Question 1

Figure 11.9  
-Refer to Figure 11.9.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the negative externality curve. 
D)  the value of pollution reduction curve. 
A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the negative externality curve. 
D)  the value of pollution reduction curve.

Question 2

Which of the following is true of private costs?

Accepted Answer

A)  Are borne by consumers of a good while social costs are borne by government 
B)  Are borne by producers of a good while social costs are borne by government 
C)  Are borne by producers of a good while social costs are borne by society at large 
D)  Are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good 
A)  Are borne by consumers of a good while social costs are borne by government 
B)  Are borne by producers of a good while social costs are borne by government 
C)  Are borne by producers of a good while social costs are borne by society at large 
D)  Are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good

Question 3

Which of the following statements about rent seeking is false?

Accepted Answer

A)  Rent seeking often involves governments because governments transfer huge amounts of funds that economic agents must compete for. 
B)  A person is engaging in rent-seeking behaviour when he uses the political process to acquire ownership of a resource that belongs to the public. 
C)  Because rent seeking redistributes society's resources, anyone engaging in such behaviour is violating the law. 
D)  If a firm can benefit from government intervention in the economy, it is more likely to spend resources attempting to secure this intervention than toward innovating its product to gain a competitive edge in the market. 
A)  Rent seeking often involves governments because governments transfer huge amounts of funds that economic agents must compete for. 
B)  A person is engaging in rent-seeking behaviour when he uses the political process to acquire ownership of a resource that belongs to the public. 
C)  Because rent seeking redistributes society's resources, anyone engaging in such behaviour is violating the law. 
D)  If a firm can benefit from government intervention in the economy, it is more likely to spend resources attempting to secure this intervention than toward innovating its product to gain a competitive edge in the market.

Question 4

Figure 11.9  
-Refer to Figure 11.9.The marginal benefit of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the positive externality curve. 
D)  the external benefit curve. 
A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the positive externality curve. 
D)  the external benefit curve.

Question 5

If air pollution from a coal mine imposes external costs on people who live near the mine and the victims of the pollution could not legally enforce the right of their property not to be damaged,which of the following would be true concerning the amount of pollution reduction?

Accepted Answer

A)  It would be significantly less than if the owners of the smelter were legally liable for damages. 
B)  It would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. 
C)  It would be the same as if it would be if the owners of the smelter were legally liable. 
D)  It would be too small; the government would have to intervene to bring about an efficient outcome. 
A)  It would be significantly less than if the owners of the smelter were legally liable for damages. 
B)  It would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. 
C)  It would be the same as if it would be if the owners of the smelter were legally liable. 
D)  It would be too small; the government would have to intervene to bring about an efficient outcome.

Question 6

A key difficulty facing insurance companies is that people know more about their health than do insurance companies,and that those people who are seriously ill are the most likely to want to obtain health insurance.What is this phenomenon called?

Accepted Answer

A)  Moral hazard 
B)  Economic irrationality 
C)  Asymmetric information 
D)  Adverse selection 
A)  Moral hazard 
B)  Economic irrationality 
C)  Asymmetric information 
D)  Adverse selection

Question 7

Figure 11.7   Figure 11.7 shows a market with an externality. The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output. The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 11.7.If,because of an externality,the economically efficient output is Q2 and not the current equilibrium output of Q1,what does D2 represent?

Accepted Answer

A)  The demand curve reflecting external benefits 
B)  The demand curve reflecting social benefits 
C)  The demand curve reflecting private benefits 
D)  The demand curve reflecting the sum of social and external benefits 
A)  The demand curve reflecting external benefits 
B)  The demand curve reflecting social benefits 
C)  The demand curve reflecting private benefits 
D)  The demand curve reflecting the sum of social and external benefits

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

What is one difference between the demand for a private good and that for a public good?

Accepted Answer

A)  With a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
B)  With a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
C)  With a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realises the same amount of benefit from consuming the product. 
D)  The marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former. 
A)  With a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
B)  With a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
C)  With a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realises the same amount of benefit from consuming the product. 
D)  The marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former.

Question 10

The economist who first proposed that governments use taxes and subsidies to correct for externalities was -.

Accepted Answer

A)  Ronald Coase 
B)  Adam Smith 
C)  A. C. Pigou 
D)  David Hume 
A)  Ronald Coase 
B)  Adam Smith 
C)  A. C. Pigou 
D)  David Hume

Question 11

The social cost of cutting trees for firewood in a government forest is

Accepted Answer

A)  the increased likelihood of flooding as more trees are cut. 
B)  the increased likelihood of flooding as more trees are cut plus the private cost of cutting the trees. 
C)  opportunity cost to the individual of cutting the wood. 
D)  the marginal costs of cutting the last tree. 
A)  the increased likelihood of flooding as more trees are cut. 
B)  the increased likelihood of flooding as more trees are cut plus the private cost of cutting the trees. 
C)  opportunity cost to the individual of cutting the wood. 
D)  the marginal costs of cutting the last tree.

Question 12

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 13

State whether each of the following goods and services is non-rival,non-excludable,or both:
a.A toll road
b.A public park
c.A lighthouse
d.An art museum
e.A radio broadcast of 'A Prairie Home Companion'
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Accepted Answer

a.Non-rival,although rivalry could exist

Question 14

One reason why adverse selection problems arise in health insurance markets is that

Accepted Answer

A)  sick people are more likely to want health insurance than healthy people. 
B)  because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone. 
C)  the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers. 
D)  fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance. 
A)  sick people are more likely to want health insurance than healthy people. 
B)  because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone. 
C)  the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers. 
D)  fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance.

Question 15

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

Accepted Answer

A) True 
 B)False

Question 16

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 17

What does the private market produce when a negative externality exists?

Accepted Answer

A)  Products at a high opportunity cost 
B)  Less than the economically efficient output level 
C)  Products at a low opportunity cost 
D)  More than the economically efficient output level 
A)  Products at a high opportunity cost 
B)  Less than the economically efficient output level 
C)  Products at a low opportunity cost 
D)  More than the economically efficient output level

Question 18

Where does the efficient output level of a public good occur?

Accepted Answer

A)  Where greatest number of free riders occurs 
B)  Where marginal cost of producing the last unit is equal to the marginal benefit realised by consumers 
C)  Where total cost of production is affordable 
D)  Where marginal cost of production is at its lowest 
A)  Where greatest number of free riders occurs 
B)  Where marginal cost of producing the last unit is equal to the marginal benefit realised by consumers 
C)  Where total cost of production is affordable 
D)  Where marginal cost of production is at its lowest

Question 19

Figure 11.4   Figure 11.4 shows a market with a negative externality.
-Refer to Figure 11.4.What price represents the marginal benefit of the last unit produced?

Accepted Answer

A)  Pa 
B)  Pb 
C)  Pc 
D)  Pf 
A)  Pa 
B)  Pb 
C)  Pc 
D)  Pf

Question 20

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.

Figure 11.9 -Refer to Figure 11.9.The marginal cost of reducing pollution curve is the same curve as

Which of the following is true of private costs?

Which of the following statements about rent seeking is false?

Figure 11.9 -Refer to Figure 11.9.The marginal benefit of reducing pollution curve is the same curve as

If air pollution from a coal mine imposes external costs on people who live near the mine and the victims of the pollution could not legally enforce the right of their property not to be damaged,which of the following would be true concerning the amount of pollution reduction?

A key difficulty facing insurance companies is that people know more about their health than do insurance companies,and that those people who are seriously ill are the most likely to want to obtain health insurance.What is this phenomenon called?

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

What is one difference between the demand for a private good and that for a public good?

The economist who first proposed that governments use taxes and subsidies to correct for externalities was -.

The social cost of cutting trees for firewood in a government forest is

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

One reason why adverse selection problems arise in health insurance markets is that

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

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

What does the private market produce when a negative externality exists?

Where does the efficient output level of a public good occur?

Figure 11.4 Figure 11.4 shows a market with a negative externality. -Refer to Figure 11.4.What price represents the marginal benefit of the last unit produced?

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?

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

Figure 11.9 -Refer to Figure 11.9.The marginal cost of reducing pollution curve is the same curve as

Which of the following is true of private costs?

Which of the following statements about rent seeking is false?

Figure 11.9 -Refer to Figure 11.9.The marginal benefit of reducing pollution curve is the same curve as

If air pollution from a coal mine imposes external costs on people who live near the mine and the victims of the pollution could not legally enforce the right of their property not to be damaged,which of the following would be true concerning the amount of pollution reduction?

A key difficulty facing insurance companies is that people know more about their health than do insurance companies,and that those people who are seriously ill are the most likely to want to obtain health insurance.What is this phenomenon called?

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

What is one difference between the demand for a private good and that for a public good?

The economist who first proposed that governments use taxes and subsidies to correct for externalities was -.

The social cost of cutting trees for firewood in a government forest is

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

One reason why adverse selection problems arise in health insurance markets is that

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

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

What does the private market produce when a negative externality exists?

Where does the efficient output level of a public good occur?

Figure 11.4 Figure 11.4 shows a market with a negative externality. -Refer to Figure 11.4.What price represents the marginal benefit of the last unit produced?

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?

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