Question 1

The most important motivation for producers is the desire to:

Accepted Answer

A)   Minimize external costs.
B)   Minimize social costs above private costs.
C)   Maximize economic profits.
D)   Maximize social benefits and private revenues at the same time.

Question 2

The market under produces public goods because:

Accepted Answer

A)   The government is mandated to produce public goods.
B)   People do not want public goods as much as private goods.
C)   People are less willing to pay for public goods than for private goods.
D)   Of concerns about equity.

Question 3

If external benefits exist:

Accepted Answer

A)   The market will overproduce the good.
B)   Private demand will exceed social demand.
C)   Market demand will understate social demand.
D)   The market will generate the optimal outcome.

Question 4

Market failure establishes a basis for:

Accepted Answer

A)   Market power.
B)   Externalities.
C)   Government intervention.
D)   Private goods.

Question 5

Social demand is equal to market:

Accepted Answer

A)   Demand plus externalities.
B)   Supply plus market demand.
C)   Demand minus externalities.
D)   Demand multiplied by externalities.

Question 6

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

Accepted Answer

A) True 
 B)False

Question 7

All of the following are macro failures that justify government intervention except for:

Accepted Answer

A)   High unemployment.
B)   A rising price level.
C)   A decline in the production capacity.
D)   Inequitable distribution of output.

Question 8

If market prices and sales are used to signal desired output,then the optimal mix of output is determined by:

Accepted Answer

A)   The market mechanism.
B)   The political process.
C)   The Federal Reserve System.
D)   Government intervention.

Question 9

In order to reduce pollution,the government can use all of the following except:

Accepted Answer

A)   Income transfers.
B)   Emissions charges.
C)   Forced recycling.
D)   Regulatory standards.

Question 10

Private costs are identified as:

Accepted Answer

A)   Costs borne by a third party as a result of polluting activities by producers.
B)   The difference between the social and public costs of a market activity.
C)   The costs of an economic activity borne directly by the immediate producer or consumer.
D)   Being greater,in general,than social costs.

Question 11

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 35 to 25 PPM?

Accepted Answer

A)   $5
B)   $7
C)   $10
D)   $50

Question 12

The government uses taxes and transfers to redistribute income more fairly.

Accepted Answer

A) True 
 B)False

Question 13

Externalities are a type of market failure because:

Accepted Answer

A)   Buyers do not have complete information about the product.
B)   Producers have too much power.
C)   Third parties bears the costs or benefits of a market activity.
D)   Goods and services are not distributed fairly.

Question 14

Noise generated by an airport best illustrates:

Accepted Answer

A)   An inequity.
B)   An externality.
C)   Market power.
D)   Overproduction of private goods.

Question 15

Figure 9.2:  
-In Figure 9.2,the market demand curve is above the social demand curve because:

Accepted Answer

A)   There are internal costs associated with cigarette smoking.
B)   There are free riders associated with cigarette smoking.
C)   The external costs of cigarette smoking are being passed on to those who do not smoke.
D)   Positive externalities are being passed on to those who do not smoke.

Question 16

Whenever there is a divergence between social costs and market costs,the result is:

Accepted Answer

A)   Market power.
B)   Market failure.
C)   Maximized social welfare.
D)   A higher minimum wage.

Question 17

External costs are equal to the difference between:

Accepted Answer

A)   Social costs and private costs.
B)   Marginal benefits and marginal costs.
C)   Average benefits and average costs.
D)   Marginal social benefits and marginal social costs.

Question 18

The distinction between public goods and private goods is based on:

Accepted Answer

A)   Government regulation.
B)   Who produces the goods.
C)   How much the goods cost.
D)   The link between payment and consumption.

Question 19

After the government filed its antitrust case,Microsoft:

Accepted Answer

A)   Ignored the power of antitrust policy.
B)   became even bolder in abusing its market power.
C)   Won its case in the courts and continued using predatory pricing.
D)   Changed some of its exclusionary licensing practices.

Question 20

A private good is a good that:

Accepted Answer

A)   Is financed by private dollars instead of taxes.
B)   Can be jointly consumed.
C)   Can be denied to those who do not pay for it.
D)   Consumers use privately in their homes.

Exam 9: Government Intervention

Correct Answer
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All of the following are macro failures that justify government intervention except for:

Correct Answer
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Figure 9.2: -In Figure 9.2,the market demand curve is above the social demand curve because:

Correct Answer
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Externalities are a type of market failure because:

Correct Answer
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The most important motivation for producers is the desire to:

Correct Answer
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If external benefits exist:

Correct Answer
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After the government filed its antitrust case,Microsoft:

Correct Answer
verified

Social demand is equal to market:

Correct Answer
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The market under produces public goods because:

Correct Answer
verified

In order to reduce pollution,the government can use all of the following except:

Correct Answer
verified

Whenever there is a divergence between social costs and market costs,the result is:

Correct Answer
verified

Market failure establishes a basis for:

Correct Answer
verified

The distinction between public goods and private goods is based on:

Correct Answer
verified

A private good is a good that:

Correct Answer
verified

If market prices and sales are used to signal desired output,then the optimal mix of output is determined by:

Correct Answer
verified

Noise generated by an airport best illustrates:

Correct Answer
verified

The government uses taxes and transfers to redistribute income more fairly.

Correct Answer
verified

External costs are equal to the difference between:

Correct Answer
verified

Private costs are identified as:

Correct Answer
verified

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

Correct Answer
verified

Exam 9: Government Intervention

Correct AnswerverifiedShow Answer

All of the following are macro failures that justify government intervention except for:

Correct AnswerverifiedShow Answer

Figure 9.2: -In Figure 9.2,the market demand curve is above the social demand curve because:

Correct AnswerverifiedShow Answer

Externalities are a type of market failure because:

Correct AnswerverifiedShow Answer

The most important motivation for producers is the desire to:

Correct AnswerverifiedShow Answer

If external benefits exist:

Correct AnswerverifiedShow Answer

After the government filed its antitrust case,Microsoft:

Correct AnswerverifiedShow Answer

Social demand is equal to market:

Correct AnswerverifiedShow Answer

The market under produces public goods because:

Correct AnswerverifiedShow Answer

In order to reduce pollution,the government can use all of the following except:

Correct AnswerverifiedShow Answer

Whenever there is a divergence between social costs and market costs,the result is:

Correct AnswerverifiedShow Answer

Market failure establishes a basis for:

Correct AnswerverifiedShow Answer

The distinction between public goods and private goods is based on:

Correct AnswerverifiedShow Answer

A private good is a good that:

Correct AnswerverifiedShow Answer

If market prices and sales are used to signal desired output,then the optimal mix of output is determined by:

Correct AnswerverifiedShow Answer

Noise generated by an airport best illustrates:

Correct AnswerverifiedShow Answer

The government uses taxes and transfers to redistribute income more fairly.

Correct AnswerverifiedShow Answer

External costs are equal to the difference between:

Correct AnswerverifiedShow Answer

Private costs are identified as:

Correct AnswerverifiedShow Answer

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

Correct AnswerverifiedShow Answer

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