Question 1

Explain why broadcast television is considered a public good.

Accepted Answer

Broadcast television

Question 2

Public goods, like national defense, are usually funded through government because:

Accepted Answer

A) no one cares about them, because they are public. 
B) it is prohibitively difficult to withhold national defense from someone unwilling to pay for it. 
C) they cost too much for private firms to produce them. 
D) they provide benefits only to individuals, and not firms. 
A) no one cares about them, because they are public. 
B) it is prohibitively difficult to withhold national defense from someone unwilling to pay for it. 
C) they cost too much for private firms to produce them. 
D) they provide benefits only to individuals, and not firms.

Question 3

Figure 6-F  
-A public good or service can be consumed by paying and nonpaying customers alike.

Accepted Answer

A) True 
 B)False

Question 4

Leanne, a local taxpayer, and Crystal, a visitor from out of town, both attend a city-sponsored Fourth of July fireworks display at Prospect Park.Crystal is:

Accepted Answer

A) a rival consumer. 
B) an excludable consumer. 
C) unpatriotic. 
D) a free rider. 
E) acting irrationally. 
A) a rival consumer. 
B) an excludable consumer. 
C) unpatriotic. 
D) a free rider. 
E) acting irrationally.

Question 5

Assume that production of a good generates external benefits for others.The equilibrium price of the good will be ____ and the equilibrium quantity ____ for efficient resource allocation.

Accepted Answer

A) too high; too high. 
B) too high; too low. 
C) too low; too high. 
D) too low; too low. 
A) too high; too high. 
B) too high; too low. 
C) too low; too high. 
D) too low; too low.

Question 6

Consider two goods-one that generates external benefits and another that generates external costs.A competitive market economy would tend to produce:

Accepted Answer

A) too much of both goods, relative to the social optimum. 
B) too little of both goods, relative to the social optimum. 
C) too much of the good that generates external benefits relative to the social optimum, and too little of the good that generates external costs. 
D) too little of the good that generates external benefits relative to the social optimum, and too much of the good that generates external costs. 
A) too much of both goods, relative to the social optimum. 
B) too little of both goods, relative to the social optimum. 
C) too much of the good that generates external benefits relative to the social optimum, and too little of the good that generates external costs. 
D) too little of the good that generates external benefits relative to the social optimum, and too much of the good that generates external costs.

Question 7

The motivation for an individual citizen to spend the necessary time and effort to resist an interest group is minimal, even if she had a guarantee that this resistance would be effective.

Accepted Answer

A) True 
 B)False

Question 8

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

Accepted Answer

A) True 
 B)False

Question 9

If a company offers a medical and dental care plan that offers benefits to all of the members of each employee's family for a given monthly premium, an employee who is a mother of five children and who has bad teeth who elects that plan would be an illustration of:

Accepted Answer

A) the moral hazard problem. 
B) the free rider problem. 
C) the adverse selection problem. 
D) the "lemon" problem. 
A) the moral hazard problem. 
B) the free rider problem. 
C) the adverse selection problem. 
D) the "lemon" problem.

Question 10

Which of the following is false?

Accepted Answer

A) Negative externalities are real costs, but, unlike the other resources a firm uses in production, no one owns the air, so a firm does not have to pay for its use. 
B) In the case of external costs, firms tend to produce too much from society's standpoint, causing an efficiency loss due to an overallocation of scarce resources to the production of the good. 
C) If government could impose a pollution tax equal to the exact size of the external costs imposed by a firm, then the firm would produce at the socially desired level of output. 
D) Alternatives to pollution taxes include the government prohibiting certain types of activities causing pollution or forcing firms to clean up their emissions. 
E) None of the above are false; all are true. 
A) Negative externalities are real costs, but, unlike the other resources a firm uses in production, no one owns the air, so a firm does not have to pay for its use. 
B) In the case of external costs, firms tend to produce too much from society's standpoint, causing an efficiency loss due to an overallocation of scarce resources to the production of the good. 
C) If government could impose a pollution tax equal to the exact size of the external costs imposed by a firm, then the firm would produce at the socially desired level of output. 
D) Alternatives to pollution taxes include the government prohibiting certain types of activities causing pollution or forcing firms to clean up their emissions. 
E) None of the above are false; all are true.

Question 11

A tax equal to the external cost on firms that emit pollutants would:

Accepted Answer

A) provide firms with the incentive to increase the level of activity creating the pollution. 
B) provide firms with the incentive to decrease the level of activity creating the pollution. 
C) provide firms with little incentive to search for less environmentally damaging production methods. 
D) not reduce pollution levels at all. 
A) provide firms with the incentive to increase the level of activity creating the pollution. 
B) provide firms with the incentive to decrease the level of activity creating the pollution. 
C) provide firms with little incentive to search for less environmentally damaging production methods. 
D) not reduce pollution levels at all.

Question 12

Which of the following provides an example of an externality?

Accepted Answer

A) The air pollution generated when you drive your car. 
B) The view that passersby and neighbors enjoy when observing your rose garden. 
C) The free concerts neighbors hear when an accomplished musician practices at home. 
D) All of the above. 
A) The air pollution generated when you drive your car. 
B) The view that passersby and neighbors enjoy when observing your rose garden. 
C) The free concerts neighbors hear when an accomplished musician practices at home. 
D) All of the above.

Question 13

When a 5% increase in price leads to an 8% increase in quantity supplied, supply is relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 14

Why do decision makers tend to ignore external costs? How can internalizing external costs move us closer to efficient levels of output?

Accepted Answer

The decision makers ignore it because it

Question 15

An example of a public good is:

Accepted Answer

A) an outdoor fireworks display. 
B) a cake. 
C) a personal computer. 
D) a DVD player. 
A) an outdoor fireworks display. 
B) a cake. 
C) a personal computer. 
D) a DVD player.

Question 16

If two producers had identical supply curves, but one sold at a lower price than the other, the one receiving the lower price would receive more producer surplus.

Accepted Answer

A) True 
 B)False

Question 17

When a good is nonrivalrous in consumption, then:

Accepted Answer

A) consumption by an additional individual will significantly reduce the benefits derived by others from a public good. 
B) individuals who refuse to pay for a public good cannot be excluded from benefiting from it. 
C) consumption by an additional individual does not prevent others from benefiting from a public good. 
D) individuals who refuse to pay for a public good can be excluded from benefiting from it. 
A) consumption by an additional individual will significantly reduce the benefits derived by others from a public good. 
B) individuals who refuse to pay for a public good cannot be excluded from benefiting from it. 
C) consumption by an additional individual does not prevent others from benefiting from a public good. 
D) individuals who refuse to pay for a public good can be excluded from benefiting from it.

Question 18

You have been hired by the city to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues.The debate has been heated and the city council seems to be divided.One side argues that in order to increase revenues from the transit system, prices must be increased.The opposing side argues that a price increase at this time will lower revenues.What assumptions are each side making about the price elasticity of demand, and how might you determine the best course of action?

Accepted Answer

The side that is arguing that revenues w

Question 19

When supply shifts to the left, it would make the surplus from a price floor smaller, other things equal.

Accepted Answer

A) True 
 B)False

Question 20

Producer surplus is always the total area below the demand curve and above the price.

Accepted Answer

A) True 
 B)False

Explain why broadcast television is considered a public good.

Public goods, like national defense, are usually funded through government because:

Figure 6-F -A public good or service can be consumed by paying and nonpaying customers alike.

Leanne, a local taxpayer, and Crystal, a visitor from out of town, both attend a city-sponsored Fourth of July fireworks display at Prospect Park.Crystal is:

Assume that production of a good generates external benefits for others.The equilibrium price of the good will be and the equilibrium quantity for efficient resource allocation.

Consider two goods-one that generates external benefits and another that generates external costs.A competitive market economy would tend to produce:

The motivation for an individual citizen to spend the necessary time and effort to resist an interest group is minimal, even if she had a guarantee that this resistance would be effective.

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

If a company offers a medical and dental care plan that offers benefits to all of the members of each employee's family for a given monthly premium, an employee who is a mother of five children and who has bad teeth who elects that plan would be an illustration of:

Which of the following is false?

A tax equal to the external cost on firms that emit pollutants would:

Which of the following provides an example of an externality?

When a 5% increase in price leads to an 8% increase in quantity supplied, supply is relatively inelastic.

Why do decision makers tend to ignore external costs? How can internalizing external costs move us closer to efficient levels of output?

An example of a public good is:

If two producers had identical supply curves, but one sold at a lower price than the other, the one receiving the lower price would receive more producer surplus.

When a good is nonrivalrous in consumption, then:

When supply shifts to the left, it would make the surplus from a price floor smaller, other things equal.

Producer surplus is always the total area below the demand curve and above the price.

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Exam 5: Market Failure and Public Choice

Explain why broadcast television is considered a public good.

Public goods, like national defense, are usually funded through government because:

Figure 6-F -A public good or service can be consumed by paying and nonpaying customers alike.

Leanne, a local taxpayer, and Crystal, a visitor from out of town, both attend a city-sponsored Fourth of July fireworks display at Prospect Park.Crystal is:

Assume that production of a good generates external benefits for others.The equilibrium price of the good will be ____ and the equilibrium quantity ____ for efficient resource allocation.

Consider two goods-one that generates external benefits and another that generates external costs.A competitive market economy would tend to produce:

The motivation for an individual citizen to spend the necessary time and effort to resist an interest group is minimal, even if she had a guarantee that this resistance would be effective.

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

If a company offers a medical and dental care plan that offers benefits to all of the members of each employee's family for a given monthly premium, an employee who is a mother of five children and who has bad teeth who elects that plan would be an illustration of:

Which of the following is false?

A tax equal to the external cost on firms that emit pollutants would:

Which of the following provides an example of an externality?

When a 5% increase in price leads to an 8% increase in quantity supplied, supply is relatively inelastic.

Why do decision makers tend to ignore external costs? How can internalizing external costs move us closer to efficient levels of output?

An example of a public good is:

If two producers had identical supply curves, but one sold at a lower price than the other, the one receiving the lower price would receive more producer surplus.

When a good is nonrivalrous in consumption, then:

When supply shifts to the left, it would make the surplus from a price floor smaller, other things equal.

Producer surplus is always the total area below the demand curve and above the price.

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Assume that production of a good generates external benefits for others.The equilibrium price of the good will be and the equilibrium quantity for efficient resource allocation.