Exam 13: Market Failures, Government Failures, and Rent Seeking

The following table shows the costs and benefit of producing a commodity. Table 13.1 -In Table 13.1,what level of tax per unit would be appropriate to internalize the externality?

For which of the following goods will the free rider problem arise?

The free rider problem arises when a good is:

In the case of public goods:

One cause of market failure may be the absence of clearly defined property rights.

Which of the following statements is true?

Under a marketable permit system,if the government reduces the quantity of permits,the price of each permit will increase.

The following table shows the costs and benefit of producing a commodity. Table 13.1 - According to Table 13.1,at the free market equilibrium:

Suppose that the current price of a marketable permit to emit one ton of gunk is $60.For firm A,the marginal cost of reducing one ton of gunk is $50.For firm B,the marginal cost of reducing one ton of gunk is $70.Under a marketable permit system:

According to the Coase theorem,high transaction costs necessarily call for government action.

The cost borne by an individual user to switch to another network is less if the network which he is using is large.

The major problem with common ownership is that,too much of the commonly owned is consumed,and not enough is produced.

In order to reduce the possibility of adverse selection banks should raise their interest rates charged on the loans.

A pollution tax has the effect of reducing the costs of production for a firm,leading to a rightward shift of the supply curve.

Which of the following is true of a public good?

The government should subsidize the production of goods which generate a positive externality.

Why does an existing less efficient technology drive out a new more efficient technology?

One of the reasons that communism failed in the Soviet Union is that,under communism:

When economic activity imposes costs on others not directly involved in the transaction:

Which of the following is an example of government failure?