Question 1

(Last Word) A cap-and-trade program:

Accepted Answer

A)   assigns a property right to the atmosphere.
B)   mandates that every firm individually cut its emissions to below a certain level.
C)   assigns a property right to polluting the atmosphere.
D)   is easy to establish and enforce.E) None of the above
F) B) and D)

Question 2

Demand-side market failures occur when:

Accepted Answer

A)   the demand and supply curves don't reflect consumers' full willingness to pay for a good or service.
B)   the demand and supply curves don't reflect the full cost of producing a good or service.
C)   government imposes a tax on a good or service.
D)   a good or service is not produced because no one demands it.E) A) and B)
F) A) and D)

Question 3

That government that has the smallest budget is the most efficient in the economic sense.

Accepted Answer

A) True 
 B)False

Question 4

If a good that generates positive externalities were produced and priced to take into account these spillover benefits,then its:

Accepted Answer

A)   price and output would increase.
B)   output would increase,but price would remain constant.
C)   price would increase and output would decrease.
D)   price would increase,but output would remain constant.E) A) and B)
F) A) and C)

Question 5

Graphically,if the supply and demand curves are linear,consumer surplus is measured as the triangle:

Accepted Answer

A)   under the demand curve and below the actual price.
B)   under the demand curve and above the actual price.
C)   above the supply curve and above the actual price.
D)   above the supply curve and below the actual price.E) A) and B)
F) All of the above

Question 6

Along a supply curve,product price and producer surplus are inversely related.

Accepted Answer

A) True 
 B)False

Question 7

Answer the question on the basis of the following information for four highway programs of increasing scope.All figures are in millions of dollars.  Program‾ABCDTotal Cost‾$261220Total Benefit‾$9162123\begin{array}{c}\begin{array}{c}\underline{	ext {Program}}\	ext {A}\	ext {B}\	ext {C}\	ext {D}\end{array}\begin{array}{c}\underline{	ext {Total Cost}}\\$ 2 \6\12\20 \end{array}\begin{array}{c}\underline{	ext {Total Benefit}}\\$ 9 \16 \21 \23\end{array}\end{array}Program​ABCD​Total Cost​$261220​Total Benefit​$9162123​​ 
 On the basis of the data we can say that:

Accepted Answer

A)   Program D is the most efficient on economic grounds.
B)   Program C is the most efficient on economic grounds.
C)   Program B is the most efficient on economic grounds.
D)   Program A is the most efficient on economic grounds. E) A) and B)
F) None of the above

Question 8

If one person's consumption of a good does not preclude another's consumption,the good is said to be:

Accepted Answer

A)   nonrival in consumption.
B)   rival in consumption.
C)   nonexcludable.
D)   excludable.E) All of the above
F) A) and C)

Question 9

Allocative efficiency occurs where the collective sum of consumer and producer surplus is at a maximum.

Accepted Answer

A) True 
 B)False

Question 10

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Accepted Answer

A)   Frozen yogurt.
B)   Bubble gum.
C)   Microwave popcorn.
D)   Courts of law.E) B) and D)
F) B) and C)

Question 11

At the output where the combined amounts of consumer and producer surplus are largest:

Accepted Answer

A)   the areas of consumer and producer surplus necessarily are equal.
B)   the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.
C)   consumer surplus exceeds producer surplus by the greatest amount.
D)   marginal benefit exceeds marginal cost by the greatest amount.E) A) and B)
F) A) and C)

Question 12

People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay.Because those who put up lights are unable to charge others to view them,they don't put up as many lights as people would like.This is an example of a:

Accepted Answer

A)   negative externality.
B)   supply-side market failure.
C)   demand-side market failure.
D)   government failure.E) C) and D)
F) None of the above

Question 13

What two conditions must hold for a competitive market to produce efficient outcomes?

Accepted Answer

A)   Demand curves must reflect all costs of production,and supply curves must reflect consumers' full willingness to pay.
B)   Supply curves must reflect all costs of production,and demand curves must reflect consumers' full willingness to pay.
C)   Firms must minimize production costs,and consumers must minimize total expenditures.
D)   Firms must maximize profits,and consumers must all pay prices equal to their maximum willingness to pay.E) None of the above
F) A) and D)

Question 14

As it applies to insurance,the moral hazard problem is the tendency for:

Accepted Answer

A)   those most likely to collect on insurance to buy it.
B)   those who buy insurance to take less precaution in avoiding the insured risk.
C)   sellers to price discriminate.
D)   sellers to restrict output and charge high prices.E) A) and B)
F) B) and D)

Question 15

Along a demand curve,product price and consumer surplus are inversely related.

Accepted Answer

A) True 
 B)False

Question 16

Supply-side market failures occur because it is impossible in certain cases for sellers to charge consumers what they are willing to pay for a product.

Accepted Answer

A) True 
 B)False

Question 17

Supply-side market failures occur when:

Accepted Answer

A)   the demand and supply curves don't reflect consumers' full willingness to pay for a good or service.
B)   the demand and supply curves don't reflect the full cost of producing a good or service.
C)   government regulates production of a good or service.
D)   a good or service is not supplied because no one wants it.E) All of the above
F) B) and D)

Question 18

At the output level defining allocative efficiency:

Accepted Answer

A)   the areas of consumer and producer surplus necessarily are equal.
B)   marginal benefit exceeds marginal cost by the greatest amount.
C)   consumer surplus exceeds producer surplus by the greatest amount.
D)   the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.E) A) and C)
F) All of the above

Question 19

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8,respectively,for the third unit of a public good.Also,assume that the marginal cost of the third unit is $17.We can conclude that:

Accepted Answer

A)   the third unit should not be produced.
B)   the third unit should be produced.
C)   zero units should be produced.
D)   4 units should be produced.E) B) and C)
F) A) and D)

Question 20

Graphically,producer surplus is measured as the area:

Accepted Answer

A)   under the demand curve and below the actual price.
B)   under the demand curve and above the actual price.
C)   above the supply curve and above the actual price.
D)   above the supply curve and below the actual price.E) None of the above
F) A) and B)

Exam 4: Market Failures: Public Goods and Externalities

As it applies to insurance,the moral hazard problem is the tendency for:

Correct Answer
verified

Supply-side market failures occur because it is impossible in certain cases for sellers to charge consumers what they are willing to pay for a product.

Correct Answer
verified

Along a demand curve,product price and consumer surplus are inversely related.

Correct Answer
verified

Allocative efficiency occurs where the collective sum of consumer and producer surplus is at a maximum.

Correct Answer
verified

Graphically,producer surplus is measured as the area:

Correct Answer
verified

Supply-side market failures occur when:

Correct Answer
verified

(Last Word) A cap-and-trade program:

Correct Answer
verified

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8,respectively,for the third unit of a public good.Also,assume that the marginal cost of the third unit is $17.We can conclude that:

Correct Answer
verified

If a good that generates positive externalities were produced and priced to take into account these spillover benefits,then its:

Correct Answer
verified

People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay.Because those who put up lights are unable to charge others to view them,they don't put up as many lights as people would like.This is an example of a:

Correct Answer
verified

What two conditions must hold for a competitive market to produce efficient outcomes?

Correct Answer
verified

If one person's consumption of a good does not preclude another's consumption,the good is said to be:

Correct Answer
verified

Along a supply curve,product price and producer surplus are inversely related.

Correct Answer
verified

At the output level defining allocative efficiency:

Correct Answer
verified

Correct Answer
verified

At the output where the combined amounts of consumer and producer surplus are largest:

Correct Answer
verified

That government that has the smallest budget is the most efficient in the economic sense.

Correct Answer
verified

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Correct Answer
verified

Graphically,if the supply and demand curves are linear,consumer surplus is measured as the triangle:

Correct Answer
verified

Demand-side market failures occur when:

Correct Answer
verified

Exam 4: Market Failures: Public Goods and Externalities

As it applies to insurance,the moral hazard problem is the tendency for:

Correct AnswerverifiedShow Answer

Supply-side market failures occur because it is impossible in certain cases for sellers to charge consumers what they are willing to pay for a product.

Correct AnswerverifiedShow Answer

Along a demand curve,product price and consumer surplus are inversely related.

Correct AnswerverifiedShow Answer

Allocative efficiency occurs where the collective sum of consumer and producer surplus is at a maximum.

Correct AnswerverifiedShow Answer

Graphically,producer surplus is measured as the area:

Correct AnswerverifiedShow Answer

Supply-side market failures occur when:

Correct AnswerverifiedShow Answer

(Last Word) A cap-and-trade program:

Correct AnswerverifiedShow Answer

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8,respectively,for the third unit of a public good.Also,assume that the marginal cost of the third unit is $17.We can conclude that:

Correct AnswerverifiedShow Answer

If a good that generates positive externalities were produced and priced to take into account these spillover benefits,then its:

Correct AnswerverifiedShow Answer

People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay.Because those who put up lights are unable to charge others to view them,they don't put up as many lights as people would like.This is an example of a:

Correct AnswerverifiedShow Answer

What two conditions must hold for a competitive market to produce efficient outcomes?

Correct AnswerverifiedShow Answer

If one person's consumption of a good does not preclude another's consumption,the good is said to be:

Correct AnswerverifiedShow Answer

Along a supply curve,product price and producer surplus are inversely related.

Correct AnswerverifiedShow Answer

At the output level defining allocative efficiency:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the output where the combined amounts of consumer and producer surplus are largest:

Correct AnswerverifiedShow Answer

That government that has the smallest budget is the most efficient in the economic sense.

Correct AnswerverifiedShow Answer

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Correct AnswerverifiedShow Answer

Graphically,if the supply and demand curves are linear,consumer surplus is measured as the triangle:

Correct AnswerverifiedShow Answer

Demand-side market failures occur when:

Correct AnswerverifiedShow Answer

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