Question 1

With MB1 and MC1,society's optimal amount of pollution moderation is: 1 and MC1,society's optimal amount of pollution moderation is:   A)  Q1. B)  Q2. C)  Q3. D)  Q4." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.E) C) and D)
F) A) and B)

Question 2

A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service.

Accepted Answer

A) True 
 B)False

Question 3

The external costs of severe air pollution are usually paid:

Accepted Answer

A)   by no one.
B)   by the producer alone.
C)   in part by the public through higher medical bills.
D)   totally by the consumers who purchase the product.E) B) and C)
F) C) and D)

Question 4

A market for pollution rights can be expected to:

Accepted Answer

A)   eliminate all pollution.
B)   produce a shortage of pollution.
C)   encourage potential polluters to increase emissions.
D)   provide potential polluters with a monetary incentive to reduce emissions.E) A) and B)
F) A) and C)

Question 5

A supply-side market failure occurs when supply curves do not reflect the full cost of producing a good or service.

Accepted Answer

A) True 
 B)False

Question 6

Supply-side market failure

Accepted Answer

A)   arises in situations in which a firm does not have to pay the full cost of producing its output.
B)   arises when it is impossible to charge consumers what they are willing to pay for a product.
C)   exists in equilibrium with supply-side market failure.
D)   happens only when the quantity of a good demanded is less than that which is supplied.E) B) and C)
F) A) and D)

Question 7

Which is a characteristic of a public good?

Accepted Answer

A)   the possibility of excluding payers from non-payers
B)   non-rivalry and non-excludability
C)   it is possible to withhold it from those who would not pay for it
D)   it is provided by the private sectorE) A) and B)
F) C) and D)

Question 8

Answer the question based on the following information.Way-Below Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism.The university is now considering several alternative levels of crime control.This table shows the expected annual costs and benefits of these alternatives.The marginal costs of additional levels of crime control are:

Accepted Answer

A)   $60,000 for Level Two.
B)   $20,000 for Level Three.
C)   $5,000 for Level Five.
D)   $10,000 for Levels Two,Three,Four,and Five.E) A) and B)
F) A) and C)

Question 9

Refer to the below supply and demand graph.Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective.If government decides to correct this externality with a subsidy to consumers,then the: 2 to D1. B)  supply curve will shift from S1 to S2. C)  demand curve will shift from D1 to D2. D)  supply curve will shift from S2 to S1." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   demand curve will shift from D2 to D1.
B)   supply curve will shift from S1 to S2.
C)   demand curve will shift from D1 to D2.
D)   supply curve will shift from S2 to S1.E) None of the above
F) A) and B)

Question 10

Answer the question based on the following information.Way-Below Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism.The university is now considering several alternative levels of crime control.This table shows the expected annual costs and benefits of these alternatives. 
Based on cost-benefit analysis,Way-Below Normal should undertake

Accepted Answer

A)   Two.
B)   Three.
C)   Four.
D)   Five.E) A) and B)
F) A) and C)

Question 11

From society's perspective,if MB2 and MC1 are relevant: 2 and MC1 are relevant:   A)  Q4 represents too little pollution moderation. B)  Q1 represents too little pollution moderation. C)  Q3 represents an optimal amount of pollution moderation. D)  none of these is true." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   Q4 represents too little pollution moderation.
B)   Q1 represents too little pollution moderation.
C)   Q3 represents an optimal amount of pollution moderation.
D)   none of these is true.E) A) and C)
F) C) and D)

Question 12

There is a positive relationship between equilibrium price and the amount of producer surplus.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information below: 
A government is considering undertaking one or more construction project(s) .The estimated marginal costs and benefits of each project are given in the above table.What is the total amount that the government should spend on construction project?

Accepted Answer

A)   $ 8 million.
B)   $ 11 million.
C)   $ 18 million.
D)   $ 19 million.E) A) and B)
F) None of the above

Question 14

Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.

Accepted Answer

A) True 
 B)False

Question 15

From society's perspective,if MB1 and MC2 are relevant: 1 and MC2 are relevant:   A)  Q4 represents too little pollution moderation. B)  Q1 represents too much pollution moderation. C)  Q2 represents an optimal amount of pollution moderation. D)  none of these is true." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   Q4 represents too little pollution moderation.
B)   Q1 represents too much pollution moderation.
C)   Q2 represents an optimal amount of pollution moderation.
D)   none of these is true.E) A) and D)
F) C) and D)

Question 16

There is little incentive for an individual firm to voluntarily internalize its negative externalities because to do so would:

Accepted Answer

A)   cause it to forgo the diseconomies of agglomeration.
B)   shift its cost curves downward.
C)   put it at a competitive disadvantage compared to rival producers.
D)   make it subject to emission or effluent fees.E) B) and D)
F) B) and C)

Question 17

Consumer surplus refers to:

Accepted Answer

A)   The total amount consumer pays for the product
B)   The area under the demand curve
C)   The price consumer pays for the product
D)   The difference between the total amount consumers pays for the product and the value of the purchase to the consumersE) A) and B)
F) A) and D)

Question 18

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) A) and B)
F) A) and C)

Question 19

Market failure

Accepted Answer

A)   does not occur in competitive markets.
B)   sometimes can occur in competitive markets.
C)   occurs only when markets underproduce.
D)   occurs only when markets overproduce.E) None of the above
F) A) and B)

Question 20

The Coase Theorem:

Accepted Answer

A)   applies only to circumstances in which externalities are extensive and bargaining costs are high.
B)   holds that the median voter will decide the outcome of elections.
C)   states that in some circumstances majority voting can yield inconsistent results.
D)   suggests that in some circumstances government intervention is not needed to resolve externality problems.E) All of the above
F) A) and D)

Exam 4: Market Failures: Public Goods and Externalities

A supply-side market failure occurs when supply curves do not reflect the full cost of producing a good or service.

Correct Answer
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A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service.

Correct Answer
verified

Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.

Correct Answer
verified

The external costs of severe air pollution are usually paid:

Correct Answer
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The Coase Theorem:

Correct Answer
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With MB₁ and MC₁,society's optimal amount of pollution moderation is:

Correct Answer
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Correct Answer
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From society's perspective,if MB₂ and MC₁ are relevant:

Correct Answer
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Which is a characteristic of a public good?

Correct Answer
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A market for pollution rights can be expected to:

Correct Answer
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There is a positive relationship between equilibrium price and the amount of producer surplus.

Correct Answer
verified

Refer to the below supply and demand graph.Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective.If government decides to correct this externality with a subsidy to consumers,then the:

Correct Answer
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From society's perspective,if MB₁ and MC₂ are relevant:

Correct Answer
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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

Refer to the information below: A government is considering undertaking one or more construction project(s) .The estimated marginal costs and benefits of each project are given in the above table.What is the total amount that the government should spend on construction project?

Correct Answer
verified

There is little incentive for an individual firm to voluntarily internalize its negative externalities because to do so would:

Correct Answer
verified

Supply-side market failure

Correct Answer
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Market failure

Correct Answer
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Correct Answer
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Consumer surplus refers to:

Correct Answer
verified

Exam 4: Market Failures: Public Goods and Externalities

A supply-side market failure occurs when supply curves do not reflect the full cost of producing a good or service.

Correct AnswerverifiedShow Answer

A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service.

Correct AnswerverifiedShow Answer

Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.

Correct AnswerverifiedShow Answer

The external costs of severe air pollution are usually paid:

Correct AnswerverifiedShow Answer

The Coase Theorem:

Correct AnswerverifiedShow Answer

With MB1 and MC1,society's optimal amount of pollution moderation is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

From society's perspective,if MB2 and MC1 are relevant:

Correct AnswerverifiedShow Answer

Which is a characteristic of a public good?

Correct AnswerverifiedShow Answer

A market for pollution rights can be expected to:

Correct AnswerverifiedShow Answer

There is a positive relationship between equilibrium price and the amount of producer surplus.

Correct AnswerverifiedShow Answer

Refer to the below supply and demand graph.Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective.If government decides to correct this externality with a subsidy to consumers,then the:

Correct AnswerverifiedShow Answer

From society's perspective,if MB1 and MC2 are relevant:

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

Refer to the information below: A government is considering undertaking one or more construction project(s) .The estimated marginal costs and benefits of each project are given in the above table.What is the total amount that the government should spend on construction project?

Correct AnswerverifiedShow Answer

There is little incentive for an individual firm to voluntarily internalize its negative externalities because to do so would:

Correct AnswerverifiedShow Answer

Supply-side market failure

Correct AnswerverifiedShow Answer

Market failure

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consumer surplus refers to:

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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With MB₁ and MC₁,society's optimal amount of pollution moderation is:

Correct Answer
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Correct Answer
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From society's perspective,if MB₂ and MC₁ are relevant:

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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From society's perspective,if MB₁ and MC₂ are relevant:

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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