Question 1

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 2

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

Accepted Answer

A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above. 
A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above.

Question 3

In a competitive market,a negative externality creates a deadweight loss because

Accepted Answer

A)  the cost of the externality is double counted. 
B)  a harm is generated. 
C)  price equals social marginal cost. 
D)  price equals private marginal cost. 
A)  the cost of the externality is double counted. 
B)  a harm is generated. 
C)  price equals social marginal cost. 
D)  price equals private marginal cost.

Question 4

A firm's private costs

Accepted Answer

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

Question 5

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 6

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

Accepted Answer

A)  marginal benefit to the median voter. 
B)  marginal benefit to each individual. 
C)  sum of all individual marginal benefits. 
D)  sum of all individual marginal benefits divided by the number of voters. 
A)  marginal benefit to the median voter. 
B)  marginal benefit to each individual. 
C)  sum of all individual marginal benefits. 
D)  sum of all individual marginal benefits divided by the number of voters.

Question 7

If a government policy increases benefits to the unemployed without having a detrimental effect on any other constituent,the policy is

Accepted Answer

A)  a Pareto improvement. 
B)  redistributive. 
C)  regressive. 
D)  a positive externality effect. 
A)  a Pareto improvement. 
B)  redistributive. 
C)  regressive. 
D)  a positive externality effect.

Question 8

According to the cost-benefit principle

Accepted Answer

A)  if a change generates $50,000 in gains and $45,000 in losses, it is desirable. 
B)  if a change generates $50,000 in gains and $45,000 in losses, the gain is not large enough to justify the change. 
C)  if a change generates $50,000 in gains and $45,000 in losses, the desirability depends on who gains and who loses. 
D)  if a change generates $50,000 in gains and $45,000 in losses, it is a Pareto improvement. 
A)  if a change generates $50,000 in gains and $45,000 in losses, it is desirable. 
B)  if a change generates $50,000 in gains and $45,000 in losses, the gain is not large enough to justify the change. 
C)  if a change generates $50,000 in gains and $45,000 in losses, the desirability depends on who gains and who loses. 
D)  if a change generates $50,000 in gains and $45,000 in losses, it is a Pareto improvement.

Question 9

Which of the following is NOT a common property?

Accepted Answer

A)  a city park 
B)  a main street 
C)  a public beach 
D)  a movie screening 
A)  a city park 
B)  a main street 
C)  a public beach 
D)  a movie screening

Question 10

If a monopolist's production process has economies of scale and average cost exceeds marginal cost,then

Accepted Answer

A)  the government should set price equal to marginal cost. 
B)  if the government sets price equal to marginal cost, the monopoly will go out of business. 
C)  if the government sets price equal to average cost, the monopoly will go out of business. 
D)  the government cannot regulate price. 
A)  the government should set price equal to marginal cost. 
B)  if the government sets price equal to marginal cost, the monopoly will go out of business. 
C)  if the government sets price equal to average cost, the monopoly will go out of business. 
D)  the government cannot regulate price.

Question 11

The price of pie increases.Some people who purchased pie before the price increase no longer purchase pie.This is

Accepted Answer

A)  a positive externality. 
B)  a negative externality. 
C)  a positive externality for some consumers and a negative externality for others. 
D)  not an externality. 
A)  a positive externality. 
B)  a negative externality. 
C)  a positive externality for some consumers and a negative externality for others. 
D)  not an externality.

Question 12

The argument that society should be in favor of changes that benefit some people without making others worse off is known as

Accepted Answer

A)  a positive externality. 
B)  the Coase Theorem. 
C)  the cost-benefit principle. 
D)  the Pareto principle. 
A)  a positive externality. 
B)  the Coase Theorem. 
C)  the cost-benefit principle. 
D)  the Pareto principle.

Question 13

In the case of a good that has no exclusion and no rivalry,private markets fail because

Accepted Answer

A)  of free-ridership. 
B)  this is a natural monopoly. 
C)  profit is driven down to zero. 
D)  the quantity produced will exceed the social optimum. 
A)  of free-ridership. 
B)  this is a natural monopoly. 
C)  profit is driven down to zero. 
D)  the quantity produced will exceed the social optimum.

Question 14

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 15

One way to avoid the free rider problem is

Accepted Answer

A)  through mandates. 
B)  for the government to provide the good or service. 
C)  to use social pressure. 
D)  All of the above. 
A)  through mandates. 
B)  for the government to provide the good or service. 
C)  to use social pressure. 
D)  All of the above.

Question 16

A common resource is best described as a resource where

Accepted Answer

A)  there is a positive externality in consumption. 
B)  there is a negative externality in consumption. 
C)  there is a positive externality in production. 
D)  there is a negative externality in production. 
A)  there is a positive externality in consumption. 
B)  there is a negative externality in consumption. 
C)  there is a positive externality in production. 
D)  there is a negative externality in production.

Question 17

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

Accepted Answer

A)  the socially optimal quantity of steel is zero. 
B)  the socially optimal quantity of steel of 50 units is produced. 
C)  the socially optimal quantity of steel of 100 units is produced. 
D)  more than the socially optimal quantity of 50 units of steel is produced. 
A)  the socially optimal quantity of steel is zero. 
B)  the socially optimal quantity of steel of 50 units is produced. 
C)  the socially optimal quantity of steel of 100 units is produced. 
D)  more than the socially optimal quantity of 50 units of steel is produced.

Question 18

In the presence of no externalities

Accepted Answer

A)  social marginal cost exceeds private marginal cost. 
B)  social marginal cost is less than private marginal cost. 
C)  social marginal cost equals private marginal cost. 
D)  social marginal cost and private marginal cost cannot be compared. 
A)  social marginal cost exceeds private marginal cost. 
B)  social marginal cost is less than private marginal cost. 
C)  social marginal cost equals private marginal cost. 
D)  social marginal cost and private marginal cost cannot be compared.

Question 19

An exclusive deal is

Accepted Answer

A)  always illegal. 
B)  welfare reducing. 
C)  one where a firm will only sell to a customer if the customer agrees not to buy anything from the firm's rivals. 
D)  All of the above. 
A)  always illegal. 
B)  welfare reducing. 
C)  one where a firm will only sell to a customer if the customer agrees not to buy anything from the firm's rivals. 
D)  All of the above.

Question 20

Which of the following would be considered open-access common property?

Accepted Answer

A)  A library 
B)  The world wide web 
C)  A company gym 
D)  Broadcast television 
A)  A library 
B)  The world wide web 
C)  A company gym 
D)  Broadcast television

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

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

In a competitive market,a negative externality creates a deadweight loss because

A firm's private costs

A public good in which exclusion is possible is called

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

If a government policy increases benefits to the unemployed without having a detrimental effect on any other constituent,the policy is

According to the cost-benefit principle

Which of the following is NOT a common property?

If a monopolist's production process has economies of scale and average cost exceeds marginal cost,then

The price of pie increases.Some people who purchased pie before the price increase no longer purchase pie.This is

The argument that society should be in favor of changes that benefit some people without making others worse off is known as

In the case of a good that has no exclusion and no rivalry,private markets fail because

Market failures and generate .

One way to avoid the free rider problem is

A common resource is best described as a resource where

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

In the presence of no externalities

An exclusive deal is

Which of the following would be considered open-access common property?

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

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

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

In a competitive market,a negative externality creates a deadweight loss because

A firm's private costs

A public good in which exclusion is possible is called

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

If a government policy increases benefits to the unemployed without having a detrimental effect on any other constituent,the policy is

According to the cost-benefit principle

Which of the following is NOT a common property?

If a monopolist's production process has economies of scale and average cost exceeds marginal cost,then

The price of pie increases.Some people who purchased pie before the price increase no longer purchase pie.This is

The argument that society should be in favor of changes that benefit some people without making others worse off is known as

In the case of a good that has no exclusion and no rivalry,private markets fail because

Market failures ________ and generate ________.

One way to avoid the free rider problem is

A common resource is best described as a resource where

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

In the presence of no externalities

An exclusive deal is

Which of the following would be considered open-access common property?

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 .