Question 1

If Don paints the outside of his house a horrendous color:

Accepted Answer

A) ​he probably has lowered the value of his home, but not that of his neighbors' homes. 
B) ​he probably has lowered the value of his home and the value of his neighbors' homes. 
C) ​he probably has lowered the value of his neighbors' homes but not the value of his own home. 
D) ​none of the above 
A) ​he probably has lowered the value of his home, but not that of his neighbors' homes. 
B) ​he probably has lowered the value of his home and the value of his neighbors' homes. 
C) ​he probably has lowered the value of his neighbors' homes but not the value of his own home. 
D) ​none of the above

Question 2

Differentiate between a public good and a common resource gooD.​

Accepted Answer

​A public good is neither rival nor excl

Question 3

Which of the following is false?

Accepted Answer

A) ​The nature of public goods is such that the government cannot accurately assess the benefits of those affected. 
B) ​National defense and flood control are illustrations of public goods. 
C) ​Just as in the case of external costs, public goods tend to be underprovided by the private sector. 
D) ​All of the above are true. 
A) ​The nature of public goods is such that the government cannot accurately assess the benefits of those affected. 
B) ​National defense and flood control are illustrations of public goods. 
C) ​Just as in the case of external costs, public goods tend to be underprovided by the private sector. 
D) ​All of the above are true.

Question 4

The ____ is the government agency with the task of developing and enforcing policies that are aimed at protecting the environment.

Accepted Answer

A) ​FDA 
B) ​DOI 
C) ​FEMA 
D) ​EPA 
A) ​FDA 
B) ​DOI 
C) ​FEMA 
D) ​EPA

Question 5

Nick owns a dog whose barking annoys his neighbor Jane. Suppose that the benefit of owning the dog is worth $700 to Nick, and that Jane bears a cost of $500 from the barking. Assume that the city has no ordinance against barking dogs. A possible private solution that would benefit both parties is for:

Accepted Answer

A) ​There is no private solution that would improve this situation for both parties. 
B) ​Jane to pay Nick $650 to get rid of the dog. 
C) ​Jane to pay Nick $800 to get rid of the dog. 
D) ​Nick to pay Jane $600 for her inconvenience. 
A) ​There is no private solution that would improve this situation for both parties. 
B) ​Jane to pay Nick $650 to get rid of the dog. 
C) ​Jane to pay Nick $800 to get rid of the dog. 
D) ​Nick to pay Jane $600 for her inconvenience.

Question 6

​Exhibit 8-1  
-Refer to Exhibit 8-1. Suppose that education provides spillover benefits to the community as illustrated in the diagram. Based on this information, we can say that:

Accepted Answer

A) ​the market would exceed short of the desirable level of education, Q0. 
B) ​education is overproduced by Q1 minus Q0 units. 
C) ​the socially optimal quantity of education is Q1 units. 
D) ​the socially optimal quantity of education is Q0 units. 
A) ​the market would exceed short of the desirable level of education, Q0. 
B) ​education is overproduced by Q1 minus Q0 units. 
C) ​the socially optimal quantity of education is Q1 units. 
D) ​the socially optimal quantity of education is Q0 units.

Question 7

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:

Accepted Answer

A) ​the lemon problem. 
B) ​moral hazard. 
C) ​external costs. 
D) ​None of the above. 
A) ​the lemon problem. 
B) ​moral hazard. 
C) ​external costs. 
D) ​None of the above.

Question 8

If there are significant external benefits associated with the consumption of a product, it can be said that the private benefit to the consumer ____ the relative importance of this product to society and output should ____ to move toward the efficient situation.

Accepted Answer

A) ​overstates; increase 
B) ​understates; increase 
C) ​overstates; decrease 
D) ​understates; decrease 
A) ​overstates; increase 
B) ​understates; increase 
C) ​overstates; decrease 
D) ​understates; decrease

Question 9

Transaction costs are the cost of negotiating and executing an exchange.

Accepted Answer

A) True 
 B)False

Question 10

The key explanation for the prevalence of waterway pollution is:

Accepted Answer

A) ​the inclusion in decisions of all production costs associated with the use of waterways. 
B) ​that there are private costs but no costs to society associated with the use of waterways that are not costs to society. 
C) ​that waterways are not private property and can be used free of charge. 
D) ​that waterways are not of great value to society. 
A) ​the inclusion in decisions of all production costs associated with the use of waterways. 
B) ​that there are private costs but no costs to society associated with the use of waterways that are not costs to society. 
C) ​that waterways are not private property and can be used free of charge. 
D) ​that waterways are not of great value to society.

Question 11

An negative externality is present whenever:

Accepted Answer

A) ​the private marginal cost of an activity exceeds the private marginal benefit. 
B) ​the private marginal benefit of an activity exceeds the private marginal cost. 
C) ​the social marginal cost of an activity exceeds the private marginal cost. 
D) ​none of the above 
A) ​the private marginal cost of an activity exceeds the private marginal benefit. 
B) ​the private marginal benefit of an activity exceeds the private marginal cost. 
C) ​the social marginal cost of an activity exceeds the private marginal cost. 
D) ​none of the above

Question 12

In the health insurance field, asymmetric information creates problems _____ insurance contracts are signed; moral hazard causes problems_____ insurance contracts are signed.

Accepted Answer

A) ​Before; before 
B) ​Before; after 
C) ​After; after 
D) ​After; before 
A) ​Before; before 
B) ​Before; after 
C) ​After; after 
D) ​After; before

Question 13

Which of the following goods is least likely to be provided by the private sector?

Accepted Answer

A) ​a good characterized by nonrivalry in consumption from which nonpaying customers can be excluded 
B) ​a good characterized by nonrivalry in consumption from which paying customers cannot be excluded 
C) ​a good characterized by rivalry in consumption from which nonpaying customers can be excluded 
D) ​a good for which the marginal private benefit to an individual exceeds the marginal cost of producing the good 
A) ​a good characterized by nonrivalry in consumption from which nonpaying customers can be excluded 
B) ​a good characterized by nonrivalry in consumption from which paying customers cannot be excluded 
C) ​a good characterized by rivalry in consumption from which nonpaying customers can be excluded 
D) ​a good for which the marginal private benefit to an individual exceeds the marginal cost of producing the good

Question 14

Increase in the number of transactors makes it difficult to negotiate private agreements for environmental goods.

Accepted Answer

A) True 
 B)False

Question 15

What is the difference between private and social costs?

Accepted Answer

Social costs are those that ac

Question 16

An ideal pollution control policy:

Accepted Answer

A) ​would reduce pollution to zero. 
B) ​would reduce pollution to the socially efficient level. 
C) ​discourage firms from wasting time developing abatement technologies. 
D) ​reduce pollution as quickly as possible, regardless of the cost. 
A) ​would reduce pollution to zero. 
B) ​would reduce pollution to the socially efficient level. 
C) ​discourage firms from wasting time developing abatement technologies. 
D) ​reduce pollution as quickly as possible, regardless of the cost.

Question 17

An externality occurs when:

Accepted Answer

A) ​people other than those making the demand and supply decisions share the benefits or the costs of an activity. 
B) ​only the people making the demand and supply decisions share the benefits or the costs of an activity. 
C) ​private costs of production equal the full social costs associated with production of a good. 
D) ​private costs of production are ignored. 
A) ​people other than those making the demand and supply decisions share the benefits or the costs of an activity. 
B) ​only the people making the demand and supply decisions share the benefits or the costs of an activity. 
C) ​private costs of production equal the full social costs associated with production of a good. 
D) ​private costs of production are ignored.

Question 18

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 19

Moral hazard occurs when an informed party benefits in an exchange by taking advantage of knowing more than the other party.

Accepted Answer

A) True 
 B)False

Question 20

According to the Coase Theorem, private solutions to externalities can lead to the socially efficient outcome when:
I.transaction costs are negligible
II.property rights are clearly defined
IiI.the number of parties involved is small

Accepted Answer

A) ​(i), (ii), and (iii) 
B) ​(i) and (ii) only 
C) ​(iii) only 
D) ​(ii) and (iii) only 
A) ​(i), (ii), and (iii) 
B) ​(i) and (ii) only 
C) ​(iii) only 
D) ​(ii) and (iii) only

If Don paints the outside of his house a horrendous color:

Differentiate between a public good and a common resource gooD.

Which of the following is false?

The ____ is the government agency with the task of developing and enforcing policies that are aimed at protecting the environment.

Exhibit 8-1 -Refer to Exhibit 8-1. Suppose that education provides spillover benefits to the community as illustrated in the diagram. Based on this information, we can say that:

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:

If there are significant external benefits associated with the consumption of a product, it can be said that the private benefit to the consumer the relative importance of this product to society and output should to move toward the efficient situation.

Transaction costs are the cost of negotiating and executing an exchange.

The key explanation for the prevalence of waterway pollution is:

An negative externality is present whenever:

In the health insurance field, asymmetric information creates problems _ insurance contracts are signed; moral hazard causes problems_ insurance contracts are signed.

Which of the following goods is least likely to be provided by the private sector?

Increase in the number of transactors makes it difficult to negotiate private agreements for environmental goods.

What is the difference between private and social costs?

An ideal pollution control policy:

An externality occurs when:

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

Moral hazard occurs when an informed party benefits in an exchange by taking advantage of knowing more than the other party.

According to the Coase Theorem, private solutions to externalities can lead to the socially efficient outcome when: I.transaction costs are negligible II.property rights are clearly defined IiI.the number of parties involved is small

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

Exam 8: Market Failure

If Don paints the outside of his house a horrendous color:

Differentiate between a public good and a common resource gooD.​

Which of the following is false?

The ____ is the government agency with the task of developing and enforcing policies that are aimed at protecting the environment.

​Exhibit 8-1 -Refer to Exhibit 8-1. Suppose that education provides spillover benefits to the community as illustrated in the diagram. Based on this information, we can say that:

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:

If there are significant external benefits associated with the consumption of a product, it can be said that the private benefit to the consumer ____ the relative importance of this product to society and output should ____ to move toward the efficient situation.

Transaction costs are the cost of negotiating and executing an exchange.

The key explanation for the prevalence of waterway pollution is:

An negative externality is present whenever:

In the health insurance field, asymmetric information creates problems _____ insurance contracts are signed; moral hazard causes problems_____ insurance contracts are signed.

Which of the following goods is least likely to be provided by the private sector?

Increase in the number of transactors makes it difficult to negotiate private agreements for environmental goods.

What is the difference between private and social costs?

An ideal pollution control policy:

An externality occurs when:

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

Moral hazard occurs when an informed party benefits in an exchange by taking advantage of knowing more than the other party.

According to the Coase Theorem, private solutions to externalities can lead to the socially efficient outcome when: I.transaction costs are negligible II.property rights are clearly defined IiI.the number of parties involved is small

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

Differentiate between a public good and a common resource gooD.

Exhibit 8-1 -Refer to Exhibit 8-1. Suppose that education provides spillover benefits to the community as illustrated in the diagram. Based on this information, we can say that:

If there are significant external benefits associated with the consumption of a product, it can be said that the private benefit to the consumer the relative importance of this product to society and output should to move toward the efficient situation.

In the health insurance field, asymmetric information creates problems _ insurance contracts are signed; moral hazard causes problems_ insurance contracts are signed.