Exam 4: Market Failures: Public Goods and Externalities

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8,respectively,for the third unit of a public good.Also,assume that the marginal cost of the third unit is $17.We can conclude that:

Graphically,producer surplus is measured as the area:

Demand-side market failures occur when:

Supply-side market failures occur when:

At the output level defining allocative efficiency:

At the output where the combined amounts of consumer and producer surplus are largest:

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Along a demand curve,product price and consumer surplus are inversely related.

Along a supply curve,product price and producer surplus are inversely related.

Allocative efficiency occurs where the collective sum of consumer and producer surplus is at a maximum.

Graphically,if the supply and demand curves are linear,consumer surplus is measured as the triangle:

(Last Word)A cap-and-trade program:

What two conditions must hold for a competitive market to produce efficient outcomes?

If one person's consumption of a good does not preclude another's consumption,the good is said to be:

Supply-side market failures occur because it is impossible in certain cases for sellers to charge consumers what they are willing to pay for a product.

As it applies to insurance,the moral hazard problem is the tendency for:

People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay.Because those who put up lights are unable to charge others to view them,they don't put up as many lights as people would like.This is an example of a:

If a good that generates positive externalities were produced and priced to take into account these spillover benefits,then its:

That government that has the smallest budget is the most efficient in the economic sense.

Answer the question on the basis of the following information for four highway programs of increasing scope.All figures are in millions of dollars. A B C D \ 2 6 12 20 \ 9 16 21 23 On the basis of the data we can say that: