Exam 21: Market Failures, Government Failures, and Rent Seeking

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

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 According to Figure 13.3, the market attains equilibrium before the tax at:

_____ occurs when unobservable qualities are valued incorrectly because of a lack of information.

The figure given below shows the demand and supply curves of steel.S_p is the private supply curve, and S_s is the social supply curve that includes both private costs and external costs. Figure 13.2 According to Figure 13.2:

When legislators support one another's project in order to ensure support for their own, it is referred to as:

Consumers in used car markets can very easily differentiate between high-quality and low-quality cars.

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

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.If each fisherman decides whether or not to fish based on the average catch, how many boats per hour will go out to fish?

The free rider problem arises when a good is:

If a gas station selling gasoline is asked to incorporate the pollution costs, its supply curve will shift to the right.

The government should subsidize the production of goods which generate a positive externality.

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:

When negative externalities exist in production:

Which of the following may be explained by adverse selection?

A pollution tax has the effect of reducing the costs of production for a firm, leading to a rightward shift of the supply curve.

As opposed to economists like Tinbergen and Galbraith, the "public choice" school argues that:

For which of the following goods will the free rider problem arise?

Suppose the American Medical Association has been able to persuade the Congress to pass a no-fault insurance law protecting doctors from malpractice suits.The reduction in costs to doctors is a rent.

A market in which adverse selection occurs is often called a lemons market.

When the government imposes a tax on production of a commodity: