Exam 11: Government Intervention in the Market

The cost of group health insurance is lower than if an individual buys a policy on his own because

Rent-seeking behaviour,unlike profit maximising behaviour in competitive markets,wastes society's scarce resources.

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually,the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.Why was the grass depleted?

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

A patent or copyright is a barrier to entry based on

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

When negative externalities exist,the competitive market supply curve does not include all of the costs borne by members of society.

Figure 11.5 -Refer to Figure 11.5.What is the private profit maximising output level?

Property rights are

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $9,

'Free riding' is a characteristic of which type of good?

When is economic efficiency achieved in a competitive market?

Figure 11.2 Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 11.2 shows their willingness to pay for different quantities of street lights, the market demand for street lights and the marginal cost of installing the street lights. -Refer to Figure 11.2.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

What does a positive externality cause?

Figure 11.14 University education benefits society by producing a more employable workforce, reducing crime and creating a better informed citizenry. Thus, the social benefits of university education exceed the private benefits for any level of university education. This is illustrated in Figure 11.14. -Refer to Figure 11.14.One way to obtain the economically efficient amount of university education is for governments to subsidise university education.What is the size of the per-student Pigovian subsidy that the government must provide to internalise the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example,through low-interest student loans.)

Explain how mandatory seat belt laws may reduce the negative externalities of risky behaviour. -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------

In economics,the term 'free rider' refers to

Which of the following best illustrates the free rider problem?

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