Question 1

Even if society is producing a combination of goods and services on the production possibilities curve,it may not be producing the optimal mix of output.

Accepted Answer

A) True 
 B)False

Question 2

The free-rider dilemma is associated with:

Accepted Answer

A)   Private goods.
B)   Public goods.
C)   Externalities.
D)   Market power.E) All of the above
F) None of the above

Question 3

Externalities are the:

Accepted Answer

A)   Domestic economic impact of foreign events.
B)   Difference between social and private costs or benefits.
C)   Outside costs that producers absorb.
D)   Effects of government actions on the private sector.E) All of the above
F) B) and D)

Question 4

Sources of microeconomic market failure include public goods,externalities,and market power.

Accepted Answer

A) True 
 B)False

Question 5

The costs of lead contamination have been estimated to be $1 billion for medical care of those sickened by lead,plumbing repairs,and reduced earnings of those affected by lead.This $1 billion can best be classified as:

Accepted Answer

A)   The benefits of government intervention.
B)   The costs of government intervention.
C)   Social costs of market failure.
D)   Social costs of government failure.E) C) and D)
F) B) and D)

Question 6

Figure 9.3:   
-In Figure 9.3,if the firm chooses a production method that results in zero external costs,the rate of output will be:

Accepted Answer

A)   Less than 200 units.
B)   200 units.
C)   320 units.
D)   Greater than 320 units.E) A) and B)
F) None of the above

Question 7

Even if external costs or benefits exist,a private firm will allocate its resources and operate its plant in such a way as to maximize social welfare.

Accepted Answer

A) True 
 B)False

Question 8

The most desirable combination of output attainable with available resources,technology and social values is known as the:

Accepted Answer

A)   Economic choice of output.
B)   Efficient choice of production.
C)   Preferred output choice.
D)   Optimal mix of output.E) None of the above
F) A) and B)

Question 9

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s) below.
Table 9.1-Costs of reducing water pollution 
-In Table 9.1,what is the marginal social benefit (in dollars per PPM) of reducing pollution rates from 25 to 10 PPM?

Accepted Answer

A)   $1
B)   $2
C)   $3
D)   $30E) B) and C)
F) A) and B)

Question 10

Which of the following is most likely to have social demand greater than market demand?

Accepted Answer

A)   Health services
B)   Cars
C)   Housing
D)   CigarettesE) A) and B)
F) C) and D)

Question 11

An emission charge can be used to:

Accepted Answer

A)   Reduce the difference between social and private costs.
B)   Encourage firms to externalize pollution costs.
C)   Encourage the equitable distribution of goods.
D)   Reduce the abuses of market power.E) A) and D)
F) B) and C)

Question 12

The tendency for the market to under produce public goods and overproduce private goods results from:

Accepted Answer

A)   the law of diminishing returns.
B)   the fact that people are reluctant to buy what they can get free.
C)   public goods are not as important as private goods.
D)   the law of conservation of matter and energy.E) A) and C)
F) A) and B)

Question 13

Market power is considered to be a market failure because firms with market power:

Accepted Answer

A)   Do not respond to consumer demand.
B)   Tend to ignore external costs.
C)   Produce less output than is socially optimal.
D)   Charge a lower price than is socially optimal.E) B) and C)
F) A) and B)

Question 14

Which of the following is most likely a public good?

Accepted Answer

A)   A park
B)   Electricity
C)   A computer
D)   Social Security paymentsE) A) and B)
F) C) and D)

Question 15

If you play your music too loud and your neighbor cannot study,this is an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following does not explain why the market sometimes fails to produce the optimal mix of output?

Accepted Answer

A)   Some producers have market power.
B)   Public goods can have free-riders.
C)   Private goods cannot be consumed jointly.
D)   There are externalities associated with production.E) C) and D)
F) B) and D)

Question 17

If the economy relies entirely on markets to answer the WHAT question,it tends to:

Accepted Answer

A)   Overproduce private goods and overproduce public goods.
B)   Overproduce private goods and under produce public goods.
C)   Under produce private goods and overproduce public goods.
D)   Under produce private goods and under produce public goods.E) A) and B)
F) B) and C)

Question 18

One News Wire article in the text carries the headline "Forced Recycling Is a Waste." If the city forces people to recycle,which type of market failure is it attempting to correct?

Accepted Answer

A)   Public goods.
B)   Externalities.
C)   Market power.
D)   Inequity.E) C) and D)
F) A) and C)

Question 19

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s) below.
Table 9.1-Costs of reducing water pollution 
-In Table 9.1,which of the following explains why the lake should not be made entirely free of pollution?

Accepted Answer

A)   Society cannot clean up the lake
B)   There would be no benefit in making the lake completely clean
C)   The total social cost would exceed the total social benefit of completely cleaning the lake
D)   The marginal social costs of reaching 0 PPM are greater than the marginal social benefits from doing soE) B) and C)
F) A) and C)

Question 20

An individual firm will not normally have any Incentive to internalize external costs because to do so would;

Accepted Answer

A)   make it subject to government regulation.
B)   cause its MC curve to shift to the right.
C)   put it at a competitive disadvantage to rival producers.
D)   not give it much public relations help with the public.E) A) and B)
F) A) and C)

Exam 9: Government Intervention

One News Wire article in the text carries the headline "Forced Recycling Is a Waste." If the city forces people to recycle,which type of market failure is it attempting to correct?

Correct Answer
verified

Which of the following is most likely a public good?

Correct Answer
verified

Sources of microeconomic market failure include public goods,externalities,and market power.

Correct Answer
verified

Even if society is producing a combination of goods and services on the production possibilities curve,it may not be producing the optimal mix of output.

Correct Answer
verified

Market power is considered to be a market failure because firms with market power:

Correct Answer
verified

The free-rider dilemma is associated with:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the economy relies entirely on markets to answer the WHAT question,it tends to:

Correct Answer
verified

The most desirable combination of output attainable with available resources,technology and social values is known as the:

Correct Answer
verified

Externalities are the:

Correct Answer
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If you play your music too loud and your neighbor cannot study,this is an example of a negative externality.

Correct Answer
verified

An individual firm will not normally have any Incentive to internalize external costs because to do so would;

Correct Answer
verified

Which of the following does not explain why the market sometimes fails to produce the optimal mix of output?

Correct Answer
verified

An emission charge can be used to:

Correct Answer
verified

Which of the following is most likely to have social demand greater than market demand?

Correct Answer
verified

The tendency for the market to under produce public goods and overproduce private goods results from:

Correct Answer
verified

Figure 9.3: -In Figure 9.3,if the firm chooses a production method that results in zero external costs,the rate of output will be:

Correct Answer
verified

The costs of lead contamination have been estimated to be $1 billion for medical care of those sickened by lead,plumbing repairs,and reduced earnings of those affected by lead.This $1 billion can best be classified as:

Correct Answer
verified

Even if external costs or benefits exist,a private firm will allocate its resources and operate its plant in such a way as to maximize social welfare.

Correct Answer
verified

Exam 9: Government Intervention

One News Wire article in the text carries the headline "Forced Recycling Is a Waste." If the city forces people to recycle,which type of market failure is it attempting to correct?

Correct AnswerverifiedShow Answer

Which of the following is most likely a public good?

Correct AnswerverifiedShow Answer

Sources of microeconomic market failure include public goods,externalities,and market power.

Correct AnswerverifiedShow Answer

Even if society is producing a combination of goods and services on the production possibilities curve,it may not be producing the optimal mix of output.

Correct AnswerverifiedShow Answer

Market power is considered to be a market failure because firms with market power:

Correct AnswerverifiedShow Answer

The free-rider dilemma is associated with:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the economy relies entirely on markets to answer the WHAT question,it tends to:

Correct AnswerverifiedShow Answer

The most desirable combination of output attainable with available resources,technology and social values is known as the:

Correct AnswerverifiedShow Answer

Externalities are the:

Correct AnswerverifiedShow Answer

If you play your music too loud and your neighbor cannot study,this is an example of a negative externality.

Correct AnswerverifiedShow Answer

An individual firm will not normally have any Incentive to internalize external costs because to do so would;

Correct AnswerverifiedShow Answer

Which of the following does not explain why the market sometimes fails to produce the optimal mix of output?

Correct AnswerverifiedShow Answer

An emission charge can be used to:

Correct AnswerverifiedShow Answer

Which of the following is most likely to have social demand greater than market demand?

Correct AnswerverifiedShow Answer

The tendency for the market to under produce public goods and overproduce private goods results from:

Correct AnswerverifiedShow Answer

Figure 9.3: -In Figure 9.3,if the firm chooses a production method that results in zero external costs,the rate of output will be:

Correct AnswerverifiedShow Answer

The costs of lead contamination have been estimated to be $1 billion for medical care of those sickened by lead,plumbing repairs,and reduced earnings of those affected by lead.This $1 billion can best be classified as:

Correct AnswerverifiedShow Answer

Even if external costs or benefits exist,a private firm will allocate its resources and operate its plant in such a way as to maximize social welfare.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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