Question 1

Disputes over resource ownership are the domain of

Accepted Answer

A) property law 
B) antitrust law 
C) tort law 
D) contract law 
E) constitutional law

Question 2

When a negative externality exists,the marginal social cost curve

Accepted Answer

A) is the same as the market supply curve 
B) is the same as the market demand curve 
C) lies above the market demand curve 
D) lies below the market supply curve 
E) lies above the market supply curve.

Question 3

A contract

Accepted Answer

A) is an example of a side payment 
B) eliminates the possibility of simultaneous exchange 
C) is worthless unless it refers to a perfectly competitive market 
D) often requires one party to do something first,and the other party to do something later 
E) can be enforced through the application of criminal law

Question 4

The two defining characteristics of pure private goods are

Accepted Answer

A) nonrivalry and excludability 
B) positive externalities and efficiency 
C) nonexcludability and nonrivalry 
D) efficiency and profitability 
E) rivalry and excludability

Question 5

Single-price monopoly is inefficient because

Accepted Answer

A) side payments are not made 
B) a monopoly firm charges a price that exceeds its marginal cost 
C) a monopoly firm charges a price equal to its marginal cost 
D) a monopoly firm produces the quantity at which P = MR = MC. 
E) a monopoly firm produces the quantity at which MR = MC.

Question 6

Robbery reduces economic efficiency by

Accepted Answer

A) creating voluntary exchanges 
B) decreasing government spending 
C) increasing unemployment 
D) creating involuntary exchanges 
E) lowering the number of potential Pareto improvements

Question 7

Talking loudly in a library creates

Accepted Answer

A) a market for noise 
B) a positive externality 
C) a side payment 
D) a public good 
E) a negative externality

Question 8

If production creates a negative externality,social welfare can be increased through

Accepted Answer

A) antitrust law 
B) subsidization 
C) taxation 
D) free market policies 
E) allocative efficiency

Question 9

If firms make agreements that reduce the amount of competition in a market,

Accepted Answer

A) the market price usually falls 
B) they would face penalties under antitrust legislation 
C) mergers will result 
D) there must be diseconomies of scale in the industry 
E) they would face penalties under contract law

Question 10

A good is nonexcludable if the benefits derived from consuming it cannot be easily denied to those who do not purchase it.

Accepted Answer

A) True 
 B)False

Question 11

When regulating a natural monopoly,government officials

Accepted Answer

A) can set an efficient price,but the firm will suffer a loss 
B) can arrange a Pareto improvement by leaving the firm alone 
C) should force the firm to set a price equal to minimum marginal cost 
D) should force the firm to set a price equal to minimum long-run average total cost 
E) will increase efficiency if they force the firm to produce where MR = MC.

Question 12

If property rights are poorly defined

Accepted Answer

A) no one can really "own" property 
B) time and energy are wasted in disputes about ownership 
C) most exchanges are involuntary exchanges 
D) consumer surplus cannot exist 
E) producer surplus cannot exist

Question 13

To achieve economic efficiency,a pure public good

Accepted Answer

A) would have to be provided at marginal cost 
B) would have to be provide at marginal revenue 
C) should never be provided 
D) should be provided to everyone 
E) would have to be provide free of charge

Question 14

-Suppose that production of the product in Figure 14-2 imposes a cost on society of $7.00 per unit.If the government imposes a tax of $7.00 per unit of output on the producer the equilibrium price will

Accepted Answer

A) rise by $7.00 
B) fall by $7.00 
C) rise by $2.50 
D) fall by $2.50 
E) not change

Question 15

Suppose that production of a good creates a negative externality.An excise tax equivalent to the difference between the marginal social cost and the marginal private cost of production can correct the inefficiency.

Accepted Answer

A) True 
 B)False

Question 16

Contracts reduce the level of specialization in an economy.

Accepted Answer

A) True 
 B)False

Question 17

Road traffic

Accepted Answer

A) should be provided free of charge 
B) is efficient on a toll road 
C) creates a positive externality 
D) is efficient in London,England 
E) creates a negative externality

Question 18

The noise inflicted on bystanders by users of chain saws,lawn mowers,and motorcycles is an example of

Accepted Answer

A) a positive externality 
B) a public good 
C) nonexcludability 
D) marginal private benefit exceeding marginal social benefit 
E) marginal social cost and the free-rider problem

Question 19

If a widow is harmed by mail fraud,

Accepted Answer

A) she may be compensated under property law 
B) her legal action will be in the category of antitrust law 
C) she may be compensated under tort law 
D) this is a potential Pareto improvement 
E) an economic inefficiency has arisen

Question 20

The private sector of the economy produces mainly goods that are nonexcludable.

Accepted Answer

A) True 
 B)False

Exam 16: Governments Role in Economic Efficiency

Disputes over resource ownership are the domain of

When a negative externality exists,the marginal social cost curve

A contract

The two defining characteristics of pure private goods are

Single-price monopoly is inefficient because

Robbery reduces economic efficiency by

Talking loudly in a library creates

If production creates a negative externality,social welfare can be increased through

If firms make agreements that reduce the amount of competition in a market,

A good is nonexcludable if the benefits derived from consuming it cannot be easily denied to those who do not purchase it.

When regulating a natural monopoly,government officials

If property rights are poorly defined

To achieve economic efficiency,a pure public good

-Suppose that production of the product in Figure 14-2 imposes a cost on society of $7.00 per unit.If the government imposes a tax of $7.00 per unit of output on the producer the equilibrium price will

Suppose that production of a good creates a negative externality.An excise tax equivalent to the difference between the marginal social cost and the marginal private cost of production can correct the inefficiency.

Contracts reduce the level of specialization in an economy.

Road traffic

The noise inflicted on bystanders by users of chain saws,lawn mowers,and motorcycles is an example of

If a widow is harmed by mail fraud,

The private sector of the economy produces mainly goods that are nonexcludable.