Question 1

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 2

Figure 11.1  
-Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,what changes in the market would result in an economically efficient output?

Accepted Answer

A)  The price would increase, the quantity supplied would decrease, and the quantity demanded would increase 
B)  The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would increase 
C)  The price would increase, the demand would decrease and the supply would increase 
D)  The price would increase, the quantity demanded would decrease and the quantity supplied would increase 
A)  The price would increase, the quantity supplied would decrease, and the quantity demanded would increase 
B)  The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would increase 
C)  The price would increase, the demand would decrease and the supply would increase 
D)  The price would increase, the quantity demanded would decrease and the quantity supplied would increase

Question 3

Figure 11.11   Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 11.11 illustrates the situation in the toilet paper market.
-Refer to Figure 11.11.The efficient output is -.

Accepted Answer

A)  Q1 
B)  Q2 
C)  Q3 
D)  Q4 
A)  Q1 
B)  Q2 
C)  Q3 
D)  Q4

Question 4

If electric utilities continually reduce their emissions of sulphur dioxide,

Accepted Answer

A)  the utilities will eventually be forced to go out of business. 
B)  the marginal benefit of additional emissions will rise. 
C)  the marginal cost of further emissions will rise. 
D)  the total benefit of sulphur dioxide emissions will fall. 
A)  the utilities will eventually be forced to go out of business. 
B)  the marginal benefit of additional emissions will rise. 
C)  the marginal cost of further emissions will rise. 
D)  the total benefit of sulphur dioxide emissions will fall.

Question 5

Which of the following is not an advantage of risk pooling?

Accepted Answer

A)  By insuring large groups as opposed to individuals, health insurance providers reduce adverse selection. 
B)  It gives very sick people in the group the same access to health care at the same premiums as healthy individuals. 
C)  It is easier for an insurance company to estimate the average number of claims likely to be filed under a group policy than it is to predict the number of claims likely to be filed under an individual policy. 
D)  Individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to over-use those services. 
A)  By insuring large groups as opposed to individuals, health insurance providers reduce adverse selection. 
B)  It gives very sick people in the group the same access to health care at the same premiums as healthy individuals. 
C)  It is easier for an insurance company to estimate the average number of claims likely to be filed under a group policy than it is to predict the number of claims likely to be filed under an individual policy. 
D)  Individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to over-use those services.

Question 6

Figure 11.10   Consider a chemical plant that discharges toxic waste into a nearby waterway. To reduce the emissions of toxic waste, the firm can install pollution abatement devices. Figure 11.10 shows the marginal benefit and the marginal cost from reduction the toxic waste emissions.
-Refer to Figure 11.10.What is the economically efficient level of pollution reduction?

Accepted Answer

A)  12.5 million tons 
B)  9 million tons 
C)  8 million tons 
D)  0 tons 
A)  12.5 million tons 
B)  9 million tons 
C)  8 million tons 
D)  0 tons

Question 7

A possible solution when a scarce resource is subject to the tragedy of the commons is

Accepted Answer

A)  Restrict access to the commons through community norms and laws 
B)  Offer subsidies to consumers 
C)  Force people to move away from the commons 
D)  Persuade people to use less of the scarce resource through an advertising campaign 
A)  Restrict access to the commons through community norms and laws 
B)  Offer subsidies to consumers 
C)  Force people to move away from the commons 
D)  Persuade people to use less of the scarce resource through an advertising campaign

Question 8

Figure 11.4   Figure 11.4 shows a market with a negative externality.
-Refer to Figure 11.4.What is the efficient output level?

Accepted Answer

A)  Qd 
B)  Qb 
C)  Qa 
D)  Qb - Qd 
A)  Qd 
B)  Qb 
C)  Qa 
D)  Qb - Qd

Question 9

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Accepted Answer

A) True 
 B)False

Question 10

Figure 11.5  
-Refer to Figure 11.5.The size of marginal external benefits can be determined by

Accepted Answer

A)  the demand curve D2. 
B)  D2 + D1 at each output level. 
C)  D2 - D1 at each output level. 
D)  the demand curve D1. 
A)  the demand curve D2. 
B)  D2 + D1 at each output level. 
C)  D2 - D1 at each output level. 
D)  the demand curve D1.

Question 11

Figure 11.5  
-Refer to Figure 11.5.The deadweight loss due to the externality is represented by the area -.

Accepted Answer

A)  mso 
B)  msn 
C)  nso 
D)  mtn 
A)  mso 
B)  msn 
C)  nso 
D)  mtn

Question 12

Figure 11.11   Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 11.11 illustrates the situation in the toilet paper market.
-Refer to Figure 11.11.The private profit-maximising output level is -.

Accepted Answer

A)  Q1 
B)  Q2 
C)  Q3 
D)  Q4 
A)  Q1 
B)  Q2 
C)  Q3 
D)  Q4

Question 13

Which of the following is an example of a Pigovian tax?

Accepted Answer

A)  Payments by utilities to obtain tradable emissions allowances 
B)  A payroll tax 
C)  Payments for licenses to pollute 
D)  A tax imposed on a utility that internalises the cost of externalities caused by the utility 
A)  Payments by utilities to obtain tradable emissions allowances 
B)  A payroll tax 
C)  Payments for licenses to pollute 
D)  A tax imposed on a utility that internalises the cost of externalities caused by the utility

Question 14

Consider the following characteristics: 
A.low transactions costs
B.small levels of pollution
C.high levels of pollution
D.clear assignment of property rights.
Which of the above are assumptions behind the Coase Theorem?

Accepted Answer

A)  a, b, and d 
B)  a, c, and d 
C)  a and d 
D)  a only 
A)  a, b, and d 
B)  a, c, and d 
C)  a and d 
D)  a only

Question 15

A product is considered to be non-excludable if

Accepted Answer

A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community. 
A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community.

Question 16

An externality refers to economic events outside a market.

Accepted Answer

A) True 
 B)False

Question 17

When production generates a negative externality,the true cost of production is the

Accepted Answer

A)  private cost of production. 
B)  public cost of production. 
C)  social cost of production. 
D)  average cost of production. 
A)  private cost of production. 
B)  public cost of production. 
C)  social cost of production. 
D)  average cost of production.

Question 18

Should the level of pollution be reduced to zero and if not,then to what level?
--------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------

Accepted Answer

No,the level of pollution should not be

Question 19

Figure 11.12   Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 11.12.
-Refer to Figure 11.12.What is the value of the net gain to society as a result of subsidising chicken pox vaccinations?

Accepted Answer

A)  (PE × Q
E)  
B)  (PF × QF) 
C)  Value equal to the area of FEG 
D)  Value equal to the area of QFFGQE 
A)  (PE × Q
E)  
B)  (PF × QF) 
C)  Value equal to the area of FEG 
D)  Value equal to the area of QFFGQE

Question 20

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Accepted Answer

A) True 
 B)False

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

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,what changes in the market would result in an economically efficient output?

Figure 11.11 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 11.11 illustrates the situation in the toilet paper market. -Refer to Figure 11.11.The efficient output is -.

If electric utilities continually reduce their emissions of sulphur dioxide,

Which of the following is not an advantage of risk pooling?

A possible solution when a scarce resource is subject to the tragedy of the commons is

Figure 11.4 Figure 11.4 shows a market with a negative externality. -Refer to Figure 11.4.What is the efficient output level?

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Figure 11.5 -Refer to Figure 11.5.The size of marginal external benefits can be determined by

Figure 11.5 -Refer to Figure 11.5.The deadweight loss due to the externality is represented by the area -.

Which of the following is an example of a Pigovian tax?

Consider the following characteristics: A.low transactions costs B.small levels of pollution C.high levels of pollution D.clear assignment of property rights. Which of the above are assumptions behind the Coase Theorem?

A product is considered to be non-excludable if

An externality refers to economic events outside a market.

When production generates a negative externality,the true cost of production is the

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

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

Exam 11: Government Intervention in the Market

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

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,what changes in the market would result in an economically efficient output?

Figure 11.11 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 11.11 illustrates the situation in the toilet paper market. -Refer to Figure 11.11.The efficient output is -.

If electric utilities continually reduce their emissions of sulphur dioxide,

Which of the following is not an advantage of risk pooling?

A possible solution when a scarce resource is subject to the tragedy of the commons is

Figure 11.4 Figure 11.4 shows a market with a negative externality. -Refer to Figure 11.4.What is the efficient output level?

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Figure 11.5 -Refer to Figure 11.5.The size of marginal external benefits can be determined by

Figure 11.5 -Refer to Figure 11.5.The deadweight loss due to the externality is represented by the area -.

Which of the following is an example of a Pigovian tax?

Consider the following characteristics: A.low transactions costs B.small levels of pollution C.high levels of pollution D.clear assignment of property rights. Which of the above are assumptions behind the Coase Theorem?

A product is considered to be non-excludable if

An externality refers to economic events outside a market.

When production generates a negative externality,the true cost of production is the

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

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