Question 1

Identify the approach used by the Environmental Protection Agency (EPA) to enforce environmental standards.

Accepted Answer

A) ​pollution taxes 
B) ​least-cost method 
C) ​compliance standards 
D) ​pollution rights 
A) ​pollution taxes 
B) ​least-cost method 
C) ​compliance standards 
D) ​pollution rights

Question 2

A public good is:

Accepted Answer

A) a good or service for which it is relatively easy to exclude nonpaying customers from consumption. 
B) ​a good or service that is consumed by both the paying and nonpaying customers. 
C) any good or service that is produced by the government. 
D) a good or service that is consumed by private individuals and financed by private contributions. 
A) a good or service for which it is relatively easy to exclude nonpaying customers from consumption. 
B) ​a good or service that is consumed by both the paying and nonpaying customers. 
C) any good or service that is produced by the government. 
D) a good or service that is consumed by private individuals and financed by private contributions.

Question 3

Public goods:

Accepted Answer

A) ​Can be both produced and financed by the private sector. 
B) ​Can be both produced but not easily financed by the private sector 
C) ​Cannot be produced but can be financed by the private sector. 
D) ​Cannot be produced or easily financed by the private sector. 
A) ​Can be both produced and financed by the private sector. 
B) ​Can be both produced but not easily financed by the private sector 
C) ​Cannot be produced but can be financed by the private sector. 
D) ​Cannot be produced or easily financed by the private sector.

Question 4

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 5

Which of the following is false?

Accepted Answer

A) ​Product liability laws can make it unprofitable to sell shoddy merchandise, providing a substantial incentive to provide safe products independent of government regulations. 
B) ​Asymmetric information exists when the available information is initially distributed in favor of one party to a transaction relative to another. 
C) ​In adverse selection situations, it is rational for a seller with more information about a product to provide a truthful and complete disclosure and make that fact known to a potential buyer. 
D) ​Moral hazard arises in part from the fact that it is costly for an insurer to monitor the behaviors of the insured party. 
A) ​Product liability laws can make it unprofitable to sell shoddy merchandise, providing a substantial incentive to provide safe products independent of government regulations. 
B) ​Asymmetric information exists when the available information is initially distributed in favor of one party to a transaction relative to another. 
C) ​In adverse selection situations, it is rational for a seller with more information about a product to provide a truthful and complete disclosure and make that fact known to a potential buyer. 
D) ​Moral hazard arises in part from the fact that it is costly for an insurer to monitor the behaviors of the insured party.

Question 6

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,

Accepted Answer

A) ​Taxing it could bring us closer to the efficient solution 
B) ​Subsidizing it could bring us closer to the efficient solution 
C) ​Neither a tax or a subsidy could bring us closer to the efficient solution 
D) ​None of the above is true. 
A) ​Taxing it could bring us closer to the efficient solution 
B) ​Subsidizing it could bring us closer to the efficient solution 
C) ​Neither a tax or a subsidy could bring us closer to the efficient solution 
D) ​None of the above is true.

Question 7

The over hunting of U.S. buffalo that nearly caused their extinction would be an example of the tragedy of the commons.

Accepted Answer

A) True 
 B)False

Question 8

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are less than the external costs,

Accepted Answer

A) ​More than the efficient amount is being produced 
B) ​Less than the efficient amount is being produced 
C) ​the efficient amount is being produced 
D) ​We do not know whether the efficient amount, or more or less, is being produced. 
A) ​More than the efficient amount is being produced 
B) ​Less than the efficient amount is being produced 
C) ​the efficient amount is being produced 
D) ​We do not know whether the efficient amount, or more or less, is being produced.

Question 9

Exhibit 8-2 ​  
-Refer to Exhibit 8-2. The supply curve S social includes the following costs.

Accepted Answer

A) ​Private costs only 
B) Private costs and external costs 
C) ​External costs and public costs 
D) ​all of the above 
A) ​Private costs only 
B) Private costs and external costs 
C) ​External costs and public costs 
D) ​all of the above

Question 10

Over the air television signals are ____________ ; television signals available through cable are

Accepted Answer

A) Public goods, public goods 
B) ​Public goods, private goods 
C) Private goods, private goods 
D) Private goods, public goods 
A) Public goods, public goods 
B) ​Public goods, private goods 
C) Private goods, private goods 
D) Private goods, public goods

Question 11

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

Accepted Answer

A) ​those most likely to collect on insurance to buy it. 
B) ​those who buy insurance to take fewer precautions to avoid the insured risk. 
C) ​those with less insurance to take on more risk. 
D) ​to none of the above. 
A) ​those most likely to collect on insurance to buy it. 
B) ​those who buy insurance to take fewer precautions to avoid the insured risk. 
C) ​those with less insurance to take on more risk. 
D) ​to none of the above.

Question 12

Which of the following is an example of an externality?

Accepted Answer

A) ​cigarette smoke that permeates an entire restaurant 
B) ​a flu shot that prevents a student from transmitting the virus 
C) ​a beautiful flower garden outside the county courthouse 
D) ​All of the above are examples of externalities. 
A) ​cigarette smoke that permeates an entire restaurant 
B) ​a flu shot that prevents a student from transmitting the virus 
C) ​a beautiful flower garden outside the county courthouse 
D) ​All of the above are examples of externalities.

Question 13

Socially inefficient outcomes may occur in markets where there are:

Accepted Answer

A) ​negative externalities present. 
B) ​asymmetric information problems present. 
C) ​positive externalities present. 
D) ​any of the above. 
A) ​negative externalities present. 
B) ​asymmetric information problems present. 
C) ​positive externalities present. 
D) ​any of the above.

Question 14

Which of the following is a rival good that is nonexcludable?

Accepted Answer

A) ​public good 
B) ​private good 
C) ​common resource 
D) ​none of the above 
A) ​public good 
B) ​private good 
C) ​common resource 
D) ​none of the above

Question 15

Evidence suggests that the marginal social cost of pollution reduction:

Accepted Answer

A) ​increases as pollution reduction increases. 
B) ​remains constant as pollution reduction increases. 
C) ​decreases as pollution reduction increases. 
D) ​equals zero since it is beneficial to reduce pollution. 
A) ​increases as pollution reduction increases. 
B) ​remains constant as pollution reduction increases. 
C) ​decreases as pollution reduction increases. 
D) ​equals zero since it is beneficial to reduce pollution.

Question 16

Explain why broadcasting television over the air is considered a public good. Why is cable TV not a public good?
​

Accepted Answer

​Broadcast television is a good that is

Question 17

When negative externalities are present, it leads to an underallocation of resources in that area relative to that which is socially desirable.

Accepted Answer

A) True 
 B)False

Question 18

The least costly way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Accepted Answer

A) True 
 B)False

Question 19

The presence of a negative externality is likely to give rise to significant market failures when:

Accepted Answer

A) ​property rights are not well-defined. 
B) ​property rights are well-defined. 
C) ​there are few victims of pollution and few polluters. 
D) ​transaction costs are relatively low. 
A) ​property rights are not well-defined. 
B) ​property rights are well-defined. 
C) ​there are few victims of pollution and few polluters. 
D) ​transaction costs are relatively low.

Question 20

A positive externality will cause a market to produce:

Accepted Answer

A) ​more than the efficient equilibrium output level. 
B) ​iless than the efficient equilibrium output level. 
C) ​the efficient equilibrium output level. 
D) ​None of the above. 
A) ​more than the efficient equilibrium output level. 
B) ​iless than the efficient equilibrium output level. 
C) ​the efficient equilibrium output level. 
D) ​None of the above.

Exam 8: Market Failure

Identify the approach used by the Environmental Protection Agency (EPA) to enforce environmental standards.

A public good is:

Public goods:

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

Which of the following is false?

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,

The over hunting of U.S. buffalo that nearly caused their extinction would be an example of the tragedy of the commons.

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are less than the external costs,

Exhibit 8-2 ​ -Refer to Exhibit 8-2. The supply curve S social includes the following costs.

Over the air television signals are ____________ ; television signals available through cable are

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

Which of the following is an example of an externality?

Socially inefficient outcomes may occur in markets where there are:

Which of the following is a rival good that is nonexcludable?

Evidence suggests that the marginal social cost of pollution reduction:

Explain why broadcasting television over the air is considered a public good. Why is cable TV not a public good? ​

When negative externalities are present, it leads to an underallocation of resources in that area relative to that which is socially desirable.

The least costly way to clean up the environment is for all firms to reduce pollution by an equal percentage.

The presence of a negative externality is likely to give rise to significant market failures when:

A positive externality will cause a market to produce:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exhibit 8-2 -Refer to Exhibit 8-2. The supply curve S social includes the following costs.

Explain why broadcasting television over the air is considered a public good. Why is cable TV not a public good?