Question 1

Laws that are used to prevent firms from colluding and setting high prices are called

Accepted Answer

A) anti-trust laws. 
B) price ceiling laws. 
C) anti-cartel laws. 
D) anti-competition policies. 
A) anti-trust laws. 
B) price ceiling laws. 
C) anti-cartel laws. 
D) anti-competition policies.

Question 2

Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al

Accepted Answer

A) will achieve the socially optimal quantity of trash. 
B) will result in zero trash being dumped in the park. 
C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly. 
D) is unfair. 
A) will achieve the socially optimal quantity of trash. 
B) will result in zero trash being dumped in the park. 
C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly. 
D) is unfair.

Question 3

Market failures ________ and generate ________.

Accepted Answer

A) compel the government to act; regulations 
B) create monopolies or oligopolies; deadweight loss 
C) reduce economic efficiency; deadweight loss 
D) create deadweight loss; externalities 
A) compel the government to act; regulations 
B) create monopolies or oligopolies; deadweight loss 
C) reduce economic efficiency; deadweight loss 
D) create deadweight loss; externalities

Question 4

Which of the following goods has the property of rivalry?

Accepted Answer

A) national defense 
B) a highway 
C) air to breathe 
D) a digital music file 
A) national defense 
B) a highway 
C) air to breathe 
D) a digital music file

Question 5

A main rationale for government intervention in markets ________ and ________.

Accepted Answer

A) is to reduce producer surplus; redistribute wealth 
B) concerns the creation of public goods; reduces free-riding 
C) is to correct market failures; increase surplus 
D) There is never an economic rationale for government intervention. 
A) is to reduce producer surplus; redistribute wealth 
B) concerns the creation of public goods; reduces free-riding 
C) is to correct market failures; increase surplus 
D) There is never an economic rationale for government intervention.

Question 6

A cable company can add a subscriber for ________ and a market failure occurs because the price charged ________.

Accepted Answer

A) nearly zero marginal cost; exceeds marginal cost 
B) less than average cost; reduces consumer surplus 
C) nearly zero marginal cost; is extortionist 
D) average variable cost; increases producer surplus 
A) nearly zero marginal cost; exceeds marginal cost 
B) less than average cost; reduces consumer surplus 
C) nearly zero marginal cost; is extortionist 
D) average variable cost; increases producer surplus

Question 7

Regulation

Accepted Answer

A) always increases consumer surplus. 
B) passes the cost-benefit test. 
C) solves market failures of all size. 
D) None of the above. 
A) always increases consumer surplus. 
B) passes the cost-benefit test. 
C) solves market failures of all size. 
D) None of the above.

Question 8

Markets tend to produce too little of an excludable public good because

Accepted Answer

A) transaction costs are high. 
B) of the lack of rivalry. 
C) these goods are depletable. 
D) All of the above. 
A) transaction costs are high. 
B) of the lack of rivalry. 
C) these goods are depletable. 
D) All of the above.

Question 9

Cartels persist despite laws against them because

Accepted Answer

A) international cartels are legal. 
B) firms believe they can avoid detection and the penalties are small anyway. 
C) firms can coordinate without explicitly colluding. 
D) All of the above. 
A) international cartels are legal. 
B) firms believe they can avoid detection and the penalties are small anyway. 
C) firms can coordinate without explicitly colluding. 
D) All of the above.

Question 10

If a change is a Pareto improvement, then

Accepted Answer

A) we also achieve Pareto efficiency. 
B) consumer surplus is maximized. 
C) it also passes the cost-benefit test. 
D) the distributional effect is likely to be regressive. 
A) we also achieve Pareto efficiency. 
B) consumer surplus is maximized. 
C) it also passes the cost-benefit test. 
D) the distributional effect is likely to be regressive.

Question 11

A public good in which exclusion is possible is called

Accepted Answer

A) an exclusive good. 
B) a common good. 
C) an impure good. 
D) a club good. 
A) an exclusive good. 
B) a common good. 
C) an impure good. 
D) a club good.

Question 12

Cartels persist despite laws against them because

Accepted Answer

A) international cartels are legal. 
B) it is impossible to convict firms. 
C) of the Prisoners' Dilemma issue. 
D) All of the above. 
A) international cartels are legal. 
B) it is impossible to convict firms. 
C) of the Prisoners' Dilemma issue. 
D) All of the above.

Question 13

If children go to school and become productive members of society

Accepted Answer

A) a negative externality is created by the schools. 
B) a positive externality is created by the schools. 
C) no externality is created by the schools. 
D) an externality is created that may be positive or negative. 
A) a negative externality is created by the schools. 
B) a positive externality is created by the schools. 
C) no externality is created by the schools. 
D) an externality is created that may be positive or negative.

Question 14

Which of the following statements about private and social costs associated with a negative externality is TRUE?

Accepted Answer

A) Social costs include externalities. 
B) Private cost do not include externalities. 
C) Social costs are never smaller than private costs. 
D) All of the above. 
A) Social costs include externalities. 
B) Private cost do not include externalities. 
C) Social costs are never smaller than private costs. 
D) All of the above.

Question 15

Which of the following is likely protected by copyright?

Accepted Answer

A) Your recipe for chocolate cake 
B) Your autobiography 
C) The color scheme for your house 
D) The names of your children 
A) Your recipe for chocolate cake 
B) Your autobiography 
C) The color scheme for your house 
D) The names of your children

Question 16

Mergers may result in

Accepted Answer

A) anticompetitive behavior. 
B) more efficient production. 
C) fewer firms in a market. 
D) All of the above. 
A) anticompetitive behavior. 
B) more efficient production. 
C) fewer firms in a market. 
D) All of the above.

Question 17

When discussing rules that governments use to intervene in a market, we can take a ________ approach where we discuss what governments should do, or a ________ approach where we discuss what governments actually do.

Accepted Answer

A) normative; positive 
B) positive; normative 
C) optimistic; cynical 
D) bipartisan; normative 
A) normative; positive 
B) positive; normative 
C) optimistic; cynical 
D) bipartisan; normative

Question 18

Students who talk loudly with each other in class

Accepted Answer

A) create an externality because other students cannot follow the lecture as well. 
B) disturb nobody. 
C) benefit the other students in class because they engage in conversation. 
D) only create an externality if they talk about something unrelated to class. 
A) create an externality because other students cannot follow the lecture as well. 
B) disturb nobody. 
C) benefit the other students in class because they engage in conversation. 
D) only create an externality if they talk about something unrelated to class.

Question 19

What is one problem with trying to regulate a monopoly's price?

Accepted Answer

A) The government needs information on the monopoly's marginal cost. 
B) The government needs information on the maximum quantity the monopoly can supply. 
C) The government needs to identify which firm is a monopolist. 
D) Anything that the government does is problematic. 
A) The government needs information on the monopoly's marginal cost. 
B) The government needs information on the maximum quantity the monopoly can supply. 
C) The government needs to identify which firm is a monopolist. 
D) Anything that the government does is problematic.

Question 20

A firm's private costs

Accepted Answer

A) include only its direct costs. 
B) is the private profit minus the producer surplus. 
C) include both direct and indirect costs. 
D) exclude the taxes on any externalities generated. 
A) include only its direct costs. 
B) is the private profit minus the producer surplus. 
C) include both direct and indirect costs. 
D) exclude the taxes on any externalities generated.

Laws that are used to prevent firms from colluding and setting high prices are called

Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al

Market failures and generate .

Which of the following goods has the property of rivalry?

A main rationale for government intervention in markets and .

A cable company can add a subscriber for and a market failure occurs because the price charged .

Regulation

Markets tend to produce too little of an excludable public good because

Cartels persist despite laws against them because

If a change is a Pareto improvement, then

A public good in which exclusion is possible is called

Cartels persist despite laws against them because

If children go to school and become productive members of society

Which of the following statements about private and social costs associated with a negative externality is TRUE?

Which of the following is likely protected by copyright?

Mergers may result in

When discussing rules that governments use to intervene in a market, we can take a approach where we discuss what governments should do, or a approach where we discuss what governments actually do.

Students who talk loudly with each other in class

What is one problem with trying to regulate a monopoly's price?

A firm's private costs

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Global Business

Filters

Exam 16: Government and Business

Laws that are used to prevent firms from colluding and setting high prices are called

Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al

Market failures ________ and generate ________.

Which of the following goods has the property of rivalry?

A main rationale for government intervention in markets ________ and ________.

A cable company can add a subscriber for ________ and a market failure occurs because the price charged ________.

Regulation

Markets tend to produce too little of an excludable public good because

Cartels persist despite laws against them because

If a change is a Pareto improvement, then

A public good in which exclusion is possible is called

Cartels persist despite laws against them because

If children go to school and become productive members of society

Which of the following statements about private and social costs associated with a negative externality is TRUE?

Which of the following is likely protected by copyright?

Mergers may result in

When discussing rules that governments use to intervene in a market, we can take a ________ approach where we discuss what governments should do, or a ________ approach where we discuss what governments actually do.

Students who talk loudly with each other in class

What is one problem with trying to regulate a monopoly's price?

A firm's private costs

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Global Business

Filters

Market failures and generate .

A main rationale for government intervention in markets and .

A cable company can add a subscriber for and a market failure occurs because the price charged .

When discussing rules that governments use to intervene in a market, we can take a approach where we discuss what governments should do, or a approach where we discuss what governments actually do.