Question 1

Nonexcludability describes a condition where:

Accepted Answer

A)  one person's consumption of a good does not prevent consumption of the good by others. 
B)  there is no effective way to keep people from using a good once it comes into being. 
C)  sellers can withhold the benefits of a good from those unwilling to pay for it. 
D)  there is no potential for free-riding behavior. 
A)  one person's consumption of a good does not prevent consumption of the good by others. 
B)  there is no effective way to keep people from using a good once it comes into being. 
C)  sellers can withhold the benefits of a good from those unwilling to pay for it. 
D)  there is no potential for free-riding behavior.

Question 2

(Consider This)Suppose that a new band,"Balin and the Wolf Riders," tries to sell its music on the internet.Economists would expect:

Accepted Answer

A)  all of those enjoying the music to pay for downloads and compensate the band for its costs. 
B)  some of those enjoying the music to "free ride" through illegal file sharing and digital piracy. 
C)  government to tax those attempting to download the band's music. 
D)  there to be no consumer surplus for those who download the band's music. 
A)  all of those enjoying the music to pay for downloads and compensate the band for its costs. 
B)  some of those enjoying the music to "free ride" through illegal file sharing and digital piracy. 
C)  government to tax those attempting to download the band's music. 
D)  there to be no consumer surplus for those who download the band's music.

Question 3

Which of the following statements is not true?

Accepted Answer

A)  Some public goods are paid for by private philanthropy. 
B)  Private provision of public goods is usually unprofitable. 
C)  The free-rider problem results from the characteristics of nonrivalry and nonexcludability. 
D)  Public goods are only provided by government. 
A)  Some public goods are paid for by private philanthropy. 
B)  Private provision of public goods is usually unprofitable. 
C)  The free-rider problem results from the characteristics of nonrivalry and nonexcludability. 
D)  Public goods are only provided by government.

Question 4

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?

Accepted Answer

A)  The benefit surpluses shared between consumers and producers will be maximized. 
B)  The benefit surpluses received by consumers and producers will be equal. 
C)  There will be no consumer or producer surplus. 
D)  Consumer surplus will be maximized,and producer surplus will be minimized. 
A)  The benefit surpluses shared between consumers and producers will be maximized. 
B)  The benefit surpluses received by consumers and producers will be equal. 
C)  There will be no consumer or producer surplus. 
D)  Consumer surplus will be maximized,and producer surplus will be minimized.

Question 5

According to the marginal-cost-marginal-benefit rule:

Accepted Answer

A)  only government projects (as opposed to private projects)should be assessed by comparing marginal costs and marginal benefits. 
B)  the optimal project size is the one for which MB = MC. 
C)  the optimal project size is the one for which MB exceeds MC by the greatest amount. 
D)  project managers should attempt to minimize both MB and MC. 
A)  only government projects (as opposed to private projects)should be assessed by comparing marginal costs and marginal benefits. 
B)  the optimal project size is the one for which MB = MC. 
C)  the optimal project size is the one for which MB exceeds MC by the greatest amount. 
D)  project managers should attempt to minimize both MB and MC.

Question 6

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Accepted Answer

A)  Consumers' maximum willingness to pay equals producers' minimum acceptable price for the last unit of output. 
B)  The sum of producer and consumer surplus is maximized. 
C)  The total revenue received by producers equals the total cost of production. 
D)  The marginal benefit of the last unit produced equals the marginal cost of producing that unit. 
A)  Consumers' maximum willingness to pay equals producers' minimum acceptable price for the last unit of output. 
B)  The sum of producer and consumer surplus is maximized. 
C)  The total revenue received by producers equals the total cost of production. 
D)  The marginal benefit of the last unit produced equals the marginal cost of producing that unit.

Question 7

Consumer surplus:

Accepted Answer

A)  is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B)  the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. 
C)  the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D)  rises as equilibrium price rises. 
A)  is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B)  the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. 
C)  the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D)  rises as equilibrium price rises.

Question 8

From society's perspective,in the presence of a supply-side market failure,the last unit of a good produced typically:

Accepted Answer

A)  generates more of a benefit than it costs to produce. 
B)  produces a benefit exactly equal to the cost of producing the last unit. 
C)  maximizes the net benefit to society. 
D)  costs more to produce than it provides in benefits. 
A)  generates more of a benefit than it costs to produce. 
B)  produces a benefit exactly equal to the cost of producing the last unit. 
C)  maximizes the net benefit to society. 
D)  costs more to produce than it provides in benefits.

Question 9

Allocative efficiency occurs where (for the last unit)maximum willingness to pay exceeds minimum acceptable price by the greatest amount.

Accepted Answer

A) True 
 B)False

Question 10

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of a public good?

Accepted Answer

A)  A weather warning system. 
B)  A television set. 
C)  A sofa. 
D)  A bottle of soda. 
A)  A weather warning system. 
B)  A television set. 
C)  A sofa. 
D)  A bottle of soda.

Question 12

Asymmetric information always results in adverse selection.

Accepted Answer

A) True 
 B)False

Question 13

(Last Word)In a cap-and-trade program:

Accepted Answer

A)  government fixes the price of pollution rights and firms choose how many permits to purchase. 
B)  government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other. 
C)  each firm is provided a fixed number of permits for a particular pollutant and no individual firm is allowed to acquire additional permits. 
D)  firms can emit whatever type of pollutant they want,so long as the total tonnage does not exceed a government-established quantity. 
A)  government fixes the price of pollution rights and firms choose how many permits to purchase. 
B)  government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other. 
C)  each firm is provided a fixed number of permits for a particular pollutant and no individual firm is allowed to acquire additional permits. 
D)  firms can emit whatever type of pollutant they want,so long as the total tonnage does not exceed a government-established quantity.

Question 14

Producer surplus:

Accepted Answer

A)  is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B)  rises as equilibrium price falls. 
C)  is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D)  is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. 
A)  is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B)  rises as equilibrium price falls. 
C)  is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D)  is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.

Question 15

(Last Word)Because there are so many sources of carbon dioxide,making monitoring difficult and costly,many economists:

Accepted Answer

A)  prefer a carbon tax to cap-and-trade for reducing carbon dioxide emissions. 
B)  prefer cap-and-trade to a carbon tax for reducing carbon dioxide emissions. 
C)  believe that cap-and-trade and a carbon tax are both costly but should be implemented to reduce carbon dioxide emissions. 
D)  believe that neither cap-and-trade nor carbon taxes can effectively reduce carbon dioxide emissions. 
A)  prefer a carbon tax to cap-and-trade for reducing carbon dioxide emissions. 
B)  prefer cap-and-trade to a carbon tax for reducing carbon dioxide emissions. 
C)  believe that cap-and-trade and a carbon tax are both costly but should be implemented to reduce carbon dioxide emissions. 
D)  believe that neither cap-and-trade nor carbon taxes can effectively reduce carbon dioxide emissions.

Question 16

Suppose that the Anytown city government asks private citizens to donate money to support the town's annual holiday lighting display.Assuming that the citizens of Anytown enjoy the lighting display,the request for donations suggests that:

Accepted Answer

A)  the display creates negative externalities. 
B)  government should tax the producers of holiday lighting. 
C)  resources are currently overallocated to the provision of holiday lighting in Anytown. 
D)  resources are currently underallocated to the provision of holiday lighting in Anytown. 
A)  the display creates negative externalities. 
B)  government should tax the producers of holiday lighting. 
C)  resources are currently overallocated to the provision of holiday lighting in Anytown. 
D)  resources are currently underallocated to the provision of holiday lighting in Anytown.

Question 17

Amanda buys a ruby for $330 for which she was willing to pay $340.The minimum acceptable price to the seller,Tony,was $140.Amanda experiences:

Accepted Answer

A)  a consumer surplus of $10 and Tony experiences a producer surplus of $190. 
B)  a producer surplus of $200 and Tony experiences a consumer surplus of $10. 
C)  a consumer surplus of $670 and Tony experiences a producer surplus of $200. 
D)  a producer surplus of $10 and Tony experiences a consumer surplus of $190. 
A)  a consumer surplus of $10 and Tony experiences a producer surplus of $190. 
B)  a producer surplus of $200 and Tony experiences a consumer surplus of $10. 
C)  a consumer surplus of $670 and Tony experiences a producer surplus of $200. 
D)  a producer surplus of $10 and Tony experiences a consumer surplus of $190.

Nonexcludability describes a condition where:

(Consider This)Suppose that a new band,"Balin and the Wolf Riders," tries to sell its music on the internet.Economists would expect:

Which of the following statements is not true?

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?

According to the marginal-cost-marginal-benefit rule:

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Consumer surplus:

From society's perspective,in the presence of a supply-side market failure,the last unit of a good produced typically:

Allocative efficiency occurs where (for the last unit)maximum willingness to pay exceeds minimum acceptable price by the greatest amount.

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Which of the following is an example of a public good?

Asymmetric information always results in adverse selection.

(Last Word)In a cap-and-trade program:

Producer surplus:

(Last Word)Because there are so many sources of carbon dioxide,making monitoring difficult and costly,many economists:

Suppose that the Anytown city government asks private citizens to donate money to support the town's annual holiday lighting display.Assuming that the citizens of Anytown enjoy the lighting display,the request for donations suggests that:

Amanda buys a ruby for $330 for which she was willing to pay $340.The minimum acceptable price to the seller,Tony,was $140.Amanda experiences:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Filters

Exam 4: Market Failures: Public Goods and Externalities

Nonexcludability describes a condition where:

(Consider This)Suppose that a new band,"Balin and the Wolf Riders," tries to sell its music on the internet.Economists would expect:

Which of the following statements is not true?

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?

According to the marginal-cost-marginal-benefit rule:

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Consumer surplus:

From society's perspective,in the presence of a supply-side market failure,the last unit of a good produced typically:

Allocative efficiency occurs where (for the last unit)maximum willingness to pay exceeds minimum acceptable price by the greatest amount.

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Which of the following is an example of a public good?

Asymmetric information always results in adverse selection.

(Last Word)In a cap-and-trade program:

Producer surplus:

(Last Word)Because there are so many sources of carbon dioxide,making monitoring difficult and costly,many economists:

Suppose that the Anytown city government asks private citizens to donate money to support the town's annual holiday lighting display.Assuming that the citizens of Anytown enjoy the lighting display,the request for donations suggests that:

Amanda buys a ruby for $330 for which she was willing to pay $340.The minimum acceptable price to the seller,Tony,was $140.Amanda experiences:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Filters