Question 1

A modern example of the tragedy of the commons is the forests in many poor countries.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following must be present to reach a private solution to an externality problem?

Accepted Answer

A)  A majority of the parties affected by the externality must agree to a solution. 
B)  The transactions costs to negotiate a solution must be relatively low. 
C)  The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution. 
D)  The government must approve the solution for it to be a legal solution. 
A)  A majority of the parties affected by the externality must agree to a solution. 
B)  The transactions costs to negotiate a solution must be relatively low. 
C)  The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution. 
D)  The government must approve the solution for it to be a legal solution.

Question 3

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

Accepted Answer

A)  A public good 
B)  A private good 
C)  A quasi-public good 
D)  A common resource 
A)  A public good 
B)  A private good 
C)  A quasi-public good 
D)  A common resource

Question 4

How does the construction of a market demand curve for a private good differ from that for a public good?

Accepted Answer

A)  There is no difference; in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
B)  There is no difference; in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price. 
C)  The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price, but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
D)  The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good, but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price. 
A)  There is no difference; in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
B)  There is no difference; in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price. 
C)  The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price, but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
D)  The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good, but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price.

Question 5

If there is pollution in producing a product,then the market equilibrium price

Accepted Answer

A)  is too high and equilibrium quantity is too low. 
B)  and equilibrium quantity are too low. 
C)  and equilibrium quantity are too high. 
D)  is too low and equilibrium quantity is too high. 
A)  is too high and equilibrium quantity is too low. 
B)  and equilibrium quantity are too low. 
C)  and equilibrium quantity are too high. 
D)  is too low and equilibrium quantity is too high.

Question 6

The free rider problem refers to a situation in which

Accepted Answer

A)  people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay. 
B)  the marginal cost of allowing additional consumers to consume a public good is zero. 
C)  high income individuals subsidise the production of goods, such as education, that make society better off. 
D)  markets fail to allocate resources efficiently when benefits outweigh costs. 
A)  people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay. 
B)  the marginal cost of allowing additional consumers to consume a public good is zero. 
C)  high income individuals subsidise the production of goods, such as education, that make society better off. 
D)  markets fail to allocate resources efficiently when benefits outweigh costs.

Question 7

Explain how the decision by parents to not immunise their children,hoping that their children will not get sick because other parents have had their children immunised,is an example of free riding.How is this behaviour dangerous to the public?

Accepted Answer

Free riding is benefitting from a good w

Question 8

Moral hazard refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about the economically efficient level of air pollution is correct?

Accepted Answer

A)  The economically efficient level of pollution is zero. 
B)  The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C)  The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D)  The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised. 
A)  The economically efficient level of pollution is zero. 
B)  The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C)  The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D)  The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised.

Question 10

Haiti was once a heavily forested country.Today,80 per cent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has led to devastating floods when it rains heavily.This is an example of

Accepted Answer

A)  tragic externalities. 
B)  the tragedy of the commons. 
C)  human greed. 
D)  the consequences of not having a market economic system. 
A)  tragic externalities. 
B)  the tragedy of the commons. 
C)  human greed. 
D)  the consequences of not having a market economic system.

Question 11

Goods can be classified on the basis of whether their consumption is

Accepted Answer

A)  internal and excludable. 
B)  rival and competitive. 
C)  includable and cooperative. 
D)  rival and excludable. 
A)  internal and excludable. 
B)  rival and competitive. 
C)  includable and cooperative. 
D)  rival and excludable.

Question 12

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 13

Some environmentalists have criticised tradable emissions allowances on the grounds that they give permit holders a licence to pollute.Furthermore,environmentalists argue that those who sell their permits receive a monetary benefit from their contribution to polluting the environment.Use economic reasoning to evaluate this criticism.

Accepted Answer

The criticism ignores one of the central

Question 14

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 15

It is difficult for a private market to provide the economically efficient quantity of a public good because

Accepted Answer

A)  by law, governments cannot use cost-benefit analysis to determine this quantity. 
B)  public goods produce positive and negative externalities. 
C)  individual preferences are not revealed in the market for the good. 
D)  it is too expensive to produce the necessary amount of the good. 
A)  by law, governments cannot use cost-benefit analysis to determine this quantity. 
B)  public goods produce positive and negative externalities. 
C)  individual preferences are not revealed in the market for the good. 
D)  it is too expensive to produce the necessary amount of the good.

Question 16

In England during the Middle Ages,each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually,the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.The reason the grass was depleted was

Accepted Answer

A)  the area of pasture was non-excludable and the consumption of the grass was rival. 
B)  self-interest motives led livestock owners to raise too many cows and sheep. 
C)  due to a policy of neglect on the part of the English government. 
D)  it did not get enough rainfall. 
A)  the area of pasture was non-excludable and the consumption of the grass was rival. 
B)  self-interest motives led livestock owners to raise too many cows and sheep. 
C)  due to a policy of neglect on the part of the English government. 
D)  it did not get enough rainfall.

Question 17

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

Accepted Answer

A)  individuals reveal their preferences for a public good, but they do not have to reveal their preferences for a private good. 
B)  the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned. 
C)  individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good. 
D)  the demand for a private good produces consumption externalities; the demand for a public good produces production externalities. 
A)  individuals reveal their preferences for a public good, but they do not have to reveal their preferences for a private good. 
B)  the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned. 
C)  individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good. 
D)  the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.

Question 18

The supply curve of a public good shows

Accepted Answer

A)  the total quantities that all producers are willing and able to supply at each price. 
B)  the maximum amount suppliers require to produce each quantity of the good. 
C)  the total cost of producing each unit of the good. 
D)  the marginal cost of producing each unit of the good. 
A)  the total quantities that all producers are willing and able to supply at each price. 
B)  the maximum amount suppliers require to produce each quantity of the good. 
C)  the total cost of producing each unit of the good. 
D)  the marginal cost of producing each unit of the good.

Question 19

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

Accepted Answer

A)  individuals reveal their preferences for a public good, but they do not have to reveal their preferences for a private good. 
B)  the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned. 
C)  individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good. 
D)  the demand for a private good produces consumption externalities; the demand for a public good produces production externalities. 
A)  individuals reveal their preferences for a public good, but they do not have to reveal their preferences for a private good. 
B)  the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned. 
C)  individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good. 
D)  the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.

Question 20

How does a negative externality in production reduce economic efficiency?

Accepted Answer

If there is a negative externality in pr

A modern example of the tragedy of the commons is the forests in many poor countries.

Which of the following must be present to reach a private solution to an externality problem?

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

How does the construction of a market demand curve for a private good differ from that for a public good?

If there is pollution in producing a product,then the market equilibrium price

The free rider problem refers to a situation in which

Explain how the decision by parents to not immunise their children,hoping that their children will not get sick because other parents have had their children immunised,is an example of free riding.How is this behaviour dangerous to the public?

Moral hazard refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

Which of the following statements about the economically efficient level of air pollution is correct?

Haiti was once a heavily forested country.Today,80 per cent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has led to devastating floods when it rains heavily.This is an example of

Goods can be classified on the basis of whether their consumption is

Which of the following displays these two characteristics: non-rivalry and non-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,what changes in the market would result in an economically efficient output?

It is difficult for a private market to provide the economically efficient quantity of a public good because

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

The supply curve of a public good shows

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

How does a negative externality in production reduce economic efficiency?

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

A modern example of the tragedy of the commons is the forests in many poor countries.

Which of the following must be present to reach a private solution to an externality problem?

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

How does the construction of a market demand curve for a private good differ from that for a public good?

If there is pollution in producing a product,then the market equilibrium price

The free rider problem refers to a situation in which

Explain how the decision by parents to not immunise their children,hoping that their children will not get sick because other parents have had their children immunised,is an example of free riding.How is this behaviour dangerous to the public?

Moral hazard refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

Which of the following statements about the economically efficient level of air pollution is correct?

Haiti was once a heavily forested country.Today,80 per cent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has led to devastating floods when it rains heavily.This is an example of

Goods can be classified on the basis of whether their consumption is

Which of the following displays these two characteristics: non-rivalry and non-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,what changes in the market would result in an economically efficient output?

It is difficult for a private market to provide the economically efficient quantity of a public good because

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

The supply curve of a public good shows

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

How does a negative externality in production reduce economic efficiency?

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