Question 1

Free market environmentalism is a form of emissions trading.

Accepted Answer

A) True 
 B)False  True

Question 2

The table below shows the market for private long-term-care beds in two countries,Gothum and Camdon,which have identical demands but different supplies.
   a)What are the present equilibrium fee and number of available beds in each country?
b)If demand were to decrease by 60 in each country,what would be the new equilibrium fee and quantity in each country?
c)What explains the different effects in the two counties?
d)From the initial situation in a),suppose that the government in each country wished to increase the quantity of beds available by 20.How much subsidy to residents would be needed in each country?

Accepted Answer

a)fee = $1,300;number of beds:210
b)Gothum:fee = $1,000;number of beds = 180
Candon:fee = $1,100;number of beds = 170
c)The supply in Gothum is more inelastic.
d)Gothum:$400
Candon:$300

Question 3

Explain how government can integrate external benefits in a market.

Accepted Answer

There are two methods that a government can use to integrate external benefits.First,the government can directly provide the goods and services.This is usually the method for things that are regarded as being public concerns,such as health and education.The other way government can increase production of certain products is by offering subsidies,either to the consumer or the producer.A subsidy given to the producer will increase supply and a subsidy given to consumer will increase demand.In either case,quantity traded will increase

Question 4

What is productive efficiency?

Accepted Answer

A) Production of a combination of products that best satisfies consumers' demands. 
B) The maximization of inputs for a given level of output. 
C) The production of an output at the lowest possible average cost. 
D) The minimization of output for a given level of inputs. 
A) Production of a combination of products that best satisfies consumers' demands. 
B) The maximization of inputs for a given level of output. 
C) The production of an output at the lowest possible average cost. 
D) The minimization of output for a given level of inputs.

Question 5

What does allocative efficiency mean?

Accepted Answer

A) That a product is produced where its price is equal to its marginal costs. 
B) That a product is produced where its price is below its marginal costs. 
C) That a product is produced where its price is equal to its average costs. 
D) That a product is produced where its price is below its average costs. 
A) That a product is produced where its price is equal to its marginal costs. 
B) That a product is produced where its price is below its marginal costs. 
C) That a product is produced where its price is equal to its average costs. 
D) That a product is produced where its price is below its average costs.

Question 6

Which of the following terms refers to the impossibility of preventing non-buyers from enjoying the benefits of a product?

Accepted Answer

A) Non-consumption. 
B) Non-excludable. 
C) Non-rival. 
D) Externalities. 
A) Non-consumption. 
B) Non-excludable. 
C) Non-rival. 
D) Externalities.

Question 7

An externality is a benefit or cost experienced by people who neither produce nor consume that product.

Accepted Answer

A) True 
 B)False

Question 8

-Refer to the above graph to answer this question.If buyers of this product were subsidized by an amount equal to the external benefits,what would be the equilibrium values of price and quantity?

Accepted Answer

A) $80 and 40. 
B) $100 and 30. 
C) $100 and 80. 
D) $120 and 70. 
E) $120 and 80. 
A) $80 and 40. 
B) $100 and 30. 
C) $100 and 80. 
D) $120 and 70. 
E) $120 and 80.

Question 9

If the government imposes a tax on buyers as a way of reducing pollution,which curve is affected and how?

Accepted Answer

A) The supply curve shifts to the right. 
B) The supply curve shifts to the left. 
C) The demand curve shifts to the right. 
D) The demand curve shifts to the left. 
E) Neither the demand nor the supply curve is affected but the price will increase. 
A) The supply curve shifts to the right. 
B) The supply curve shifts to the left. 
C) The demand curve shifts to the right. 
D) The demand curve shifts to the left. 
E) Neither the demand nor the supply curve is affected but the price will increase.

Question 10

Distinguish between external cost and external benefit.

Accepted Answer

External benefits are enjoyed

Question 11

-Refer to the above graph to answer this question.If this were an unregulated market,what would be the equilibrium values of price and quantity?

Accepted Answer

A) $80 and 40. 
B) $100 and 30. 
C) $100 and 80. 
D) $120 and 70. 
E) $120 and 80. 
A) $80 and 40. 
B) $100 and 30. 
C) $100 and 80. 
D) $120 and 70. 
E) $120 and 80.

Question 12

All of the following except one are reasons why competitive firms are obliged to be innovative.Which is the exception?

Accepted Answer

A) If they do not keep up with the latest methods,new firms will enter who are willing to use these methods. 
B) Innovation implies higher profits for the firm in the short run. 
C) Innovations will increase the costs of production which will induce firms to increase production. 
D) Innovation usually encourages new entrants which will reduce the price in the long run,thus penalizing firms which do not innovate. 
A) If they do not keep up with the latest methods,new firms will enter who are willing to use these methods. 
B) Innovation implies higher profits for the firm in the short run. 
C) Innovations will increase the costs of production which will induce firms to increase production. 
D) Innovation usually encourages new entrants which will reduce the price in the long run,thus penalizing firms which do not innovate.

Question 13

Assume a perfectly competitive industry.If P > AC in the short-run,what will happen in the long-run?

Accepted Answer

Presently,firms are earning economic pro

Question 14

-Refer to the diagram above.When quantity supplied and quantity demanded are equal,the sum of consumer surplus and producer surplus is equal to

Accepted Answer

A) $600. 
B) $1,200. 
C) $1,400. 
D) $2,000. 
E) $2,400. 
A) $600. 
B) $1,200. 
C) $1,400. 
D) $2,000. 
E) $2,400.

Question 15

The following graph depicts the various cost curves for a representative competitive firm producing quantity Q1:
  
-Refer to the above graph to answer this question.If the price of the product is P1,what does the graph suggest?

Accepted Answer

A) The firm is making economic profits in the short run but not in the long run. 
B) The firm is making economic profits in the long run but not in the short run. 
C) The firm is making economic profits in both the short run and the long run. 
D) The firm is not making economic profits in either the short run or the long run. 
A) The firm is making economic profits in the short run but not in the long run. 
B) The firm is making economic profits in the long run but not in the short run. 
C) The firm is making economic profits in both the short run and the long run. 
D) The firm is not making economic profits in either the short run or the long run.

Question 16

When a competitive market is in long-run equilibrium,the firms will be making economic profits but not normal profits.

Accepted Answer

A) True 
 B)False

Question 17

"An allocative efficient market implies an equitable market." Evaluate this statement.

Accepted Answer

This statement is incorrect.Allocative e

Question 18

Suppose MPB = MPC = 10 at a quantity of 100 units,and MSB = MPC = 15 at a quantity of 120 units.Is the external benefit per unit less than $5,equal to $5,or greater than $5?

Accepted Answer

Greater than $5.
Bel

Question 19

-Refer to the graph above to answer this question.If a per unit tax equal to the external costs was imposed on the sellers of this product,what would be the amount of the tax?

Accepted Answer

A) ab. 
B) bc. 
C) bd. 
D) cd. 
A) ab. 
B) bc. 
C) bd. 
D) cd.

Question 20

List and briefly explain five types of market failures.

Accepted Answer

The five types of market failures are:
·

Free market environmentalism is a form of emissions trading.

Explain how government can integrate external benefits in a market.

What is productive efficiency?

What does allocative efficiency mean?

Which of the following terms refers to the impossibility of preventing non-buyers from enjoying the benefits of a product?

An externality is a benefit or cost experienced by people who neither produce nor consume that product.

-Refer to the above graph to answer this question.If buyers of this product were subsidized by an amount equal to the external benefits,what would be the equilibrium values of price and quantity?

If the government imposes a tax on buyers as a way of reducing pollution,which curve is affected and how?

Distinguish between external cost and external benefit.

-Refer to the above graph to answer this question.If this were an unregulated market,what would be the equilibrium values of price and quantity?

All of the following except one are reasons why competitive firms are obliged to be innovative.Which is the exception?

Assume a perfectly competitive industry.If P > AC in the short-run,what will happen in the long-run?

-Refer to the diagram above.When quantity supplied and quantity demanded are equal,the sum of consumer surplus and producer surplus is equal to

The following graph depicts the various cost curves for a representative competitive firm producing quantity Q1: -Refer to the above graph to answer this question.If the price of the product is P1,what does the graph suggest?

When a competitive market is in long-run equilibrium,the firms will be making economic profits but not normal profits.

"An allocative efficient market implies an equitable market." Evaluate this statement.

Suppose MPB = MPC = 10 at a quantity of 100 units,and MSB = MPC = 15 at a quantity of 120 units.Is the external benefit per unit less than $5,equal to $5,or greater than $5?

-Refer to the graph above to answer this question.If a per unit tax equal to the external costs was imposed on the sellers of this product,what would be the amount of the tax?

List and briefly explain five types of market failures.

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

Perfect Competition

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

Exam 9: An Evaluation of Competitive Markets

Free market environmentalism is a form of emissions trading.

Explain how government can integrate external benefits in a market.

What is productive efficiency?

What does allocative efficiency mean?

Which of the following terms refers to the impossibility of preventing non-buyers from enjoying the benefits of a product?

An externality is a benefit or cost experienced by people who neither produce nor consume that product.

-Refer to the above graph to answer this question.If buyers of this product were subsidized by an amount equal to the external benefits,what would be the equilibrium values of price and quantity?

If the government imposes a tax on buyers as a way of reducing pollution,which curve is affected and how?

Distinguish between external cost and external benefit.

-Refer to the above graph to answer this question.If this were an unregulated market,what would be the equilibrium values of price and quantity?

All of the following except one are reasons why competitive firms are obliged to be innovative.Which is the exception?

Assume a perfectly competitive industry.If P > AC in the short-run,what will happen in the long-run?

-Refer to the diagram above.When quantity supplied and quantity demanded are equal,the sum of consumer surplus and producer surplus is equal to

The following graph depicts the various cost curves for a representative competitive firm producing quantity Q1: -Refer to the above graph to answer this question.If the price of the product is P1,what does the graph suggest?

When a competitive market is in long-run equilibrium,the firms will be making economic profits but not normal profits.

"An allocative efficient market implies an equitable market." Evaluate this statement.

Suppose MPB = MPC = 10 at a quantity of 100 units,and MSB = MPC = 15 at a quantity of 120 units.Is the external benefit per unit less than $5,equal to $5,or greater than $5?

-Refer to the graph above to answer this question.If a per unit tax equal to the external costs was imposed on the sellers of this product,what would be the amount of the tax?

List and briefly explain five types of market failures.

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

Perfect Competition

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters