Question 1

Classifying a good as rival means

Accepted Answer

A) that the good is produced in a competitive market. 
B) that there is a shortage of the good. 
C) that when one person consumes a unit of the good no one else can consume it. 
D) anyone who does not pay for the good cannot consume it. 
A) that the good is produced in a competitive market. 
B) that there is a shortage of the good. 
C) that when one person consumes a unit of the good no one else can consume it. 
D) anyone who does not pay for the good cannot consume it. C

Question 2

It is difficult for a private market to provide the economically efficient quantity of a public good because

Accepted Answer

A) by law governments cannot use cost-benefit analysis to determine this quantity. 
B) public goods produce positive and negative externalities. 
C) individual preferences are not revealed in the market for the good. 
D) it is too expensive to produce the necessary amount of the good. 
A) by law governments cannot use cost-benefit analysis to determine this quantity. 
B) public goods produce positive and negative externalities. 
C) individual preferences are not revealed in the market for the good. 
D) it is too expensive to produce the necessary amount of the good. C

Question 3

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good.

Accepted Answer

A) True 
 B)False  True

Question 4

The basic cause of deadweight losses from the existence of common resources and externalities is

Accepted Answer

A) a lack of clearly defined and enforceable property rights. 
B) the self-interested rationality of human beings. 
C) the use of a market system to deal with scarcity. 
D) the absence of government intervention. 
A) a lack of clearly defined and enforceable property rights. 
B) the self-interested rationality of human beings. 
C) the use of a market system to deal with scarcity. 
D) the absence of government intervention.

Question 5

Which of the following best illustrates the free rider problem?

Accepted Answer

A) Since no one owns elephants and elephants are valued for their hide,meat,and ivory,elephants can be hunted to extinction. 
B) For every purchase of a $30 fare card,you are entitled to five free bus rides. 
C) If your neighbors professionally landscape their front yards,it is likely that the market value of your property will increase. 
D) All three homeowners in a quiet cul-de-sac have expressed the desirability of security lighting in the common parking area.One of the homeowners installs the lighting and asks you to contribute toward the cost.You choose not to contribute. 
A) Since no one owns elephants and elephants are valued for their hide,meat,and ivory,elephants can be hunted to extinction. 
B) For every purchase of a $30 fare card,you are entitled to five free bus rides. 
C) If your neighbors professionally landscape their front yards,it is likely that the market value of your property will increase. 
D) All three homeowners in a quiet cul-de-sac have expressed the desirability of security lighting in the common parking area.One of the homeowners installs the lighting and asks you to contribute toward the cost.You choose not to contribute.

Question 6

Figure 5-7  
-Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A) the supply of pollution reduction curve. 
B) the demand for pollution reduction curve. 
C) the negative externality curve. 
D) the value of pollution reduction curve. 
A) the supply of pollution reduction curve. 
B) the demand for pollution reduction curve. 
C) the negative externality curve. 
D) the value of pollution reduction curve.

Question 7

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a source of market failure?

Accepted Answer

A) unforeseen circumstances which leads to the bankruptcy of many firms 
B) a lack of government intervention in a market 
C) incomplete property rights or inability to enforce property rights 
D) an inequitable income distribution 
A) unforeseen circumstances which leads to the bankruptcy of many firms 
B) a lack of government intervention in a market 
C) incomplete property rights or inability to enforce property rights 
D) an inequitable income distribution

Question 9

When there is an externality in a market

Accepted Answer

A) the externality will move the market to an economically efficient equilibrium. 
B) the externality will cause the market price to be less than or greater than the equilibrium price. 
C) the government should use price controls to enable the market to reach equilibrium. 
D) government intervention may increase economic efficiency. 
A) the externality will move the market to an economically efficient equilibrium. 
B) the externality will cause the market price to be less than or greater than the equilibrium price. 
C) the government should use price controls to enable the market to reach equilibrium. 
D) government intervention may increase economic efficiency.

Question 10

Which of the following must be present to reach a private solution to an externality problem?

Accepted Answer

A) A majority of the parties affected by the externality must agree to a solution. 
B) The transactions costs to negotiate a solution must be relatively low. 
C) The total number of people,creators of the problem and those affected,must be relatively large to justify negotiating a solution. 
D) The government must approve the solution for it to be a legal solution. 
A) A majority of the parties affected by the externality must agree to a solution. 
B) The transactions costs to negotiate a solution must be relatively low. 
C) The total number of people,creators of the problem and those affected,must be relatively large to justify negotiating a solution. 
D) The government must approve the solution for it to be a legal solution.

Question 11

What are property rights?

Accepted Answer

A) the title to ownership of any physical asset 
B) a legal document verifying ownership of intangible assets 
C) the rights individuals or firms have to the exclusive use of their property,including the right to buy or sell it 
D) the right of the government to appropriate private assets for the good of society 
A) the title to ownership of any physical asset 
B) a legal document verifying ownership of intangible assets 
C) the rights individuals or firms have to the exclusive use of their property,including the right to buy or sell it 
D) the right of the government to appropriate private assets for the good of society

Question 12

The first economist to systematically analyze market failure was

Accepted Answer

A) Adam Smith. 
B) Ronald Coase. 
C) A.C.Pigou. 
D) J.E.Meade. 
A) Adam Smith. 
B) Ronald Coase. 
C) A.C.Pigou. 
D) J.E.Meade.

Question 13

If electric utilities continually reduce their emissions of sulfur dioxide

Accepted Answer

A) the utilities will eventually be forced to go out of business. 
B) the marginal benefit of additional emissions will rise. 
C) the marginal cost of further emissions will rise. 
D) the total benefit of sulfur dioxide emissions will fall. 
A) the utilities will eventually be forced to go out of business. 
B) the marginal benefit of additional emissions will rise. 
C) the marginal cost of further emissions will rise. 
D) the total benefit of sulfur dioxide emissions will fall.

Question 14

Which of the following is an example of a product that is nonexcludable and rival?

Accepted Answer

A) free concert (with limited seating)in a park 
B) national defense 
C) automobiles 
D) flu vaccinations 
A) free concert (with limited seating)in a park 
B) national defense 
C) automobiles 
D) flu vaccinations

Question 15

A public good is

Accepted Answer

A) a good that is rivalrous and excludable. 
B) a good that is nonrivalrous and nonexcludable. 
C) a good that is nonrivalrous and excludable. 
D) a good that is rivalrous and nonexcludable. 
A) a good that is rivalrous and excludable. 
B) a good that is nonrivalrous and nonexcludable. 
C) a good that is nonrivalrous and excludable. 
D) a good that is rivalrous and nonexcludable.

Question 16

The European Union established a cap-and-trade system which was designed to

Accepted Answer

A) eliminate air pollution and greenhouse gases by the year 2020. 
B) reduce carbon dioxide emissions. 
C) provide fast growing developing countries with the technology to reduce their carbon emissions. 
D) remove all taxes from polluting industries. 
A) eliminate air pollution and greenhouse gases by the year 2020. 
B) reduce carbon dioxide emissions. 
C) provide fast growing developing countries with the technology to reduce their carbon emissions. 
D) remove all taxes from polluting industries.

Question 17

The Wilfer Resort Hotel has a spectacular view of a pine forest along a river bank.Suppose a commercial logger has purchased the pine forest and is planning to clear-cut the forest in a way that has a negative impact on the resort.Can the two parties arrive at a Coasian solution and if so what might that solution be?

Accepted Answer

In this case,since there are only two pa

Question 18

The free rider problem refers to a situation in which

Accepted Answer

A) people consume a pure public good without payment,even though the good may not be produced if no one chooses to pay. 
B) the marginal cost of allowing additional consumers to consume a public good is zero. 
C) high income individuals subsidize the production of goods,such as education,that make society better off. 
D) markets fail to allocate resources efficiently when benefits outweigh costs. 
A) people consume a pure public good without payment,even though the good may not be produced if no one chooses to pay. 
B) the marginal cost of allowing additional consumers to consume a public good is zero. 
C) high income individuals subsidize the production of goods,such as education,that make society better off. 
D) markets fail to allocate resources efficiently when benefits outweigh costs.

Question 19

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is ________ to achieve an ________ amount of pollution.

Accepted Answer

A) necessary;equitable 
B) necessary;efficient 
C) not necessary;equitable 
D) not necessary;efficient 
A) necessary;equitable 
B) necessary;efficient 
C) not necessary;equitable 
D) not necessary;efficient

Question 20

Determine if each of the products below displays any of the following characteristics:
(i)rivalry
(ii)nonrivalry
(iii)excludability
(iv)nonexcludability.
a.a freeway during peak commute hours
b.an online college course
c.infectious disease prevention
d.open source software such as Linux
e.a movie showing at Century Theatres

Accepted Answer

a.rivalry due to traffic congestion alth

Exam 5: Externalities, environmental Policy, and Public Goods

Classifying a good as rival means

It is difficult for a private market to provide the economically efficient quantity of a public good because

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good.

The basic cause of deadweight losses from the existence of common resources and externalities is

Which of the following best illustrates the free rider problem?

Figure 5-7 -Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

Which of the following is a source of market failure?

When there is an externality in a market

Which of the following must be present to reach a private solution to an externality problem?

What are property rights?

The first economist to systematically analyze market failure was

If electric utilities continually reduce their emissions of sulfur dioxide

Which of the following is an example of a product that is nonexcludable and rival?

A public good is

The European Union established a cap-and-trade system which was designed to

The free rider problem refers to a situation in which

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is ________ to achieve an ________ amount of pollution.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is to achieve an amount of pollution.