Question 1

A successful trademark is one that becomes a generic name for a product, for example, 'Kleenex' has become a generic term for tissues.

Accepted Answer

A) True 
 B)False

Question 2

-Refer to Figure 14-2. What is the optimal quantity of street lights to install?

Accepted Answer

A)  3 
B)  4 
C)  6 
D)  9 
A)  3 
B)  4 
C)  6 
D)  9

Question 3

An important difference between the demand for a private good and the demand for a public good is that

Accepted Answer

A)  individuals reveal their preferences for a public good, but they do not have to reveal their preferences a private good. 
B)  the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned. 
C)  individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good. 
D)  the demand for a private good produces consumption externalities; the demand for a public good produces production externalities. 
A)  individuals reveal their preferences for a public good, but they do not have to reveal their preferences a private good. 
B)  the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned. 
C)  individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good. 
D)  the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.

Question 4

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Accepted Answer

A) True 
 B)False

Question 5

Overuse of a common resource may be avoided by all of the following methods except

Accepted Answer

A)  charging for the use of a common resource. 
B)  issuing tradable permits for the use of a common resource. 
C)  government taking over ownership of all private common resources. 
D)  setting quotas or legal limits on the quantity consumed of the common resource. 
A)  charging for the use of a common resource. 
B)  issuing tradable permits for the use of a common resource. 
C)  government taking over ownership of all private common resources. 
D)  setting quotas or legal limits on the quantity consumed of the common resource.

Question 6

In a competitive market equilibrium,

Accepted Answer

A)  total consumer surplus equals total producer surplus. 
B)  marginal benefit and marginal cost are maximised. 
C)  consumers and producers benefit equally. 
D)  the marginal benefit equals the marginal cost of the last unit sold. 
A)  total consumer surplus equals total producer surplus. 
B)  marginal benefit and marginal cost are maximised. 
C)  consumers and producers benefit equally. 
D)  the marginal benefit equals the marginal cost of the last unit sold.

Question 7

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9, what changes in the market would result in an economically efficient output?

Accepted Answer

A)  The price would decrease, the quantity supplied would decrease, and the quantity demanded would increase. 
B)  The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would decrease. 
C)  The price would decrease, the demand would increase and the supply would decrease. 
D)  The price would increase, the quantity demanded would decrease and the quantity supplied would increase. 
A)  The price would decrease, the quantity supplied would decrease, and the quantity demanded would increase. 
B)  The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would decrease. 
C)  The price would decrease, the demand would increase and the supply would decrease. 
D)  The price would increase, the quantity demanded would decrease and the quantity supplied would increase.

Question 8

An insurance company is likely to attract customers like Clancy, who wants to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?

Accepted Answer

A)  moral hazard 
B)  adverse selection 
C)  asymmetric information 
D)  economic irrationality 
A)  moral hazard 
B)  adverse selection 
C)  asymmetric information 
D)  economic irrationality

Question 9

When a firm has been granted a trademark, which grants legal protection against other firms using the name of the product that has been granted the trademark, the firm

Accepted Answer

A)  still faces the possibility that the name will become widely used and no longer associated with a specific company. 
B)  does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system. 
C)  still must apply for a copyright and a patent to ensure that no other firm will use the product's name. 
D)  must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark. 
A)  still faces the possibility that the name will become widely used and no longer associated with a specific company. 
B)  does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system. 
C)  still must apply for a copyright and a patent to ensure that no other firm will use the product's name. 
D)  must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark.

Question 10

A patent or copyright is a barrier to entry based on

Accepted Answer

A)  ownership of a key necessary raw material. 
B)  large economies of scale as output increases. 
C)  government action to protect a producer. 
D)  widespread network externalities. 
A)  ownership of a key necessary raw material. 
B)  large economies of scale as output increases. 
C)  government action to protect a producer. 
D)  widespread network externalities.

Question 11

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, and consumer surplus plus producer surplus is maximised, then

Accepted Answer

A)  maximum deadweight loss occurs. 
B)  economic efficiency is achieved. 
C)  profits are maximised. 
D)  costs are minimised. 
A)  maximum deadweight loss occurs. 
B)  economic efficiency is achieved. 
C)  profits are maximised. 
D)  costs are minimised.

Question 12

When people who buy insurance change their behaviour after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

Accepted Answer

A)  moral hazard. 
B)  adverse selection. 
C)  asymmetric information. 
D)  economic irrationality. 
A)  moral hazard. 
B)  adverse selection. 
C)  asymmetric information. 
D)  economic irrationality.

Question 13

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

Accepted Answer

A)  It conducts public surveys to determine if consumers want the product. 
B)  It hires economists to estimate the market demand for the product. 
C)  It takes a vote in Congress. 
D)  It evaluates the costs and benefits of producing the good. 
A)  It conducts public surveys to determine if consumers want the product. 
B)  It hires economists to estimate the market demand for the product. 
C)  It takes a vote in Congress. 
D)  It evaluates the costs and benefits of producing the good.

Question 14

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Accepted Answer

A) True 
 B)False

Question 15

Health insurance companies impose deductibles on policies and co-payments on claims

Accepted Answer

A)  to increase sales. 
B)  to reduce moral hazard problems. 
C)  to reduce sunk costs. 
D)  to increase prices. 
A)  to increase sales. 
B)  to reduce moral hazard problems. 
C)  to reduce sunk costs. 
D)  to increase prices.

Question 16

Due to adverse selection,very few lemons will be sold in the market for used cars.

Accepted Answer

A) True 
 B)False

Question 17

One result of the public choice model is that most economists believe that

Accepted Answer

A)  when market failure occurs, government intervention will always lead to a more efficient outcome. 
B)  government intervention will always result in a reduction in economic efficiency in regulated markets. 
C)  policymakers may have incentives to intervene in the economy in ways that do not promote economic efficiency. 
D)  the voting paradox will prevent voters from selecting the best person for public office. 
A)  when market failure occurs, government intervention will always lead to a more efficient outcome. 
B)  government intervention will always result in a reduction in economic efficiency in regulated markets. 
C)  policymakers may have incentives to intervene in the economy in ways that do not promote economic efficiency. 
D)  the voting paradox will prevent voters from selecting the best person for public office.

Question 18

A patent

Accepted Answer

A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D)  gives the firm the exclusive right to a new product during the product inventor's lifetime. 
A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D)  gives the firm the exclusive right to a new product during the product inventor's lifetime.

Question 19

Define the tragedy of the commons. Give three examples of common resources. Briefly explain why common property resources are subject to overuse.

Accepted Answer

The tragedy of the commons refers to sit

Question 20

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 8000 pounds of pecans are sold,

Accepted Answer

A)  the deadweight loss is equal to economic surplus. 
B)  producer surplus equals consumer surplus. 
C)  the marginal benefit of each of the 8000 pounds of pecans equals $9. 
D)  marginal benefit is equal to marginal cost. 
A)  the deadweight loss is equal to economic surplus. 
B)  producer surplus equals consumer surplus. 
C)  the marginal benefit of each of the 8000 pounds of pecans equals $9. 
D)  marginal benefit is equal to marginal cost.

A successful trademark is one that becomes a generic name for a product, for example, 'Kleenex' has become a generic term for tissues.

-Refer to Figure 14-2. What is the optimal quantity of street lights to install?

An important difference between the demand for a private good and the demand for a public good is that

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Overuse of a common resource may be avoided by all of the following methods except

In a competitive market equilibrium,

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9, what changes in the market would result in an economically efficient output?

An insurance company is likely to attract customers like Clancy, who wants to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?

When a firm has been granted a trademark, which grants legal protection against other firms using the name of the product that has been granted the trademark, the firm

A patent or copyright is a barrier to entry based on

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, and consumer surplus plus producer surplus is maximised, then

When people who buy insurance change their behaviour after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Health insurance companies impose deductibles on policies and co-payments on claims

Due to adverse selection,very few lemons will be sold in the market for used cars.

One result of the public choice model is that most economists believe that

A patent

Define the tragedy of the commons. Give three examples of common resources. Briefly explain why common property resources are subject to overuse.

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 8000 pounds of pecans are sold,

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 14: Government Intervention in the Market

A successful trademark is one that becomes a generic name for a product, for example, 'Kleenex' has become a generic term for tissues.

-Refer to Figure 14-2. What is the optimal quantity of street lights to install?

An important difference between the demand for a private good and the demand for a public good is that

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Overuse of a common resource may be avoided by all of the following methods except

In a competitive market equilibrium,

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9, what changes in the market would result in an economically efficient output?

An insurance company is likely to attract customers like Clancy, who wants to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?

When a firm has been granted a trademark, which grants legal protection against other firms using the name of the product that has been granted the trademark, the firm

A patent or copyright is a barrier to entry based on

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, and consumer surplus plus producer surplus is maximised, then

When people who buy insurance change their behaviour after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Health insurance companies impose deductibles on policies and co-payments on claims

Due to adverse selection,very few lemons will be sold in the market for used cars.

One result of the public choice model is that most economists believe that

A patent

Define the tragedy of the commons. Give three examples of common resources. Briefly explain why common property resources are subject to overuse.

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 8000 pounds of pecans are sold,

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters