Exam 5: Market Failure and Public Choice

Of the following, the best example of a private good is:

Figure 5-B -Refer to Figure 5-B.The area bounded by what letters represents the associated efficiency loss resulting when there are external benefits associated with education?

Which of the following activities, if any, represents an external cost?

If Pizza Hut decreases its price for a large pizza by 25% and this leads to a 75% increase in sales, we can conclude that demand is relatively elastic with regard to price.

Which of the following would most likely include a positive externality?

The free rider problem suggests that an individual will tend to:

In the market for insurance, the moral hazard problem leads:

Costs that accrue to the total population are called ____ costs.Costs incurred by the producer or consumer who makes the decision are called ____ costs.

If the government required car makers to install more costly and effective emission control devices on cars, it will lead to:

The total social costs of production are:

Which of the following activities, if any, represents an external benefit?

The free-rider problem arises when:

The consumption of public goods is

Either a price floor or a price ceiling will result in a smaller quantity exchanged than if the price was at its equilibrium level.

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

An example of a public good is:

A perfectly elastic demand curve is vertical.

The view that those whose preferences represent the middle position on an issue will tend to determine the outcome of an election is called:

Figure 6-F -If a negative externality results from the production of chemicals, an external cost is imposed on parties not directly involved in the market for the chemicals.

The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as: