Exam 4: Market Failures: Public Goods and Externalities

The licensing and regulation of financial advisers is one way by which the government tries to deal with the problem of inadequate information that financial firms have about their customers.

One consequence of the asymmetric-information problem in the used car market, if left unresolved, is the higher probability of

If Congress decreases the amount of government insurance on bank deposits, then this action would

The market demand curve for a public good

Which of the following antipollution policies is least likely to make use of cost-benefit analysis?

Economists consider governments to be "wasteful"

A positive externality or spillover benefit occurs when

New Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism. The university is now considering several alternative levels of crime control. This table shows the expected total annual costs and benefits of these alternatives. Based on cost-benefit analysis, New Normal University should undertake Level

The moral hazard problem is the tendency of some parties to a contract to alter their behavior as a result of the contract in ways that are costly to the other party.

A market for pollution rights can be expected to

When a producer cannot get all consumers of their product to pay for enjoying it, such as in the case of a fireworks display, then we have a demand-side market failure.

Market failures

Upon learning that his auto transmission is about to fail, Ray Roma sells his car to an unsuspecting buyer. This circumstance illustrates the

A competitive market produces the economically efficient outcome if the following conditions are met, except

An example of an adverse selection problem is in insurance, where the people most likely to claim insurance payouts are the people who will seek to buy the most generous policies.

If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by

The marginal cost to society of reducing pollution rises with increases in pollution abatement because of the law of

Assume that a government is considering a new social program and may choose to include in this program one of four progressively larger projects. The marginal cost and the marginal benefits of each of the four projects are given in the table below. Which project should the government select to achieve the maximum net benefit?

In a market where negative externalities are associated with consumption and production, the equilibrium will not be efficient because