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

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Anne has just purchased a new house in a lovely neighborhood. Her neighbors are friendly and even brought her house-warming gifts. Anne, however, has a problem. Her neighbors have cats, and Anne hates cats. Even though the city has a law requiring all outdoor pets to be on a leash, her neighbors ignore it, and the cats roam all over Anne's property. How would an economist describe this situation? Is there anything Anne can do?

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Question 1

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An economist would say negative externalities are present if the neighbors' cats are imposing an external cost on Anne. She could report the lawbreakers to the police, and have Animal Control round up the cats, but this wouldn't be very neighborly. Her best bet might be to get together with her neighbors and negotiate a compromise. Since they are the only two parties to this problem, they have a good chance of working out a mutually acceptable agreement.

Figure 5-4 -Refer to Figure 5-4. The figure illustrates an industry that generates

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Question 2

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Which of the following are ways in which the private market provides consumers with valuable information to help them make better decisions?

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Question 3

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Which of the following is true?

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Question 4

When a good is nonexcludable,

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Question 5

When the free-rider problem exists,

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Question 6

Government provision of goods and services that cannot easily be provided through markets because it is difficult to establish a one-to-one link between payment and consumption of the good is referred to as the

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Question 7

Competitive markets generally give consumers and producers correct incentives when

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Question 8

When the consumption of a good generates an external benefit,

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Question 9

Which of the following best explains why making air travel completely safe is not efficient?

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Question 10

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?

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Question 11

Is education a public good? Focus on whether it meets the two criteria for being a public good.

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Question 12

It is difficult for the market process to provide public goods because

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Question 13

There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the

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Question 14

Use the figure below to answer the following question(s). Figure 5-2 -Figure 5-2 illustrates the market for a product that generates an external cost. S₁ is the private market supply curve, while S₂ is the supply curve including the external cost. Which of the following is true?

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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?

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Question 16

National defense is considered a public good because there appears to be no limits to the nonrivalry-in-consumption characteristic, and exclusion of nonpayers is impossible. Are there any other goods that so perfectly meet both public goods criteria?

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Question 17

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

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Question 18

Which of the following provides the best example of a public good?

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Question 19

Consider two goods--one that generates external benefits and another that generates external costs. A competitive market economy would tend to produce too

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Question 20

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

Figure 5-4 -Refer to Figure 5-4. The figure illustrates an industry that generates

Which of the following are ways in which the private market provides consumers with valuable information to help them make better decisions?

Which of the following is true?

When a good is nonexcludable,

When the free-rider problem exists,

Government provision of goods and services that cannot easily be provided through markets because it is difficult to establish a one-to-one link between payment and consumption of the good is referred to as the

Competitive markets generally give consumers and producers correct incentives when

When the consumption of a good generates an external benefit,

Which of the following best explains why making air travel completely safe is not efficient?

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?

Is education a public good? Focus on whether it meets the two criteria for being a public good.

It is difficult for the market process to provide public goods because

There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the

Use the figure below to answer the following question(s). Figure 5-2 -Figure 5-2 illustrates the market for a product that generates an external cost. S₁ is the private market supply curve, while S₂ is the supply curve including the external cost. Which of the following is true?

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?

National defense is considered a public good because there appears to be no limits to the nonrivalry-in-consumption characteristic, and exclusion of nonpayers is impossible. Are there any other goods that so perfectly meet both public goods criteria?

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

Which of the following provides the best example of a public good?

Consider two goods--one that generates external benefits and another that generates external costs. A competitive market economy would tend to produce too

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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