Question 1

-The above figure shows the market for steel ingots.An externality can be seen because

Accepted Answer

A)  the social marginal cost exceeds the private marginal cost. 
B)  the private marginal cost exceeds the social marginal cost. 
C)  the optimal quantity of steel is zero. 
D)  not enough steel gets produced by the competitive market. 
A)  the social marginal cost exceeds the private marginal cost. 
B)  the private marginal cost exceeds the social marginal cost. 
C)  the optimal quantity of steel is zero. 
D)  not enough steel gets produced by the competitive market.

Question 2

The socially optimal amount of pollution is

Accepted Answer

A)  zero. 
B)  greater than zero. 
C)  indeterminant. 
D)  unattainable. 
A)  zero. 
B)  greater than zero. 
C)  indeterminant. 
D)  unattainable.

Question 3

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 4

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 5

A firm charging prices below marginal cost is said to be engaged in

Accepted Answer

A)  price fixing. 
B)  predatory pricing. 
C)  a cartel. 
D)  irrational behavior. 
A)  price fixing. 
B)  predatory pricing. 
C)  a cartel. 
D)  irrational behavior.

Question 6

One way for the government to eliminate a negative externality is to

Accepted Answer

A)  charge an emissions fee. 
B)  set an emissions standard. 
C)  levy an effluent charge. 
D)  All of the above. 
A)  charge an emissions fee. 
B)  set an emissions standard. 
C)  levy an effluent charge. 
D)  All of the above.

Question 7

Regulatory capture is where

Accepted Answer

A)  governments take over monopolies through use of regulation. 
B)  firms impose barriers to entry on regulators. 
C)  regulators of an industry look out for the industry instead of society. 
D)  the government taxes the profits of monopolies such that all producer surplus goes to the government. 
A)  governments take over monopolies through use of regulation. 
B)  firms impose barriers to entry on regulators. 
C)  regulators of an industry look out for the industry instead of society. 
D)  the government taxes the profits of monopolies such that all producer surplus goes to the government.

Question 8

-The above figure shows the market for steel ingots.If the market is competitive,then the deadweight loss to society is

Accepted Answer

A)  a. 
B)  b. 
C)  c. 
D)  zero. 
A)  a. 
B)  b. 
C)  c. 
D)  zero.

Question 9

If a production process creates pollution,a competitive market produces excessive pollution because

Accepted Answer

A)  private marginal cost of pollution exceeds its social marginal cost. 
B)  social marginal cost of pollution exceeds its private marginal cost. 
C)  the marginal benefit of pollution to the firm is zero. 
D)  zero pollution is optimal. 
A)  private marginal cost of pollution exceeds its social marginal cost. 
B)  social marginal cost of pollution exceeds its private marginal cost. 
C)  the marginal benefit of pollution to the firm is zero. 
D)  zero pollution is optimal.

Question 10

If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because

Accepted Answer

A)  firms take all costs into consideration. 
B)  firms incur all costs of production but ignore some of them. 
C)  firms ignore the costs of production that they do not incur. 
D)  firms set price equal to social marginal cost. 
A)  firms take all costs into consideration. 
B)  firms incur all costs of production but ignore some of them. 
C)  firms ignore the costs of production that they do not incur. 
D)  firms set price equal to social marginal cost.

Question 11

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 12

An example of an essential facility is

Accepted Answer

A)  the telephone line into your house. 
B)  U.S. Route 66. 
C)  the Golden Gate Bridge. 
D)  your local pizza parlor. 
A)  the telephone line into your house. 
B)  U.S. Route 66. 
C)  the Golden Gate Bridge. 
D)  your local pizza parlor.

Question 13

If a government policy change harms a monopolist,the government could

Accepted Answer

A)  tax those who get additional gains and compensate the monopolist, thereby making the change a Pareto improvement. 
B)  increase the general tax rate and compensate the monopolist, thereby making the change a Pareto improvement. 
C)  do nothing, because the change is a Pareto improvement. 
D)  It is not possible to mitigate the harm to a monopolist. 
A)  tax those who get additional gains and compensate the monopolist, thereby making the change a Pareto improvement. 
B)  increase the general tax rate and compensate the monopolist, thereby making the change a Pareto improvement. 
C)  do nothing, because the change is a Pareto improvement. 
D)  It is not possible to mitigate the harm to a monopolist.

Question 14

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 15

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

Accepted Answer

A)  private good. 
B)  public good. 
C)  Giffen Good. 
D)  Coase Good. 
A)  private good. 
B)  public good. 
C)  Giffen Good. 
D)  Coase Good.

Question 16

If Pareto efficiency has been achieved

Accepted Answer

A)  there are no additional Pareto improvements that can be made. 
B)  surplus is maximized. 
C)  economic efficiency is also achieved. 
D)  All of the above. 
A)  there are no additional Pareto improvements that can be made. 
B)  surplus is maximized. 
C)  economic efficiency is also achieved. 
D)  All of the above.

Question 17

Which of the following is NOT a club good?

Accepted Answer

A)  cable television 
B)  a rock concert 
C)  a country club 
D)  a baseball bat 
A)  cable television 
B)  a rock concert 
C)  a country club 
D)  a baseball bat

Question 18

If all Pareto improvements have been made

Accepted Answer

A)  the result is increased government regulations. 
B)  the outcome is Pareto efficient. 
C)  consumer surplus is maximized. 
D)  monopolists are unhappy. 
A)  the result is increased government regulations. 
B)  the outcome is Pareto efficient. 
C)  consumer surplus is maximized. 
D)  monopolists are unhappy.

Question 19

Reparations for slavery in the United States would

Accepted Answer

A)  be consistent with the Pareto principle. 
B)  be inconsistent with the Pareto principle. 
C)  have nothing to do with the Pareto principle. 
D)  would be unconstitutional. 
A)  be consistent with the Pareto principle. 
B)  be inconsistent with the Pareto principle. 
C)  have nothing to do with the Pareto principle. 
D)  would be unconstitutional.

Question 20

An externality

Accepted Answer

A)  is always either a negative or positive externality. 
B)  could be either a negative or positive externality. 
C)  can be a negative externality for one group of people and a positive externality for another. 
D)  create market failures only when they are negative. 
A)  is always either a negative or positive externality. 
B)  could be either a negative or positive externality. 
C)  can be a negative externality for one group of people and a positive externality for another. 
D)  create market failures only when they are negative.

-The above figure shows the market for steel ingots.An externality can be seen because

The socially optimal amount of pollution is

Which of the following is likely protected by copyright?

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

A firm charging prices below marginal cost is said to be engaged in

One way for the government to eliminate a negative externality is to

Regulatory capture is where

-The above figure shows the market for steel ingots.If the market is competitive,then the deadweight loss to society is

If a production process creates pollution,a competitive market produces excessive pollution because

If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because

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

An example of an essential facility is

If a government policy change harms a monopolist,the government could

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

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

If Pareto efficiency has been achieved

Which of the following is NOT a club good?

If all Pareto improvements have been made

Reparations for slavery in the United States would

An externality

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

-The above figure shows the market for steel ingots.An externality can be seen because

The socially optimal amount of pollution is

Which of the following is likely protected by copyright?

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

A firm charging prices below marginal cost is said to be engaged in

One way for the government to eliminate a negative externality is to

Regulatory capture is where

-The above figure shows the market for steel ingots.If the market is competitive,then the deadweight loss to society is

If a production process creates pollution,a competitive market produces excessive pollution because

If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because

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

An example of an essential facility is

If a government policy change harms a monopolist,the government could

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

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

If Pareto efficiency has been achieved

Which of the following is NOT a club good?

If all Pareto improvements have been made

Reparations for slavery in the United States would

An externality

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

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