Question 1

By levying taxes on households and businesses, governments:

Accepted Answer

A)  reduce private demand for goods and services.
B)  change the total utility realized by consumers.
C)  decrease the amount of quasi-public goods offered.
D)  decrease the amount of public goods offered.E) A) and B)
F) None of the above

Question 2

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

Question 3

The following information is for four highway programs of increasing scope.All figures are in millions of dollars.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) None of the above
F) All of the above

Question 4

Which is a characteristic of a public good?

Accepted Answer

A)  rivalry among firms
B)  excludability
C)  non-excludability
D)  no free-rider problemE) B) and C)
F) C) and D)

Question 5

The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.

Accepted Answer

A) True 
 B)False

Question 6

Consumer surplus and the market price are positively related.

Accepted Answer

A) True 
 B)False

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

Question 8

The MB curves in the diagram slope downward because of the law of:

Accepted Answer

A)  conservation of matter and energy.
B)  diminishing returns.
C)  diminishing marginal utility.
D)  increasing cost.E) None of the above
F) A) and B)

Question 9

If there are external benefits or positive externalities associated with the consumption of a good or service:

Accepted Answer

A)  the private demand curve will overestimate the true demand curve.
B)  the private demand curve will underestimate the true demand curve.
C)  consumers will be willing to pay for all these benefits in private markets.
D)  the market demand curve will be the vertical summation of the individual demand costs.E) A) and B)
F) B) and C)

Question 10

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 11

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

Question 12

The difference between the price consumers are willing to pay and the actual price they do pay is referred to as:

Accepted Answer

A)  consumer surplus.
B)  producer surplus.
C)  Positive cash flows.
D)  Cash outflows.E) C) and D)
F) All of the above

Question 13

Why does pollution continue to be an issue?

Accepted Answer

A)  The marginal benefits stop before all pollution is abated.
B)  Diminishing marginal utility.
C)  Increasing marginal benefit.
D)  Diminishing marginal costs.E) All of the above
F) B) and D)

Question 14

Refer to the supply and demand graph for a public good.Which line segment would indicate the amount by which the marginal benefit of this public good is greater than the marginal cost?

Accepted Answer

A)  de
B)  da
C)  ef
D)  abE) B) and C)
F) A) and D)

Question 15

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

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

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

Question 18

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 19

The right and efficient amount of a public good will be produced when:

Accepted Answer

A)  the government follows the rule of MR = MB.
B)  the government applies the rule of MB = MC.
C)  the government makes the highest level of profit from producing it.
D)  the government can exclude the payers from non-payers.E) All of the above
F) A) and B)

Question 20

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

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

Consumer surplus refers to:

Correct Answer
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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 principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.

Correct Answer
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Which is a characteristic of a public good?

Correct Answer
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Which is a characteristic of a public good?

Correct Answer
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Refer to the supply and demand graph for a public good.Which line segment would indicate the amount by which the marginal benefit of this public good is greater than the marginal cost?

Correct Answer
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By levying taxes on households and businesses, governments:

Correct Answer
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The MB curves in the diagram slope downward because of the law of:

Correct Answer
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Consumer surplus and the market price are positively related.

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

Correct Answer
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The difference between the price consumers are willing to pay and the actual price they do pay is referred to as:

Correct Answer
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If there are external benefits or positive externalities associated with the consumption of a good or service:

Correct Answer
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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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Supply-side market failure

Correct Answer
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The following information is for four highway programs of increasing scope.All figures are in millions of dollars.On the basis of the data we can say that:

Correct Answer
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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
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The right and efficient amount of a public good will be produced when:

Correct Answer
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Cost-benefit analysis attempts to:

Correct Answer
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Why does pollution continue to be an issue?

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

Consumer surplus refers to:

Correct AnswerverifiedShow Answer

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 principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.

Correct AnswerverifiedShow Answer

Which is a characteristic of a public good?

Correct AnswerverifiedShow Answer

Which is a characteristic of a public good?

Correct AnswerverifiedShow Answer

Refer to the supply and demand graph for a public good.Which line segment would indicate the amount by which the marginal benefit of this public good is greater than the marginal cost?

Correct AnswerverifiedShow Answer

By levying taxes on households and businesses, governments:

Correct AnswerverifiedShow Answer

The MB curves in the diagram slope downward because of the law of:

Correct AnswerverifiedShow Answer

Consumer surplus and the market price are positively related.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The difference between the price consumers are willing to pay and the actual price they do pay is referred to as:

Correct AnswerverifiedShow Answer

If there are external benefits or positive externalities associated with the consumption of a good or service:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Supply-side market failure

Correct AnswerverifiedShow Answer

The following information is for four highway programs of increasing scope.All figures are in millions of dollars.On the basis of the data we can say that:

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 right and efficient amount of a public good will be produced when:

Correct AnswerverifiedShow Answer

Cost-benefit analysis attempts to:

Correct AnswerverifiedShow Answer

Why does pollution continue to be an issue?

Correct AnswerverifiedShow Answer

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

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