Question 1

Answer the next question on the basis of the following information is for public good.Pa and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.If only 1 unit of this public good is produced, then the marginal benefit is: a and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.If only 1 unit of this public good is produced, then the marginal benefit is:   A) $3 and the marginal cost is $9. B) $4 and the marginal cost is $7. C) $6 and the marginal cost is $3. D) $9 and the marginal cost is $5." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $3 and the marginal cost is $9.
B)  $4 and the marginal cost is $7.
C)  $6 and the marginal cost is $3.
D)  $9 and the marginal cost is $5.E) All of the above
F) B) and C)

Question 2

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) All of the above
F) B) and D)

Question 3

A negative externality or external cost occurs when:

Accepted Answer

A)  firms fail to achieve allocative efficiency.
B)  firms fail to achieve productive efficiency.
C)  price exceeds marginal cost.
D)  the total cost of producing a good exceeds the costs borne by the producer.E) B) and D)
F) B) and C)

Question 4

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 5

The following information is for a public good.Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Refer to the data below.If the marginal cost of this good at the optimal quantity is $4, the optimal quantity must be: a and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Refer to the data below.If the marginal cost of this good at the optimal quantity is $4, the optimal quantity must be:   A) 1 unit. B) 2 units. C) 3 units. D) 4 units." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  1 unit.
B)  2 units.
C)  3 units.
D)  4 units.E) A) and B)
F) C) and D)

Question 6

It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle, and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

Accepted Answer

A)  Government agencies can make a great deal of money.
B)  Pollution would be eliminated because nobody would want to pay for such a right.
C)  The quality of water or air can be maintained at some acceptable standard through economic incentives.
D)  The social consciousness of people would be raised as they obtain more appreciation for the importance of conservation.E) All of the above
F) None of the above

Question 7

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

Question 8

In a purely competitive industry at equilibrium price and quantity

Accepted Answer

A)  the producer surplus exceeds the consumer surplus.
B)  the sum of consumer and producer surplus is maximized.
C)  the consumer surplus exceeds producer surplus.
D)  the willingness of consumers to pay exceeds the opportunity cost of producing the product.E) A) and D)
F) A) and B)

Question 9

The proposition that under some circumstances externalities can get resolved through private negotiation is known as:

Accepted Answer

A)  the paradox of externalities.
B)  the median-voter theory.
C)  the Coase Theorem.
D)  logrolling.E) B) and C)
F) B) and D)

Question 10

Answer the next question on the basis of the following information for public good.Pa and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.The collective willingness of this nation to pay for the fourth unit of the public good is: a and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.The collective willingness of this nation to pay for the fourth unit of the public good is:   A) $7 B) $6 C) $5 D) $3" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $7
B)  $6
C)  $5
D)  $3E) A) and B)
F) All of the above

Question 11

Refer to the diagrams below in which figures (a)  and (b)  show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.If the marginal cost of the optimal quantity of this public good is $10, the optimal quantity must be:

Accepted Answer

A)  1 unit.
B)  2 units.
C)  3 units.
D)  4 units.E) All of the above
F) B) and C)

Question 12

Refer to the supply and demand graph for a public good.Line segment ad represents the amount at Q1 by which the: 1 by which the:   A) marginal benefit of this public good is less than the marginal cost. B) total benefit of this public good is less than the total cost. C) marginal benefit of this public good is greater than the marginal cost. D) total benefit of this public good is greater than the total cost." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  marginal benefit of this public good is less than the marginal cost.
B)  total benefit of this public good is less than the total cost.
C)  marginal benefit of this public good is greater than the marginal cost.
D)  total benefit of this public good is greater than the total cost.E) A) and C)
F) A) and B)

Question 13

A public good:

Accepted Answer

A)  is not subject to rivalry and excludability.
B)  entails no externalities.
C)  is subject to rivalry and excludability.
D)  can not be produced by private firms.E) C) and D)
F) A) and B)

Question 14

Cost-benefit analysis attempts to:

Accepted Answer

A)  compare the real worth, rather than the market values, of various goods and services.
B)  compare the relative desirability of alternative distributions of income.
C)  determine whether it is better to cut government expenditures or reduce taxes.
D)  compare the benefits and costs associated with any economic project or activity.E) All of the above
F) B) and D)

Question 15

The socially optimal amount of pollution moderation occurs where society's marginal:

Accepted Answer

A)  benefit of moderation exceeds its marginal cost of moderation by the greatest amount.
B)  benefit of moderation equals its marginal cost of moderation.
C)  benefit of moderation is zero.
D)  cost of moderation is at its maximum.E) None of the above
F) B) and C)

Question 16

If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.

Accepted Answer

A) True 
 B)False

Question 17

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) B) and C)
F) B) and D)

Question 18

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

Question 19

In which of the following ways does the government of a nation estimate the true demand for a public good?

Accepted Answer

A)  Surveys
B)  Government elections
C)  Voting in parliament
D)  LegislationE) All of the above
F) A) and C)

Question 20

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.If Way-Below Normal undertakes Level Three:

Accepted Answer

A)  total benefits will be less than total costs.
B)  marginal costs will exceed marginal benefits.
C)  there would be an under-allocation of resources to crime control.
D)  there would be an over-allocation of resources to crime control.E) All of the above
F) A) and B)

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

Refer to the supply and demand graph for a public good.Line segment ad represents the amount at Q₁ by which the:

Correct Answer
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Correct Answer
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Refer to the diagrams below in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.If the marginal cost of the optimal quantity of this public good is $10, the optimal quantity must be:

Correct Answer
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Which is a characteristic of a public good?

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The proposition that under some circumstances externalities can get resolved through private negotiation is known as:

Correct Answer
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A public good:

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In a purely competitive industry at equilibrium price and quantity

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

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

Correct Answer
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It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle, and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

Correct Answer
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Correct Answer
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Cost-benefit analysis attempts to:

Correct Answer
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In which of the following ways does the government of a nation estimate the true demand for a public good?

Correct Answer
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If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.

Correct Answer
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The socially optimal amount of pollution moderation occurs where society's marginal:

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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A negative externality or external cost occurs when:

Correct Answer
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Supply-side market failure

Correct Answer
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Exam 4: B: Market Failures: Public Goods and Externalities

Refer to the supply and demand graph for a public good.Line segment ad represents the amount at Q1 by which the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the diagrams below in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.If the marginal cost of the optimal quantity of this public good is $10, the optimal quantity must be:

Correct AnswerverifiedShow Answer

Which is a characteristic of a public good?

Correct AnswerverifiedShow Answer

The proposition that under some circumstances externalities can get resolved through private negotiation is known as:

Correct AnswerverifiedShow Answer

A public good:

Correct AnswerverifiedShow Answer

In a purely competitive industry at equilibrium price and quantity

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle, and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cost-benefit analysis attempts to:

Correct AnswerverifiedShow Answer

In which of the following ways does the government of a nation estimate the true demand for a public good?

Correct AnswerverifiedShow Answer

If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.

Correct AnswerverifiedShow Answer

The socially optimal amount of pollution moderation occurs where society's marginal:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A negative externality or external cost occurs when:

Correct AnswerverifiedShow Answer

Supply-side market failure

Correct AnswerverifiedShow Answer

Refer to the supply and demand graph for a public good.Line segment ad represents the amount at Q₁ by which the:

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

Correct Answer
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Correct Answer
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Correct Answer
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