Question 1

The market under produces public goods because:

Accepted Answer

A)  The government is mandated to produce public goods. 
B)  People do not want public goods as much as private goods. 
C)  People are less willing to pay for public goods than for private goods. 
D)  Of concerns about equity. 
A)  The government is mandated to produce public goods. 
B)  People do not want public goods as much as private goods. 
C)  People are less willing to pay for public goods than for private goods. 
D)  Of concerns about equity.

Question 2

If external benefits exist:

Accepted Answer

A)  The market will overproduce the good. 
B)  Private demand will exceed social demand. 
C)  Market demand will understate social demand. 
D)  The market will generate the optimal outcome. 
A)  The market will overproduce the good. 
B)  Private demand will exceed social demand. 
C)  Market demand will understate social demand. 
D)  The market will generate the optimal outcome.

Question 3

External costs are equal to the difference between:

Accepted Answer

A)  Social costs and private costs. 
B)  Marginal benefits and marginal costs. 
C)  Average benefits and average costs. 
D)  Marginal social benefits and marginal social costs. 
A)  Social costs and private costs. 
B)  Marginal benefits and marginal costs. 
C)  Average benefits and average costs. 
D)  Marginal social benefits and marginal social costs.

Question 4

If market prices and sales are used to signal desired output,then the optimal mix of output is determined by:

Accepted Answer

A)  The market mechanism. 
B)  The political process. 
C)  The Federal Reserve System. 
D)  Government intervention. 
A)  The market mechanism. 
B)  The political process. 
C)  The Federal Reserve System. 
D)  Government intervention.

Question 5

The most important motivation for producers is the desire to:

Accepted Answer

A)  Minimize external costs. 
B)  Minimize social costs above private costs. 
C)  Maximize economic profits. 
D)  Maximize social benefits and private revenues at the same time. 
A)  Minimize external costs. 
B)  Minimize social costs above private costs. 
C)  Maximize economic profits. 
D)  Maximize social benefits and private revenues at the same time.

Question 6

The distinction between public goods and private goods is based on:

Accepted Answer

A)  Government regulation. 
B)  Who produces the goods. 
C)  How much the goods cost. 
D)  The link between payment and consumption. 
A)  Government regulation. 
B)  Who produces the goods. 
C)  How much the goods cost. 
D)  The link between payment and consumption.

Question 7

Externalities are a type of market failure because:

Accepted Answer

A)  Buyers do not have complete information about the product. 
B)  Producers have too much power. 
C)  Third parties bears the costs or benefits of a market activity. 
D)  Goods and services are not distributed fairly. 
A)  Buyers do not have complete information about the product. 
B)  Producers have too much power. 
C)  Third parties bears the costs or benefits of a market activity. 
D)  Goods and services are not distributed fairly.

Question 8

Market failure establishes a basis for:

Accepted Answer

A)  Market power. 
B)  Externalities. 
C)  Government intervention. 
D)  Private goods. 
A)  Market power. 
B)  Externalities. 
C)  Government intervention. 
D)  Private goods.

Question 9

Private costs are identified as:

Accepted Answer

A)  Costs borne by a third party as a result of polluting activities by producers. 
B)  The difference between the social and public costs of a market activity. 
C)  The costs of an economic activity borne directly by the immediate producer or consumer. 
D)  Being greater,in general,than social costs. 
A)  Costs borne by a third party as a result of polluting activities by producers. 
B)  The difference between the social and public costs of a market activity. 
C)  The costs of an economic activity borne directly by the immediate producer or consumer. 
D)  Being greater,in general,than social costs.

Question 10

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s)below.
Table 9.1-Costs of reducing water pollution  
-In Table 9.1,what is the marginal social benefit (in dollars per PPM)of reducing pollution rates from 35 to 25 PPM?

Accepted Answer

A)  $5 
B)  $7 
C)  $10 
D)  $50 
A)  $5 
B)  $7 
C)  $10 
D)  $50

Question 11

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

Accepted Answer

A) True 
 B)False

Question 12

Noise generated by an airport best illustrates:

Accepted Answer

A)  An inequity. 
B)  An externality. 
C)  Market power. 
D)  Overproduction of private goods. 
A)  An inequity. 
B)  An externality. 
C)  Market power. 
D)  Overproduction of private goods.

Question 13

Social demand is equal to market:

Accepted Answer

A)  Demand plus externalities. 
B)  Supply plus market demand. 
C)  Demand minus externalities. 
D)  Demand multiplied by externalities. 
A)  Demand plus externalities. 
B)  Supply plus market demand. 
C)  Demand minus externalities. 
D)  Demand multiplied by externalities.

Question 14

A private good is a good that:

Accepted Answer

A)  Is financed by private dollars instead of taxes. 
B)  Can be jointly consumed. 
C)  Can be denied to those who do not pay for it. 
D)  Consumers use privately in their homes. 
A)  Is financed by private dollars instead of taxes. 
B)  Can be jointly consumed. 
C)  Can be denied to those who do not pay for it. 
D)  Consumers use privately in their homes.

Question 15

The government uses taxes and transfers to redistribute income more fairly.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are macro failures that justify government intervention except for:

Accepted Answer

A)  High unemployment. 
B)  A rising price level. 
C)  A decline in the production capacity. 
D)  Inequitable distribution of output. 
A)  High unemployment. 
B)  A rising price level. 
C)  A decline in the production capacity. 
D)  Inequitable distribution of output.

Question 17

After the government filed its antitrust case,Microsoft:

Accepted Answer

A)  Ignored the power of antitrust policy. 
B)  became even bolder in abusing its market power. 
C)  Won its case in the courts and continued using predatory pricing. 
D)  Changed some of its exclusionary licensing practices. 
A)  Ignored the power of antitrust policy. 
B)  became even bolder in abusing its market power. 
C)  Won its case in the courts and continued using predatory pricing. 
D)  Changed some of its exclusionary licensing practices.

Question 18

In order to reduce pollution,the government can use all of the following except:

Accepted Answer

A)  Income transfers. 
B)  Emissions charges. 
C)  Forced recycling. 
D)  Regulatory standards. 
A)  Income transfers. 
B)  Emissions charges. 
C)  Forced recycling. 
D)  Regulatory standards.

Question 19

Figure 9.2:   
-In Figure 9.2,the market demand curve is above the social demand curve because:

Accepted Answer

A)  There are internal costs associated with cigarette smoking. 
B)  There are free riders associated with cigarette smoking. 
C)  The external costs of cigarette smoking are being passed on to those who do not smoke. 
D)  Positive externalities are being passed on to those who do not smoke. 
A)  There are internal costs associated with cigarette smoking. 
B)  There are free riders associated with cigarette smoking. 
C)  The external costs of cigarette smoking are being passed on to those who do not smoke. 
D)  Positive externalities are being passed on to those who do not smoke.

Question 20

Whenever there is a divergence between social costs and market costs,the result is:

Accepted Answer

A)  Market power. 
B)  Market failure. 
C)  Maximized social welfare. 
D)  A higher minimum wage. 
A)  Market power. 
B)  Market failure. 
C)  Maximized social welfare. 
D)  A higher minimum wage.

The market under produces public goods because:

If external benefits exist:

External costs are equal to the difference between:

If market prices and sales are used to signal desired output,then the optimal mix of output is determined by:

The most important motivation for producers is the desire to:

The distinction between public goods and private goods is based on:

Externalities are a type of market failure because:

Market failure establishes a basis for:

Private costs are identified as:

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

Noise generated by an airport best illustrates:

Social demand is equal to market:

A private good is a good that:

The government uses taxes and transfers to redistribute income more fairly.

All of the following are macro failures that justify government intervention except for:

After the government filed its antitrust case,Microsoft:

In order to reduce pollution,the government can use all of the following except:

Figure 9.2: -In Figure 9.2,the market demand curve is above the social demand curve because:

Whenever there is a divergence between social costs and market costs,the result is:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 9: Government Intervention

The market under produces public goods because:

If external benefits exist:

External costs are equal to the difference between:

If market prices and sales are used to signal desired output,then the optimal mix of output is determined by:

The most important motivation for producers is the desire to:

The distinction between public goods and private goods is based on:

Externalities are a type of market failure because:

Market failure establishes a basis for:

Private costs are identified as:

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

Noise generated by an airport best illustrates:

Social demand is equal to market:

A private good is a good that:

The government uses taxes and transfers to redistribute income more fairly.

All of the following are macro failures that justify government intervention except for:

After the government filed its antitrust case,Microsoft:

In order to reduce pollution,the government can use all of the following except:

Figure 9.2: -In Figure 9.2,the market demand curve is above the social demand curve because:

Whenever there is a divergence between social costs and market costs,the result is:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters