Exam 4: Market Failures: Public Goods and Externalities

Refer to the graph above. Suppose that it is shows the market for an insurance product. If something happens to heighten the adverse selection problem in this market, then:

The equilibrium point in the market is where S and D curve intersect. Refer to the graph above. At equilibrium, the total amount of spending that consumers would be paying for the product is represented by the area:

The minimum acceptable price for a product that producer Sam is willing to receive is $15. The price he could get for the product in the market is $18. How much is Sam's producer surplus?

In a free-market economy, a product which entails a positive externality will be:

If many people in a community get flu shots, the whole community benefits including those that did not get flu shots. Therefore, not enough people may decide to get the shots. This is one illustration of:

Street entertainers face the free-rider problem when they perform because of the:

Assume that a government is considering a new social program and may choose to include in this program any number of four progressively larger projects. The marginal cost and the marginal benefits of each of the four projects are given in the table. Refer to the above table and information. What is the total cost and total benefit of doing projects A, B, and C?

Which of the following antipollution policies is least likely to make use of cost-benefit analysis?

Answer the question on the basis of the following information is for public good. P_a and P_b represent the prices that citizens (a) and (b), the only two people in this nation, are willing to pay for additional units of a quantity (Q_c) of the public good. Q_s represents the quantity of the public good supplied by government at each of the collective prices. Refer to the above information. If only 1 unit of this public good is produced, then the marginal benefit is:

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment. Refer to the above information. Which of the following policies would be most appropriate for dealing with this problem?

When a competitive market achieves allocative efficiency, it implies that:

Better Business Bureaus in various cities exist partly in order to try to deal with inadequate buyer information about sellers.

E-bay, Amazon and other Internet shopping sites provide "seller ratings" done by previous buyers, in order to help deal with the problem of:

When there is overproduction of a good:

Which of the following is an example of a market failure?

Private firms can hardly produce a public good profitably because of:

Which of the following statements concerning a pure public good is false?

It has been proposed that a government agency be charged with the task of determining the amount of pollution that the atmosphere (or a body of water) can safely absorb, establish "rights" to this limited amount of pollution, and sell those limited amount of rights to firms. The firms can then buy and sell these rights among themselves later. This approach is known as the:

Insurance policies typically stipulate a deductible amount which the insured must shoulder; this is to address the problem of:

From an economist's perspective, an important consideration for policies to address global warming is: