Question 1

An externality is an example of a market failure.

Accepted Answer

A) True 
 B)False

Question 2

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Accepted Answer

A)  A. C. Pigou 
B)  Adam Smith 
C)  Ronald Coase 
D)  John Maynard Keynes 
A)  A. C. Pigou 
B)  Adam Smith 
C)  Ronald Coase 
D)  John Maynard Keynes

Question 3

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter.If the victims of the pollution could not legally enforce the right of their property not to be damaged,the amount of pollution reduction

Accepted Answer

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

Question 4

The Coase theorem asserts that government intervention is a prerequisite for addressing externality problems.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  further reductions will make society better off. 
B)  the marginal benefit will rise and the marginal cost will fall as further reductions are made. 
C)  economic efficiency will be achieved when emissions are reduced to zero. 
D)  private businesses, rather the consumers, should be made to pay for the cost of further reductions. 
A)  further reductions will make society better off. 
B)  the marginal benefit will rise and the marginal cost will fall as further reductions are made. 
C)  economic efficiency will be achieved when emissions are reduced to zero. 
D)  private businesses, rather the consumers, should be made to pay for the cost of further reductions.

Question 6

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

Accepted Answer

Internalising an externality refers to t

Question 7

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Accepted Answer

A) True 
 B)False

Question 8

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 9

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

Accepted Answer

A) True 
 B)False

Question 10

The tragedy of the commons was avoided in the Middle Ages by

Accepted Answer

A)  selling common grounds to individuals. 
B)  the local police, who monitored entry into the commons. 
C)  social pressure to uphold traditionally accepted limits on family use of the commons. 
D)  the government, which imposed a tax for the use of the commons. 
A)  selling common grounds to individuals. 
B)  the local police, who monitored entry into the commons. 
C)  social pressure to uphold traditionally accepted limits on family use of the commons. 
D)  the government, which imposed a tax for the use of the commons.

Question 11

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 $9,

Accepted Answer

A)  economic surplus is maximised. 
B)  too many consumers want to buy pecans. 
C)  the quantity supplied is greater than the economically efficient quantity. 
D)  the quantity demanded is economically efficient, but the quantity supplied is economically inefficient. 
A)  economic surplus is maximised. 
B)  too many consumers want to buy pecans. 
C)  the quantity supplied is greater than the economically efficient quantity. 
D)  the quantity demanded is economically efficient, but the quantity supplied is economically inefficient.

Question 12

Which of the following activities creates a negative externality?

Accepted Answer

A)  Cleaning up the sidewalk on your block 
B)  Graduating from university 
C)  Repainting the house you live in to improve its appearance 
D)  Keeping a junked car parked on your front lawn 
A)  Cleaning up the sidewalk on your block 
B)  Graduating from university 
C)  Repainting the house you live in to improve its appearance 
D)  Keeping a junked car parked on your front lawn

Question 13

Economic rent refers to the price of a factor of production which is fixed in supply.

Accepted Answer

A) True 
 B)False

Question 14

Figure 11-5  
-Refer to Figure 11-5.At the competitive market equilibrium,for the last unit produced,

Accepted Answer

A)  the size of the external cost is Pm - Po. 
B)  the size of the external benefit is Pm - Po. 
C)  the size of the external cost is Pn - Po. 
D)  the size of the external benefit is Pn - Po. 
A)  the size of the external cost is Pm - Po. 
B)  the size of the external benefit is Pm - Po. 
C)  the size of the external cost is Pn - Po. 
D)  the size of the external benefit is Pn - Po.

Question 15

The market demand for a public good can be determined by

Accepted Answer

A)  adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B)  adding up how much each citizen expects to consume at each possible price. 
C)  adding up how much each consumer is willing to pay for each unit of the public good. 
D)  estimating the value of the benefit that each unit provides and multiplying that by the number of consumers. 
A)  adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B)  adding up how much each citizen expects to consume at each possible price. 
C)  adding up how much each consumer is willing to pay for each unit of the public good. 
D)  estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.

Question 16

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 17

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Accepted Answer

A)  Patents encourage firms to spend money on research necessary to create new products. 
B)  Politicians sometimes succumb to pressure from lobbyists to grant favours to businesses for political reasons. 
C)  Patents are an important source of government revenue. 
D)  Patents are justified because they are an important means for creating network externalities. 
A)  Patents encourage firms to spend money on research necessary to create new products. 
B)  Politicians sometimes succumb to pressure from lobbyists to grant favours to businesses for political reasons. 
C)  Patents are an important source of government revenue. 
D)  Patents are justified because they are an important means for creating network externalities.

Question 18

Which of the following displays rivalry and 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 19

Figure 11-16   Figure 11-16 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output. The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 11-16.The current market equilibrium output is partly the result of overfishing.In that case,what does S1 represent?

Accepted Answer

A)  The private marginal benefit of harvesting salmon. 
B)  The social marginal benefit of harvesting salmon. 
C)  The private marginal cost of harvesting salmon. 
D)  The social marginal cost of harvesting salmon. 
A)  The private marginal benefit of harvesting salmon. 
B)  The social marginal benefit of harvesting salmon. 
C)  The private marginal cost of harvesting salmon. 
D)  The social marginal cost of harvesting salmon.

Question 20

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,

Accepted Answer

A)  economic surplus is maximised. 
B)  not enough consumers want to buy pecans. 
C)  the quantity supplied is less than the economically efficient quantity. 
D)  the quantity supplied is economically efficient, but the quantity demanded is economically inefficient. 
A)  economic surplus is maximised. 
B)  not enough consumers want to buy pecans. 
C)  the quantity supplied is less than the economically efficient quantity. 
D)  the quantity supplied is economically efficient, but the quantity demanded is economically inefficient.

An externality is an example of a market failure.

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter.If the victims of the pollution could not legally enforce the right of their property not to be damaged,the amount of pollution reduction

The Coase theorem asserts that government intervention is a prerequisite for addressing externality problems.

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

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

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Figure 11-5 -Refer to Figure 11-5.The deadweight loss due to the externality is represented by the area

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

The tragedy of the commons was avoided in the Middle Ages by

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 $9,

Which of the following activities creates a negative externality?

Economic rent refers to the price of a factor of production which is fixed in supply.

Figure 11-5 -Refer to Figure 11-5.At the competitive market equilibrium,for the last unit produced,

The market demand for a public good can be determined by

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

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Which of the following displays rivalry and excludability in consumption?

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,

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 11: Monopolistic Competition and Oligopoly

An externality is an example of a market failure.

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter.If the victims of the pollution could not legally enforce the right of their property not to be damaged,the amount of pollution reduction

The Coase theorem asserts that government intervention is a prerequisite for addressing externality problems.

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

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

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Figure 11-5 -Refer to Figure 11-5.The deadweight loss due to the externality is represented by the area

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

The tragedy of the commons was avoided in the Middle Ages by

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 $9,

Which of the following activities creates a negative externality?

Economic rent refers to the price of a factor of production which is fixed in supply.

Figure 11-5 -Refer to Figure 11-5.At the competitive market equilibrium,for the last unit produced,

The market demand for a public good can be determined by

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

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Which of the following displays rivalry and excludability in consumption?

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,

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters