive from the good will be higher than the true social benefit. 
B) too much of the good will tend to be produced from the viewpoint of economic efficiency. 
C) the community generally suffers an exactly offsetting external cost from the production of the good. 
D) the market demand curve will understate the total benefits derived from consumption of the good,and as a result,too little of it will be produced and consumed.

Question 15

After spending $400,000 to build your dream home,you recently discovered that after less than one year the foundation is cracking.Further investigation reveals that the contractor used substandard concrete.Is there a role for the public sector in this situation?

Accepted Answer

There would certainly appear to be since

Question 16

Sparkle-Bright toothpaste is a new product that advertises it will give you fresh breath and shiny,white teeth.You buy a tube for $1.99,and after brushing,you have both bad breath and dull teeth.Is there a role for the public sector in this situation?

Accepted Answer

The market should be able to handle the

Question 17

Which of the following is the most fundamental function of government?

Accepted Answer

A) protection of individuals and their property 
B) imposing progressive taxes to fund income-transfer programs 
C) regulating prices and wages 
D) provision of postal services and garbage collection 
A) protection of individuals and their property 
B) imposing progressive taxes to fund income-transfer programs 
C) regulating prices and wages 
D) provision of postal services and garbage collection

Question 18

Sellers have a strong incentive to lobby government for legal restrictions that would reduce the intensity of competition in their market because

Accepted Answer

A) the firms wish to be more efficient than competition will permit. 
B) competition tends to result in lower prices and lower profits. 
C) legal restrictions that lessen competition in a market generally benefit consumers. 
D) the firms fear that intense competition will lead to higher profits that will attract additional rivals into the market. 
A) the firms wish to be more efficient than competition will permit. 
B) competition tends to result in lower prices and lower profits. 
C) legal restrictions that lessen competition in a market generally benefit consumers. 
D) the firms fear that intense competition will lead to higher profits that will attract additional rivals into the market.

Question 19

Use the figure below to answer the following question(s).
Figure 5-3
  
-Figure 5-3 illustrates the market for a product that generates an external benefit.D₁ is the private market demand curve,while D₂ is the demand curve including the external benefit.Which of the following is true?

Accepted Answer

A) Point a illustrates the competitive private market outcome,while point b illustrates the outcome consistent with economic efficiency. 
B) Point b illustrates the competitive private market outcome,while point a illustrates the outcome consistent with economic efficiency. 
C) The competitive private market outcome is consistent with the conditions for economic efficiency. 
D) The good will tend to be oversupplied relative to the conditions for economic efficiency. 
A) Point a illustrates the competitive private market outcome,while point b illustrates the outcome consistent with economic efficiency. 
B) Point b illustrates the competitive private market outcome,while point a illustrates the outcome consistent with economic efficiency. 
C) The competitive private market outcome is consistent with the conditions for economic efficiency. 
D) The good will tend to be oversupplied relative to the conditions for economic efficiency.

Question 20

People who receive the benefit of a good without contributing to its costs of production are called

Accepted Answer

A) contributors in kind. 
B) free riders. 
C) frequent flyers. 
D) cost maximizers. 
A) contributors in kind. 
B) free riders. 
C) frequent flyers. 
D) cost maximizers.

Exam 5: Difficult Cases for the Market and the Role of Government

Because the benefits derived from an activity decline as it is expanded,it is generally wise to

When consumers cannot tell the difference at the time of sale between high-quality products and those with defects,strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market.Economists call this

As more and more resources are dedicated to an activity

Suppose paper pulp mills are permitted to emit harmful pollutants,free of charge,into the air.How will the price and output of paper in a competitive market compare with their values under conditions of ideal economic efficiency?

If an economic action generates more costs than benefits,the action

Does economic efficiency indicate that all pollution should be eliminated?

Which of the following would be a protective function of government?

Which of the following is most consistent with the idea that if it's worth doing,it's worth doing imperfectly?

Is your economics textbook a public or private good? If you conclude that it is a private good,why do we have copyright laws?

A sound legal system that protects individuals and their property,

Compared to ideal economic efficiency,when the production of a good generates external benefits,competitive markets will likely result in an output that is too

When production of a good generates external costs,the

In a market that lacks sufficient competition,

When the consumption of a good generates an external benefit,

After spending $400,000 to build your dream home,you recently discovered that after less than one year the foundation is cracking.Further investigation reveals that the contractor used substandard concrete.Is there a role for the public sector in this situation?

Sparkle-Bright toothpaste is a new product that advertises it will give you fresh breath and shiny,white teeth.You buy a tube for $1.99,and after brushing,you have both bad breath and dull teeth.Is there a role for the public sector in this situation?

Which of the following is the most fundamental function of government?

Sellers have a strong incentive to lobby government for legal restrictions that would reduce the intensity of competition in their market because

Use the figure below to answer the following question(s). Figure 5-3 -Figure 5-3 illustrates the market for a product that generates an external benefit.D₁ is the private market demand curve,while D₂ is the demand curve including the external benefit.Which of the following is true?

People who receive the benefit of a good without contributing to its costs of production are called

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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