Question 1

The 2010 Health Care Reform Law, also known as "Obamacare," includes a part known as universal coverage which requires everyone to have health insurance.One reason for this is to address the problem of

Accepted Answer

A)  moral hazard.
B)  externalities.
C)  adverse selection.
D)  public goods.E) All of the above
F) None of the above

Question 2

Because of the free-rider problem,

Accepted Answer

A)  the market demand for a public good is overstated.
B)  the market demand for a public good is nonexistent or understated.
C)  government has increasingly yielded to the private sector in producing public goods.
D)  public goods often create serious negative externalities.E) None of the above
F) All of the above

Question 3

A significant amount of positive consumer surplus is the reason why sometimes a shopper regrets having bought a particular item.

Accepted Answer

A) True 
 B)False

Question 4

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Accepted Answer

A) True 
 B)False

Question 5

Along a supply curve, product price and producer surplus are inversely related.

Accepted Answer

A) True 
 B)False

Question 6

The market demand curve for a public good

Accepted Answer

A)  is derived in the same manner as demand curves for private goods.
B)  is derived by horizontally summing all individual demand curves.
C)  shows the total value that all individuals place on each additional unit of the good.
D)  shows the total number of units that would be produced by the public sector at each possible price.E) A) and B)
F) B) and C)

Question 7

The licensing and regulation of financial advisers is one way by which the government tries to deal with the problem of inadequate information that financial firms have about their customers.

Accepted Answer

A) True 
 B)False

Question 8

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

Accepted Answer

A)  reverse wealth problem.
B)  negative externality problem.
C)  adverse selection problem.
D)  moral hazard problem.E) A) and C)
F) A) and B)

Question 9

Nonrivalry and nonexcludability are the main characteristics of

Accepted Answer

A)  consumption goods.
B)  capital goods.
C)  private goods.
D)  public goods.E) A) and C)
F) All of the above

Question 10

In dealing with market failures, the government always bases its decisions on economic analysis of marginal cost and marginal benefit.

Accepted Answer

A) True 
 B)False

Question 11

Market failures refer to those situations where the sellers are not producing as much as the buyers are wanting to buy.

Accepted Answer

A) True 
 B)False

Question 12

Where there are spillover (or external)  benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following, except

Accepted Answer

A)  subsiding the buyers of the product.
B)  taxing the sellers of the product.
C)  subsidizing the sellers of the product.
D)  providing the product itself.E) A) and B)
F) None of the above

Question 13

Where there is asymmetric information between buyers and sellers,

Accepted Answer

A)  product shortages will occur at the equilibrium price.
B)  product surpluses will occur at the equilibrium price.
C)  markets can produce inefficient outcomes.
D)  markets will fail due to the "free-rider problem."E) A) and C)
F) B) and C)

Question 14

When economic efficiency is attained, it implies all of the following, except

Accepted Answer

A)  per-unit cost of output produced is at minimum.
B)  allocative efficiency is achieved.
C)  total consumer and producer surplus is at a maximum.
D)  the gap between marginal benefits and marginal costs of production is at maximum.E) A) and D)
F) B) and D)

Question 15

Producer surplus is the difference between

Accepted Answer

A)  the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
B)  the quantity supplied and quantity demanded at an above equilibrium price.
C)  the minimum prices producers are willing to accept for a product and the higher equilibrium price.
D)  the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.E) A) and B)
F) A) and C)

Question 16

In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who are able to acquire the largest net benefit from using the scarce resource "clean air."

Accepted Answer

A) True 
 B)False

Question 17

In a situation where an externality occurs, the "third party" refers to those who

Accepted Answer

A)  buy the product from others.
B)  produce the product for others.
C)  trade the product with others outside the nation or community.
D)  are not directly involved in the transaction or activity.E) A) and B)
F) All of the above

Question 18

At the optimal quantity of a public good,

Accepted Answer

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

Question 19

At equilibrium in a market for a product, the total revenues received by sellers equal the

Accepted Answer

A)  market producer surplus.
B)  total amount spent by buyers on the product.
C)  total profits of sellers.
D)  market consumer surplus.E) B) and C)
F) A) and D)

Question 20

Professional buyers of antiques often have more information about the value of antique objects than do the sellers.This illustrates

Accepted Answer

A)  the principal-agent problem.
B)  the moral hazard problem.
C)  the free-rider problem.
D)  asymmetric information.E) B) and C)
F) A) and B)

Exam 4: Market Failures: Public Goods and Externalities

When economic efficiency is attained, it implies all of the following, except

Correct AnswerverifiedShow Answer

The 2010 Health Care Reform Law, also known as "Obamacare," includes a part known as universal coverage which requires everyone to have health insurance.One reason for this is to address the problem of

Correct AnswerverifiedShow Answer

Because of the free-rider problem,

Correct AnswerverifiedShow Answer

Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following, except

Correct AnswerverifiedShow Answer

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

Correct AnswerverifiedShow Answer

The market demand curve for a public good

Correct AnswerverifiedShow Answer

Along a supply curve, product price and producer surplus are inversely related.

Correct AnswerverifiedShow Answer

The licensing and regulation of financial advisers is one way by which the government tries to deal with the problem of inadequate information that financial firms have about their customers.

Correct AnswerverifiedShow Answer

In a situation where an externality occurs, the "third party" refers to those who

Correct AnswerverifiedShow Answer

Market failures refer to those situations where the sellers are not producing as much as the buyers are wanting to buy.

Correct AnswerverifiedShow Answer

In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who are able to acquire the largest net benefit from using the scarce resource "clean air."

Correct AnswerverifiedShow Answer

At equilibrium in a market for a product, the total revenues received by sellers equal the

Correct AnswerverifiedShow Answer

In dealing with market failures, the government always bases its decisions on economic analysis of marginal cost and marginal benefit.

Correct AnswerverifiedShow Answer

Professional buyers of antiques often have more information about the value of antique objects than do the sellers.This illustrates

Correct AnswerverifiedShow Answer

At the optimal quantity of a public good,

Correct AnswerverifiedShow Answer

A significant amount of positive consumer surplus is the reason why sometimes a shopper regrets having bought a particular item.

Correct AnswerverifiedShow Answer

Producer surplus is the difference between

Correct AnswerverifiedShow Answer

Where there is asymmetric information between buyers and sellers,

Correct AnswerverifiedShow Answer

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Correct AnswerverifiedShow Answer

Nonrivalry and nonexcludability are the main characteristics of

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified