Exam 11: Government Intervention in the Market

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

The basic cause of deadweight losses from the existence of common resources and externalities is

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

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

Figure 11.8 Figure 11.8 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 11.8.What is the market equilibrium output level?

Figure 11.3 Figure 11.3 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂. -Refer to Figure 11.3.If,because of an externality,the economically efficient output is Q₂ and not the current equilibrium output of Q₁,what does S₁ represent?

What is an important difference between the demand for a private good and the demand for a public good?

Figure 11.9 -Refer to Figure 11.9.What is the incremental benefit of increasing the quantity of pollution reduction from Q_B to Q_E units?

Which of the following individuals is most likely to purchase a life insurance policy that pays out an annual income beginning at a certain age until the individual's death?

Of what is pollution an example?

Which of the following is not an example of rent-seeking behaviour?

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

In a competitive market equilibrium,

Figure 11.6 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source. Figure 11.6 shows the paper market. Use this Figure to answer the following question(s). -Refer to Figure 11.6.What does S₂ represent?

When there is a positive externality,

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

Consider a used car market in which half the cars are good and half are bad (lemons).A rational buyer in this market should

When there is an externality in a market,

The marginal social benefit curve is a synonym for

When the government imposes a tax equal to the external cost of producing a product that causes pollution,the government is said to externalise the externality.