Exam 8: Market Failure

Economists generally prefer greater effort made to force internalization of externalities through taxes rather than using alternative approaches, such as establishing pollution standards.

If the production of a product creates external costs, there is an ____ to production of that good which the government can correct for by ____.

Sellers may choose not to sell in certain markets because:

An example of a negative externality is:

Medical research helps to develop better treatments for neuromuscular disease. Medical researchers are constantly in search of funds. Many in the public, however, are unwilling to contribute money toward neuromuscular disease research until a member of their own family suffers from a neuromuscular ailment. If left strictly to the private market, it is likely that there will be:

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 least-cost abatement pattern will require all polluters to clean up on an equal basis.

Positive externalities exist any time the social costs of producing a good or service exceed the private costs.

The market system fails to provide the efficient output of public goods because:

​Exhibit 8-1 -Refer to Exhibit 8-1. The area bounded by what letters represents the associated efficiency loss resulting when there are external benefits associated with education?

Which of the following will most likely generate positive externalities?

After trading in her Volkswagen Beetle for a much safer Mercedes sedan, Rene began driving less carefully. This is an example of:

When a price fails to reflect all the benefits of a product, too much of it is produced and/or consumed.

An example of a public good is:

If, after she buys a car with air bags, Maria Andretti starts to drive recklessly, that would be an illustration of:

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

Corrective taxes are generally more efficient than regulatory mandates keeping the environment clean.

Technology spillovers:

Which of the following is true of adverse selection?

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