Question 1

Which of the following statements about the economically efficient level of air pollution is correct?

Accepted Answer

A)  The economically efficient level of pollution is zero. 
B)  The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C)  The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D)  The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised. 
A)  The economically efficient level of pollution is zero. 
B)  The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C)  The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D)  The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised.

Question 2

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

Accepted Answer

A)  enforcement costs. 
B)  implicit costs. 
C)  explicit costs. 
D)  transactions costs. 
A)  enforcement costs. 
B)  implicit costs. 
C)  explicit costs. 
D)  transactions costs.

Question 3

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 4

Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.

Accepted Answer

A) True 
 B)False

Question 5

From the list below,the best example of a positive externality is

Accepted Answer

A)  forbidding the use of cell phones in public. 
B)  planting trees along the pavement, which adds beauty and creates shade. 
C)  banning the sale of candy in elementary schools. 
D)  prohibiting street parking in all residential neighbourhoods. 
A)  forbidding the use of cell phones in public. 
B)  planting trees along the pavement, which adds beauty and creates shade. 
C)  banning the sale of candy in elementary schools. 
D)  prohibiting street parking in all residential neighbourhoods.

Question 6

Goods can be classified on the basis of whether their consumption is

Accepted Answer

A)  internal and excludable. 
B)  rival and competitive. 
C)  includable and cooperative. 
D)  rival and excludable. 
A)  internal and excludable. 
B)  rival and competitive. 
C)  includable and cooperative. 
D)  rival and excludable.

Question 7

'A competitive market achieves economic efficiency by maximising the sum of consumer surplus and producer surplus.' This statement

Accepted Answer

A)  is true only if there are positive externalities in production in the market. 
B)  is true only if there are no negative externalities in the market. 
C)  is true only if there are no positive or negative externalities in the market. 
D)  is true in theory, but economic efficiency cannot be achieved in a real market. 
A)  is true only if there are positive externalities in production in the market. 
B)  is true only if there are no negative externalities in the market. 
C)  is true only if there are no positive or negative externalities in the market. 
D)  is true in theory, but economic efficiency cannot be achieved in a real market.

Question 8

Classifying a good as rival means

Accepted Answer

A)  that the good is produced in a competitive market. 
B)  that there is a shortage of the good. 
C)  that when one person consumes a unit of the good, no one else can consume it. 
D)  anyone who does not pay for the good cannot consume it. 
A)  that the good is produced in a competitive market. 
B)  that there is a shortage of the good. 
C)  that when one person consumes a unit of the good, no one else can consume it. 
D)  anyone who does not pay for the good cannot consume it.

Question 9

If the social cost of producing a good or service exceeds the private cost,

Accepted Answer

A)  a positive externality exists. 
B)  the sum of consumer surplus and producer surplus is maximised. 
C)  the market achieves economic efficiency. 
D)  a negative externality exists. 
A)  a positive externality exists. 
B)  the sum of consumer surplus and producer surplus is maximised. 
C)  the market achieves economic efficiency. 
D)  a negative externality exists.

Question 10

What are some of the limitations of the Coase theorem in practice?
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Accepted Answer

Some limitations of the theorem are as f

Question 11

The Coase theorem states that

Accepted Answer

A)  government intervention is always needed if externalities are present. 
B)  assigning property rights is the only thing the government should do in a market economy. 
C)  if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 
D)  a free market equilibrium is the best solution to address externalities. 
A)  government intervention is always needed if externalities are present. 
B)  assigning property rights is the only thing the government should do in a market economy. 
C)  if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 
D)  a free market equilibrium is the best solution to address externalities.

Question 12

An external cost is created when you

Accepted Answer

A)  graduate from university. 
B)  buy flowers for your mother on Mother's Day. 
C)  litter on the side of the road. 
D)  buy a sandwich for lunch. 
A)  graduate from university. 
B)  buy flowers for your mother on Mother's Day. 
C)  litter on the side of the road. 
D)  buy a sandwich for lunch.

Question 13

An example of a quasi-public good is -.

Accepted Answer

A)  crime prevention 
B)  organic apples 
C)  stock of knowledge in the public domain 
D)  toll road 
A)  crime prevention 
B)  organic apples 
C)  stock of knowledge in the public domain 
D)  toll road

Question 14

Which of the following is not a method to avoid overuse of a common resource?

Accepted Answer

A)  Setting quotas or legal limits on the quantity consumed of the common resource 
B)  Issuing tradable permits for the use of a common resource 
C)  Government taking over ownership of all private common resources 
D)  Charging for the use of a common resource 
A)  Setting quotas or legal limits on the quantity consumed of the common resource 
B)  Issuing tradable permits for the use of a common resource 
C)  Government taking over ownership of all private common resources 
D)  Charging for the use of a common resource

Question 15

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.
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Accepted Answer

If harmed parties do not have rights or

Question 16

What is the principal-agent problem?

Accepted Answer

A)  It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. 
B)  It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them. 
C)  It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. 
D)  It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task. 
A)  It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. 
B)  It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them. 
C)  It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. 
D)  It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task.

Question 17

Which of the following describes how a positive externality affects a competitive market?

Accepted Answer

A)  The externality causes a difference between the private benefit from consumption and the social benefit. 
B)  The externality causes a difference between the private benefit from production and the social cost of production. 
C)  The externality causes quantity demanded to exceed quantity supplied. 
D)  The externality causes a difference between the social cost of production and the social cost of consumption. 
A)  The externality causes a difference between the private benefit from consumption and the social benefit. 
B)  The externality causes a difference between the private benefit from production and the social cost of production. 
C)  The externality causes quantity demanded to exceed quantity supplied. 
D)  The externality causes a difference between the social cost of production and the social cost of consumption.

Question 18

Why do health insurance companies impose deductibles on policies and co-pays 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 19

An advantage of imposing a tax on the producer that generates pollution is that

Accepted Answer

A)  it forces the polluting producer to internalise the external cost of the pollution. 
B)  the government can keep tabs on exactly what is produced in an industry. 
C)  it will eliminate pollution. 
D)  a producer can pass the cost of the pollution to consumers. 
A)  it forces the polluting producer to internalise the external cost of the pollution. 
B)  the government can keep tabs on exactly what is produced in an industry. 
C)  it will eliminate pollution. 
D)  a producer can pass the cost of the pollution to consumers.

Question 20

What is meant by the term 'internalising an externality'? How does a Pigovian tax or subsidy internalise an externality?
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Accepted Answer

Internalising an externality refers to t

Which of the following statements about the economically efficient level of air pollution is correct?

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

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

Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.

From the list below,the best example of a positive externality is

Goods can be classified on the basis of whether their consumption is

'A competitive market achieves economic efficiency by maximising the sum of consumer surplus and producer surplus.' This statement

Classifying a good as rival means

If the social cost of producing a good or service exceeds the private cost,

The Coase theorem states that

An external cost is created when you

An example of a quasi-public good is -.

Which of the following is not a method to avoid overuse of a common resource?

What is the principal-agent problem?

Which of the following describes how a positive externality affects a competitive market?

Why do health insurance companies impose deductibles on policies and co-pays on claims?

An advantage of imposing a tax on the producer that generates pollution is that

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

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Exam 11: Government Intervention in the Market

Which of the following statements about the economically efficient level of air pollution is correct?

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

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

Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.

From the list below,the best example of a positive externality is

Goods can be classified on the basis of whether their consumption is

'A competitive market achieves economic efficiency by maximising the sum of consumer surplus and producer surplus.' This statement

Classifying a good as rival means

If the social cost of producing a good or service exceeds the private cost,

The Coase theorem states that

An external cost is created when you

An example of a quasi-public good is -.

Which of the following is not a method to avoid overuse of a common resource?

What is the principal-agent problem?

Which of the following describes how a positive externality affects a competitive market?

Why do health insurance companies impose deductibles on policies and co-pays on claims?

An advantage of imposing a tax on the producer that generates pollution is that

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters