Exam 13: Markets and Government

The figure below shows the demand and supply curves in the market for elementary education.Figure 13.1 In the figure, D: Private demand curve for elementary education D + s: Demand curve which includes public benefits S: Supply curve of education Price and Quantity have been taken on vertical and horizontal axes respectively. -According to figure 13.1, the optimal subsidy is equal to:

-Asymmetric information arises when:

The following table shows the costs and benefit of producing a commodity.Table 13.1 -When the commons are converted into privately owned resources, _____.

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -Why do externalities arise?

-Education is a good example of a positive externality because the benefits of an education accrue not only to the individual, but also to society as a whole.

-Under a marketable permit system, if the government reduces the quantity of permits, the price of each permit will increase.

-When the government makes the people creating an externality, pay for it, the externality is said to be internalized.

-Why does a network externality arise?

-A person who takes less care of his health after obtaining a health insurance is creating a negative externality.

The following table shows the costs and benefit of producing a commodity.Table 13.1 -Which of the following is not a problem with a public good?

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -A good that is both excludable and rivalrous is a(n):

The following table shows the costs and benefit of producing a commodity.Table 13.1 -According to Table 13.1, what level of tax per unit would be appropriate to internalize the externality?

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -​The consumption of a club good like cable television:

-A tradable government permit for the atmospheric release of a ton of sulfur dioxide can help reduce acid rain.

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -The free rider problem arises when a good is:

-The social cost is negative in case of a negative externality.

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -A market failure occurs when:

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -When there is a divergence between social costs and private costs in a market, _____.

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing. The fishermen were charged $50 on each boat they sent out for fishing. The following table shows the total pounds of fish caught per hour and the number of boats used for fishing.Table 13.2 -When the government imposes a tax on the production of a commodity:

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2 -Higher the economic freedom in a country, _____.