Exam 48: Market Failures, Government Failures, and Rent Seeking

After John discovered he had a serious illness, he immediately purchased health insurance without disclosing his illness to the insurance company.This is an example of adverse selection.

Private property rights help to ensure an efficient use of resources, because owners of the resources must bear the costs of inefficient use.

Suppose that the current price of a marketable permit to emit one ton of gunk is $60.For firm A, the marginal cost of reducing one ton of gunk is $50.For firm B, the marginal cost of reducing one ton of gunk is $70.Under a marketable permit system:

The cost borne by an individual user to switch to another network is less if the network which he is using is large.

The figure given below shows the demand and supply curves of automobiles. Figure 13.3 In the figure, D: Demand curve of automobiles S: Supply of automobiles prior to the tax S+t: Supply of automobiles after the tax In Figure 13.3, the amount of tax levied by the government is equal to:

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2 Refer to Table 13.2.Suppose fish sells for $1 per pound.What is the socially optimal number of boats that will maximize the profit earned by the fishermen?

Which of the following wouldhelp to minimize adverse selection?

The good for which neither the principle of mutual excludability nor the principle of rivalry applies is referred to as a:

When negative externalities exist in a market, that market will produce too little output compared to the socially efficient level of output.

The figure below shows the demand and supply curves in the market for elementary education. Figure 13.1 In the figure, D: Private demand curve for elementary education D + s: Demand curve which includes public benefits S: Supply curve of education Price and Quantity have been taken on vertical and horizontal axes respectively. In Figure 13.1, D represents the private demand for education, and D+s represents the demand including the public benefits of education.According to the figure, the optimal subsidy is equal to:

Tragedy of commons refers to:

When a firm increases its short-run supplies only by hiring more labor, other inputs remaining unchanged, eventually:

It is often impossible for a business firm to determine its private costs of production.

Moral hazard is the term used to describe the situation in which:

In the case of positive externalities, too many people consume and produce the good compared to what is desired by society.

When increase in capital is accompanied by new knowledge and by increasing number of laborers, the producer experiences increasing returns.

Why does an existing less efficient technology drive out a new more efficient technology?

The following table shows the costs and benefit of producing a commodity. Table 13.1 According to Table 13.1, at the free market equilibrium:

Which of the following statements is true?

Which of following would help minimize moral hazard in the financial market?