Question 1

The following table presents the demand schedule for product Z:  If the price of product Z increases to $15, what would be the consumer surplus?

Accepted Answer

A)  $3
B)  $8
C)  $5
D)  $15E) A) and B)
F) A) and C)

Question 2

Market for asparagus.At the market price of $2, area A represents:

Accepted Answer

A)  total consumer utility.
B)  total revenue to sellers.
C)  consumer surplus.
D)  economic profit.E) A) and C)
F) None of the above

Question 3

Producer surplus refers to:

Accepted Answer

A)  The total amount producer spends for making the product
B)  The area under the demand curve above the equilibrium price
C)  The price the producer receives.
D)  The difference between producer's revenue from selling the product and the cost of producing it.E) B) and D)
F) None of the above

Question 4

The MC curves in the diagram slope upward because of the law of:

Accepted Answer

A)  demand.
B)  conservation of matter and energy.
C)  diminishing marginal utility.
D)  diminishing returns.E) A) and C)
F) C) and D)

Question 5

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D2 and S2.If there are substantial negative externalities associated with the production of Z, it can be argued that: 2 and S2.If there are substantial negative externalities associated with the production of Z, it can be argued that:   A) a price lower than B and an output greater than G would improve resource allocation. B) government should levy a per unit excise tax on Z to shift the demand curve to the right. C) government should levy a per unit excise tax on Z to shift the supply curve toward S1. D) government should subsidize the production of Z to lower equilibrium price and increase equilibrium output." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  a price lower than B and an output greater than G would improve resource allocation.
B)  government should levy a per unit excise tax on Z to shift the demand curve to the right.
C)  government should levy a per unit excise tax on Z to shift the supply curve toward S1.
D)  government should subsidize the production of Z to lower equilibrium price and increase equilibrium output.E) A) and D)
F) A) and C)

Question 6

A public good:

Accepted Answer

A)  generally results in substantial negative externalities.
B)  can never be provided by a nongovernmental organization.
C)  can't be provided to one person without making it available to others as well.
D)  costs essentially nothing to produce and thus is provided by the government at a zero price.E) B) and C)
F) A) and D)

Question 7

Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5th unit of the public good if the marginal cost is:

Accepted Answer

A)  less than $150.
B)  less than $100.
C)  less than $60.
D)  less than $300.E) All of the above
F) None of the above

Question 8

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) A) and C)

Question 9

When the government of a country levies a tax to correct a negative externality, it is often referred to as:

Accepted Answer

A)  Pigovian tax.
B)  Keynesian tax.
C)  excise tax.
D)  Smith taxE) B) and C)
F) C) and D)

Question 10

The term "allocative efficiency" refers to:

Accepted Answer

A)  the production of the product-mix most desired by society.
B)  the allocation of resources to the production of a particular product.
C)  the production of the product-mix most desired by producers.
D)  the production of a good at the lowest average total cost.E) A) and D)
F) None of the above

Question 11

Assume there is no way to prevent someone from using an inter-provincial highway, regardless of whether or not he or she helps pay for it.This characteristic is associated with:

Accepted Answer

A)  rival goods.
B)  complementary goods.
C)  public goods.
D)  capital goods.E) B) and C)
F) C) and D)

Question 12

The graphs below refer to two separate product markets.Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1in diagram (a)  and from S to S2 in diagram (b) .We can conclude that the government is correcting for: 0 and that government purposely shifts the market supply curve from S to S1in diagram (a)  and from S to S2 in diagram (b) .We can conclude that the government is correcting for:   A) negative externalities in diagram (a)  and positive externalities in diagram (b) . B) positive externalities in diagram (a)  and negative externalities in diagram (a) . C) negative externalities in both diagrams. D) positive externalities in both diagrams." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  negative externalities in diagram (a)  and positive externalities in diagram (b) .
B)  positive externalities in diagram (a)  and negative externalities in diagram (a) .
C)  negative externalities in both diagrams.
D)  positive externalities in both diagrams.E) A) and C)
F) A) and B)

Question 13

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

Accepted Answer

A)  price will be greater than MC.
B)  firms will shut down until costs are reduced.
C)  costs of production will, on average, be too high.
D)  too many resources will be allocated to production of the good.E) A) and C)
F) A) and B)

Question 14

When the full willingness to pay for a good or service is not reflected in the resultant curve this is referred to as what type of failure?

Accepted Answer

A)  Supply side
B)  Demand side
C)  Market side
D)  Demand-supply sideE) B) and D)
F) B) and C)

Question 15

Society's marginal cost of pollution moderation curve slopes upward because of the law of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 16

Market for asparagus.At the market price of $2, area A + B represents:

Accepted Answer

A)  total consumer benefit.
B)  total revenue to sellers.
C)  consumer surplus.
D)  returns to capital and to labour.E) A) and D)
F) A) and B)

Question 17

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D2 and S2.If there are substantial positive externalities associated with the production of Z, it can be argued that: 2 and S2.If there are substantial positive externalities associated with the production of Z, it can be argued that:   A) efficient resource allocation occurs at output G and price B because the market mechanism does not measure all benefits. B) an output smaller than G would improve resource allocation. C) government should levy a per unit excise tax on Z to shift the demand curve toward D1. D) an output greater than G would result in a more efficient allocation of resources." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  efficient resource allocation occurs at output G and price B because the market mechanism does not measure all benefits.
B)  an output smaller than G would improve resource allocation.
C)  government should levy a per unit excise tax on Z to shift the demand curve toward D1.
D)  an output greater than G would result in a more efficient allocation of resources.E) All of the above
F) A) and B)

Question 18

A demand curve for a public good is determined by:

Accepted Answer

A)  summing vertically the individual demand curves for the public good.
B)  summing horizontally the individual demand curves for the public good.
C)  combining the amounts of the public good that the individual members of society demand at each price.
D)  multiplying the per-unit cost of the public good by the quantity made available.E) A) and B)
F) None of the above

Question 19

The creation of a market for pollution rights would:

Accepted Answer

A)  reduce air and water pollution to zero.
B)  stimulate the search for pollution-reducing technologies.
C)  induce an increase in the supply of pollution rights.
D)  be in conflict with the concept of user charges.E) All of the above
F) C) and D)

Question 20

If a good that generates negative externalities was priced to take into account these negative externalities, then its:

Accepted Answer

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

Exam 4: Part B: Market Failures: Public Goods and Externalities

Society's marginal cost of pollution moderation curve slopes upward because of the law of diminishing marginal utility.

Correct Answer
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Producer surplus refers to:

Correct Answer
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When the full willingness to pay for a good or service is not reflected in the resultant curve this is referred to as what type of failure?

Correct Answer
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If a good that generates negative externalities was priced to take into account these negative externalities, then its:

Correct Answer
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The term "allocative efficiency" refers to:

Correct Answer
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Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5^th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5^th unit of the public good if the marginal cost is:

Correct Answer
verified

The MC curves in the diagram slope upward because of the law of:

Correct Answer
verified

The following table presents the demand schedule for product Z: If the price of product Z increases to $15, what would be the consumer surplus?

Correct Answer
verified

Market for asparagus.At the market price of $2, area A represents:

Correct Answer
verified

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are substantial negative externalities associated with the production of Z, it can be argued that:

Correct Answer
verified

When the government of a country levies a tax to correct a negative externality, it is often referred to as:

Correct Answer
verified

A public good:

Correct Answer
verified

Assume there is no way to prevent someone from using an inter-provincial highway, regardless of whether or not he or she helps pay for it.This characteristic is associated with:

Correct Answer
verified

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

Correct Answer
verified

Correct Answer
verified

The creation of a market for pollution rights would:

Correct Answer
verified

Market for asparagus.At the market price of $2, area A + B represents:

Correct Answer
verified

A demand curve for a public good is determined by:

Correct Answer
verified

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are substantial positive externalities associated with the production of Z, it can be argued that:

Correct Answer
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The external costs of severe air pollution are usually paid:

Correct Answer
verified

Exam 4: Part B: Market Failures: Public Goods and Externalities

Society's marginal cost of pollution moderation curve slopes upward because of the law of diminishing marginal utility.

Correct AnswerverifiedShow Answer

Producer surplus refers to:

Correct AnswerverifiedShow Answer

When the full willingness to pay for a good or service is not reflected in the resultant curve this is referred to as what type of failure?

Correct AnswerverifiedShow Answer

If a good that generates negative externalities was priced to take into account these negative externalities, then its:

Correct AnswerverifiedShow Answer

The term "allocative efficiency" refers to:

Correct AnswerverifiedShow Answer

Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5th unit of the public good if the marginal cost is:

Correct AnswerverifiedShow Answer

The MC curves in the diagram slope upward because of the law of:

Correct AnswerverifiedShow Answer

The following table presents the demand schedule for product Z: If the price of product Z increases to $15, what would be the consumer surplus?

Correct AnswerverifiedShow Answer

Market for asparagus.At the market price of $2, area A represents:

Correct AnswerverifiedShow Answer

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D2 and S2.If there are substantial negative externalities associated with the production of Z, it can be argued that:

Correct AnswerverifiedShow Answer

When the government of a country levies a tax to correct a negative externality, it is often referred to as:

Correct AnswerverifiedShow Answer

A public good:

Correct AnswerverifiedShow Answer

Assume there is no way to prevent someone from using an inter-provincial highway, regardless of whether or not he or she helps pay for it.This characteristic is associated with:

Correct AnswerverifiedShow Answer

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

Correct AnswerverifiedShow Answer

The graphs below refer to two separate product markets.Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1in diagram (a) and from S to S2 in diagram (b) .We can conclude that the government is correcting for:

Correct AnswerverifiedShow Answer

The creation of a market for pollution rights would:

Correct AnswerverifiedShow Answer

Market for asparagus.At the market price of $2, area A + B represents:

Correct AnswerverifiedShow Answer

A demand curve for a public good is determined by:

Correct AnswerverifiedShow Answer

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D2 and S2.If there are substantial positive externalities associated with the production of Z, it can be argued that:

Correct AnswerverifiedShow Answer

The external costs of severe air pollution are usually paid:

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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Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5^th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5^th unit of the public good if the marginal cost is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are substantial negative externalities associated with the production of Z, it can be argued that:

Correct Answer
verified

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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Correct Answer
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Correct Answer
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Correct Answer
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Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are substantial positive externalities associated with the production of Z, it can be argued that:

Correct Answer
verified

Correct Answer
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