Question 1

Benefits granted to powerful special interest groups in return for political support are known as rents.

Accepted Answer

A) True 
 B)False

Question 2

When the government tries to control pollution through cap and trade,it _____.

Accepted Answer

A) issues permits that enables the owners of the permit to pollute. 
B) strictly mentions the amount of pollutants that can be emitted by a particular firm. 
C) levies tax on the polluting firm. 
D) gives subsidies to the firms who adopt clean production technologies. 
E) takes legal actions against the firms who pollute beyond the specified level. 
A) issues permits that enables the owners of the permit to pollute. 
B) strictly mentions the amount of pollutants that can be emitted by a particular firm. 
C) levies tax on the polluting firm. 
D) gives subsidies to the firms who adopt clean production technologies. 
E) takes legal actions against the firms who pollute beyond the specified level.

Question 3

Economists like Joseph Stiglitz regard market as:

Accepted Answer

A) an effective mechanism of allocating resources. 
B) an invisible hand which often takes correct price-quantity decisions. 
C) an efficient way of maximizing social welfare. 
D) as an inefficient mechanism of resource allocation and emphasized on the positive role of the government. 
E) a much superior mechanism compared to central planning. 
A) an effective mechanism of allocating resources. 
B) an invisible hand which often takes correct price-quantity decisions. 
C) an efficient way of maximizing social welfare. 
D) as an inefficient mechanism of resource allocation and emphasized on the positive role of the government. 
E) a much superior mechanism compared to central planning.

Question 4

Suppose the American Medical Association has been able to persuade the Congress to pass a no-fault insurance law protecting doctors from malpractice suits.The reduction in costs to doctors is a rent.

Accepted Answer

A) True 
 B)False

Question 5

Production becomes more efficient if a common property is turned into a private property.

Accepted Answer

A) True 
 B)False

Question 6

When each additional resource adds increasing amounts of additional output,it refers to a situation of:

Accepted Answer

A) constant returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) diminishing returns. 
E) increasing returns. 
A) constant returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) diminishing returns. 
E) increasing returns.

Question 7

Wikipedia and other projects utilizing wiki technology,represent an example of:

Accepted Answer

A) cap and trade. 
B) voluntary contributions. 
C) transaction cost. 
D) market failure. 
E) path dependence. 
A) cap and trade. 
B) voluntary contributions. 
C) transaction cost. 
D) market failure. 
E) path dependence.

Question 8

Private costs exceed social cost when external benefits are created.

Accepted Answer

A) True 
 B)False

Question 9

The European Union Emission Trading Scheme is an example of:

Accepted Answer

A) a pollution tax. 
B) a pollution subsidy. 
C) a command approach. 
D) cap and trade. 
E) a direct government control on private firms. 
A) a pollution tax. 
B) a pollution subsidy. 
C) a command approach. 
D) cap and trade. 
E) a direct government control on private firms.

Question 10

Problems of moral hazard and adverse selection occur most frequently when excessive information exists in markets.

Accepted Answer

A) True 
 B)False

Question 11

The Austrian school of economists stressed on the efficiency of the markets on the pretext that:

Accepted Answer

A) resources can be efficiently allocated through price system and free markets. 
B) governmental intervention was necessary for the efficient allocation of resources. 
C) the price charged under the free market system was always lower than under central planning. 
D) the market had never failed earlier. 
E) the market did not suffer from imperfect information. 
A) resources can be efficiently allocated through price system and free markets. 
B) governmental intervention was necessary for the efficient allocation of resources. 
C) the price charged under the free market system was always lower than under central planning. 
D) the market had never failed earlier. 
E) the market did not suffer from imperfect information.

Question 12

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
 
- Refer to Table 13.2.Suppose fish sells for $1 per pound.If each fisherman decides whether or not to fish based on the average catch,what is the profit that each fisherman earns?

Accepted Answer

A) $500 
B) $1,000 
C) $3,000 
D) $5,000 
E) 0 
A) $500 
B) $1,000 
C) $3,000 
D) $5,000 
E) 0

Question 13

The figure below shows the demand and supply curves in the market for elementary education. Figure 13.1
  In the figure,
D: Private demand curve for elementary education
D + s: Demand curve which includes public benefits
S: Supply curve of education
Price and Quantity have been taken on vertical and horizontal axes respectively.
-Figure 13.1 represents a situation of:

Accepted Answer

A) positive externalities. 
B) negative externalities. 
C) excess capacity. 
D) optimal provision of a public goods. 
E) comparative advantage. 
A) positive externalities. 
B) negative externalities. 
C) excess capacity. 
D) optimal provision of a public goods. 
E) comparative advantage.

Question 14

In the case of positive externalities,too many people consume and produce the good compared to what is desired by society.

Accepted Answer

A) True 
 B)False

Question 15

The figure given below shows the demand and supply curves of automobiles. Figure 13.3   In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax
-According to Figure 13.3,the market attains equilibrium before the tax at:

Accepted Answer

A) point d. 
B) point a. 
C) point b. 
D) point c. 
E) point e. 
A) point d. 
B) point a. 
C) point b. 
D) point c. 
E) point e.

Question 16

When there exists a negative externality in case of a particular good and that is not reflected in the price:

Accepted Answer

A) too little of that good is produced and consumed. 
B) too much of that good is produced and consumed. 
C) nothing of that is either produced or consumed. 
D) the government completely prohibits the production of such goods. 
E) the resources are allocated to their highest-valued activity. 
A) too little of that good is produced and consumed. 
B) too much of that good is produced and consumed. 
C) nothing of that is either produced or consumed. 
D) the government completely prohibits the production of such goods. 
E) the resources are allocated to their highest-valued activity.

Question 17

When the government imposes a tax on production of a commodity:

Accepted Answer

A) production will invariably increase. 
B) the cost of production increases,so the supply curve shifts to the left. 
C) the benefits of consumption increases,so the demand curve shifts to the right. 
D) there is no change in demand or supply. 
E) both the demand and supply curves shift to the right. 
A) production will invariably increase. 
B) the cost of production increases,so the supply curve shifts to the left. 
C) the benefits of consumption increases,so the demand curve shifts to the right. 
D) there is no change in demand or supply. 
E) both the demand and supply curves shift to the right.

Question 18

When a good is subsidized by the government,the amount of the good produced or consumed declines.

Accepted Answer

A) True 
 B)False

Question 19

Both the principles of rivalry and mutual excludability apply for club goods.

Accepted Answer

A) True 
 B)False

Question 20

When negative externalities exist in production:

Accepted Answer

A) the social supply curve lies to the left of the private supply curve. 
B) the social supply curve lies to the right of the private supply curve. 
C) the social supply curve is identical to the private supply curve. 
D) the private demand curve lies to the right of the social demand curve. 
E) the private demand curve lies to the left of the social demand curve. 
A) the social supply curve lies to the left of the private supply curve. 
B) the social supply curve lies to the right of the private supply curve. 
C) the social supply curve is identical to the private supply curve. 
D) the private demand curve lies to the right of the social demand curve. 
E) the private demand curve lies to the left of the social demand curve.

Benefits granted to powerful special interest groups in return for political support are known as rents.

When the government tries to control pollution through cap and trade,it _____.

Economists like Joseph Stiglitz regard market as:

Suppose the American Medical Association has been able to persuade the Congress to pass a no-fault insurance law protecting doctors from malpractice suits.The reduction in costs to doctors is a rent.

Production becomes more efficient if a common property is turned into a private property.

When each additional resource adds increasing amounts of additional output,it refers to a situation of:

Wikipedia and other projects utilizing wiki technology,represent an example of:

Private costs exceed social cost when external benefits are created.

The European Union Emission Trading Scheme is an example of:

Problems of moral hazard and adverse selection occur most frequently when excessive information exists in markets.

The Austrian school of economists stressed on the efficiency of the markets on the pretext that:

In the case of positive externalities,too many people consume and produce the good compared to what is desired by society.

The figure given below shows the demand and supply curves of automobiles. Figure 13.3 In the figure, D: Demand curve of automobiles S: Supply of automobiles prior to the tax S+t: Supply of automobiles after the tax -According to Figure 13.3,the market attains equilibrium before the tax at:

When there exists a negative externality in case of a particular good and that is not reflected in the price:

When the government imposes a tax on production of a commodity:

When a good is subsidized by the government,the amount of the good produced or consumed declines.

Both the principles of rivalry and mutual excludability apply for club goods.

When negative externalities exist in production:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

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

Benefits granted to powerful special interest groups in return for political support are known as rents.

When the government tries to control pollution through cap and trade,it _____.

Economists like Joseph Stiglitz regard market as:

Suppose the American Medical Association has been able to persuade the Congress to pass a no-fault insurance law protecting doctors from malpractice suits.The reduction in costs to doctors is a rent.

Production becomes more efficient if a common property is turned into a private property.

When each additional resource adds increasing amounts of additional output,it refers to a situation of:

Wikipedia and other projects utilizing wiki technology,represent an example of:

Private costs exceed social cost when external benefits are created.

The European Union Emission Trading Scheme is an example of:

Problems of moral hazard and adverse selection occur most frequently when excessive information exists in markets.

The Austrian school of economists stressed on the efficiency of the markets on the pretext that:

In the case of positive externalities,too many people consume and produce the good compared to what is desired by society.

The figure given below shows the demand and supply curves of automobiles. Figure 13.3 In the figure, D: Demand curve of automobiles S: Supply of automobiles prior to the tax S+t: Supply of automobiles after the tax -According to Figure 13.3,the market attains equilibrium before the tax at:

When there exists a negative externality in case of a particular good and that is not reflected in the price:

When the government imposes a tax on production of a commodity:

When a good is subsidized by the government,the amount of the good produced or consumed declines.

Both the principles of rivalry and mutual excludability apply for club goods.

When negative externalities exist in production:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters