Question 1

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Accepted Answer

A)  public goods 
B)  private goods 
C)  quasi-public goods 
D)  common resources 
A)  public goods 
B)  private goods 
C)  quasi-public goods 
D)  common resources

Question 2

Haiti was once a heavily forested country. Today, 80 per cent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has led to devastating floods when it rains heavily. This is an example of

Accepted Answer

A)  tragic externalities. 
B)  the tragedy of the commons. 
C)  human greed. 
D)  the consequences of not having a market economic system. 
A)  tragic externalities. 
B)  the tragedy of the commons. 
C)  human greed. 
D)  the consequences of not having a market economic system.

Question 3

Which of the following displays these two characteristics: rivalry and non-excludability?

Accepted Answer

A)  a public good 
B)  a private good 
C)  a quasi-public good 
D)  a common resource 
A)  a public good 
B)  a private good 
C)  a quasi-public good 
D)  a common resource

Question 4

-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 $3,

Accepted Answer

A)  economic surplus is maximised. 
B)  not enough consumers want to buy pecans. 
C)  the quantity supplied is less than the economically efficient quantity. 
D)  the quantity supplied is economically efficient, but the quantity demanded is economically inefficient. 
A)  economic surplus is maximised. 
B)  not enough consumers want to buy pecans. 
C)  the quantity supplied is less than the economically efficient quantity. 
D)  the quantity supplied is economically efficient, but the quantity demanded is economically inefficient.

Question 5

A public good that is a good that is both rival and excludable.

Accepted Answer

A) True 
 B)False

Question 6

What is adverse selection?

Accepted Answer

A)  It refers to the private, self-interested actions that people pursue, which, when taken collectively, lead to a loss in economic surplus. 
B)  It refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. 
C)  It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 
D)  It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction. 
A)  It refers to the private, self-interested actions that people pursue, which, when taken collectively, lead to a loss in economic surplus. 
B)  It refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. 
C)  It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 
D)  It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

Question 7

What is adverse selection?

Accepted Answer

Adverse selection refers to a

Question 8

If a state requires all drivers to purchase auto insurance, insurance companies still face the problem of

Accepted Answer

A)  correctly pricing their insurance. 
B)  sunk costs. 
C)  adverse selection. 
D)  excess demand for their insurance. 
A)  correctly pricing their insurance. 
B)  sunk costs. 
C)  adverse selection. 
D)  excess demand for their insurance.

Question 9

One reason patent protection is vitally important to pharmaceutical firms is

Accepted Answer

A)  successful new drugs are not profitable. If firms are not granted patents, many would go out of business and health care would be severely diminished. 
B)  the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process. 
C)  that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D)  the high salaries pharmaceutical firms pay to scientists and doctors make their labour costs higher than for any other business. Profits from patents are needed to pay these labour costs. 
A)  successful new drugs are not profitable. If firms are not granted patents, many would go out of business and health care would be severely diminished. 
B)  the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process. 
C)  that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D)  the high salaries pharmaceutical firms pay to scientists and doctors make their labour costs higher than for any other business. Profits from patents are needed to pay these labour costs.

Question 10

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Accepted Answer

and there

Question 11

Some individuals seek to use government action to make themselves better off at the expense of others. The actions of these individuals

Accepted Answer

A)  are examples of fraud; but these individuals usually avoid prosecution because of logrolling and rational ignorance. 
B)  are examples of rent seeking. 
C)  offer proof that Adam Smith's 'invisible hand' is not valid. 
D)  are evidence of the voting paradox. 
A)  are examples of fraud; but these individuals usually avoid prosecution because of logrolling and rational ignorance. 
B)  are examples of rent seeking. 
C)  offer proof that Adam Smith's 'invisible hand' is not valid. 
D)  are evidence of the voting paradox.

Question 12

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of

Accepted Answer

A)  moral hazard. 
B)  the principle-agent problem. 
C)  asymmetric information. 
D)  adverse selection. 
A)  moral hazard. 
B)  the principle-agent problem. 
C)  asymmetric information. 
D)  adverse selection.

Question 13

Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection.

Accepted Answer

A) True 
 B)False

Question 14

A modern example of the tragedy of the commons is the forests in many poor countries.

Accepted Answer

A) True 
 B)False

Question 15

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems, the insurance company is trying to reduce

Accepted Answer

A)  the problem of adverse selection. 
B)  the moral hazard problem. 
C)  sunk costs. 
D)  asymmetric information. 
A)  the problem of adverse selection. 
B)  the moral hazard problem. 
C)  sunk costs. 
D)  asymmetric information.

Question 16

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Accepted Answer

A) True 
 B)False

Question 17

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Accepted Answer

A)  Product differentiation 
B)  Brand management 
C)  Aggressive marketing 
D)  Advertising 
A)  Product differentiation 
B)  Brand management 
C)  Aggressive marketing 
D)  Advertising

Question 18

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is

Accepted Answer

A)  inefficient market hypothesis. 
B)  moral hazard. 
C)  information disparity. 
D)  asymmetric information. 
A)  inefficient market hypothesis. 
B)  moral hazard. 
C)  information disparity. 
D)  asymmetric information.

Question 19

Which of the following can a firm use to defend a successful product's brand name?

Accepted Answer

A)  The firm can obtain a patent on the brand name. 
B)  The firm can apply for a trademark to ban other firms from using the product's name. 
C)  The firm can increase the amount it spends on advertising for the product. 
D)  The firm can attempt to copyright the brand name. 
A)  The firm can obtain a patent on the brand name. 
B)  The firm can apply for a trademark to ban other firms from using the product's name. 
C)  The firm can increase the amount it spends on advertising for the product. 
D)  The firm can attempt to copyright the brand name.

Question 20

Adverse selection occurs in the market for used cars because used car buyers

Accepted Answer

A)  have more information than used car sellers. 
B)  have less information than used car sellers. 
C)  have less incentive to maintain the value of their cars than new car buyers. 
D)  tend to have more accidents than new car buyers. 
A)  have more information than used car sellers. 
B)  have less information than used car sellers. 
C)  have less incentive to maintain the value of their cars than new car buyers. 
D)  tend to have more accidents than new car buyers.

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Haiti was once a heavily forested country. Today, 80 per cent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has led to devastating floods when it rains heavily. This is an example of

Which of the following displays these two characteristics: rivalry and non-excludability?

-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 $3,

A public good that is a good that is both rival and excludable.

What is adverse selection?

What is adverse selection?

If a state requires all drivers to purchase auto insurance, insurance companies still face the problem of

One reason patent protection is vitally important to pharmaceutical firms is

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Some individuals seek to use government action to make themselves better off at the expense of others. The actions of these individuals

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of

Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection.

A modern example of the tragedy of the commons is the forests in many poor countries.

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems, the insurance company is trying to reduce

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

________ describes the actions a firm takes to maintain the differentiation of its product over time.

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is

Which of the following can a firm use to defend a successful product's brand name?

Adverse selection occurs in the market for used cars because used car buyers

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

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Haiti was once a heavily forested country. Today, 80 per cent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has led to devastating floods when it rains heavily. This is an example of

Which of the following displays these two characteristics: rivalry and non-excludability?

-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 $3,

A public good that is a good that is both rival and excludable.

What is adverse selection?

What is adverse selection?

If a state requires all drivers to purchase auto insurance, insurance companies still face the problem of

One reason patent protection is vitally important to pharmaceutical firms is

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Some individuals seek to use government action to make themselves better off at the expense of others. The actions of these individuals

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of

Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection.

A modern example of the tragedy of the commons is the forests in many poor countries.

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems, the insurance company is trying to reduce

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

________ describes the actions a firm takes to maintain the differentiation of its product over time.

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is

Which of the following can a firm use to defend a successful product's brand name?

Adverse selection occurs in the market for used cars because used car buyers

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