Question 1

Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.If the government wishes to establish an optimal allocation of resources in this market, it should: 1 is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.If the government wishes to establish an optimal allocation of resources in this market, it should:   A) not intervene because the market outcome is optimal. B) subsidize consumers so that the market demand curve shifts leftward. C) subsidize producers so that the market supply curve shifts leftward (upward) . D) tax producers so that the market supply curve shifts leftward (upward) ." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  not intervene because the market outcome is optimal.
B)  subsidize consumers so that the market demand curve shifts leftward.
C)  subsidize producers so that the market supply curve shifts leftward (upward) .
D)  tax producers so that the market supply curve shifts leftward (upward) .E) B) and D)
F) All of the above

Question 2

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 S1 in diagram (a)  and from S to S2 in diagram (b) .The shift of the supply curve from S to S1 in diagram (a)  might be caused by a per unit: 0 and that government purposely shifts the market supply curve from S to S1 in diagram (a)  and from S to S2 in diagram (b) .The shift of the supply curve from S to S1 in diagram (a)  might be caused by a per unit:   A) subsidy paid to the producers of this product. B) tax on the producers of this product. C) subsidy paid to the buyers of this product. D) tax on the buyers of this product." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  subsidy paid to the producers of this product.
B)  tax on the producers of this product.
C)  subsidy paid to the buyers of this product.
D)  tax on the buyers of this product.E) A) and B)
F) A) and C)

Question 3

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

Question 4

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.Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6, then the collective quantity demanded will be: 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.Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6, then the collective quantity demanded will be:   A) 1 unit and the socially optimal quantity supplied will be 5 units. B) 2 units and the socially optimal quantity supplied will be 4 units. C) 3 units and the socially optimal quantity supplied will be 3 units. D) 4 units and the socially optimal quantity supplied will be 2 units." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  1 unit and the socially optimal quantity supplied will be 5 units.
B)  2 units and the socially optimal quantity supplied will be 4 units.
C)  3 units and the socially optimal quantity supplied will be 3 units.
D)  4 units and the socially optimal quantity supplied will be 2 units.E) C) and D)
F) B) and D)

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.If this good were a private good instead of a public one, the total quantity demanded at a $3 market price would 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.If this good were a private good instead of a public one, the total quantity demanded at a $3 market price would be:   A) 2 units. B) 3 units. C) 6 units. D) 4 units." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  2 units.
B)  3 units.
C)  6 units.
D)  4 units.E) A) and B)
F) All of the above

Question 6

Productive efficiency means that the society is producing the combination of the output most desirable by consumers.

Accepted Answer

A) True 
 B)False

Question 7

The marginal benefit to society of reducing pollution declines with increases in pollution moderation because of the law of:

Accepted Answer

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

Question 8

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) B) and C)

Question 9

Consumer surplus and the market price are positively related.

Accepted Answer

A) True 
 B)False

Question 10

Examples of quasi-public goods include:

Accepted Answer

A)  education.
B)  highways.
C)  museums.
D)  all of the given possible answers are examples of quasi-public goods.E) None of the above
F) A) and B)

Question 11

One condition for individual bargaining to occur according to the Coase Theorem is that there must be:

Accepted Answer

A)  clearly defined property rights.
B)  many people affected and involved.
C)  government intervention to establish bargaining.
D)  government creation of a market for externalities.E) B) and C)
F) A) and C)

Question 12

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good.Also, assume that the marginal cost of the third unit is $17.We can conclude that:

Accepted Answer

A)  the third unit should not be produced.
B)  the third unit should be produced.
C)  zero units should be produced.
D)  4 units should be produced.E) A) and C)
F) B) and D)

Question 13

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.The collective willingness of this society to pay for the 2nd unit of this public good is: 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.The collective willingness of this society to pay for the 2nd unit of this public good is:   A) $2 B) $4 C) $6 D) $8" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $2
B)  $4
C)  $6
D)  $8E) B) and D)
F) B) and C)

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

Productive efficiency means that the society is producing the combination of the output most desirable by consumers.

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

Correct Answer
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Examples of quasi-public goods include:

Correct Answer
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Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good.Also, assume that the marginal cost of the third unit is $17.We can conclude that:

Correct Answer
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Correct Answer
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One condition for individual bargaining to occur according to the Coase Theorem is that there must be:

Correct Answer
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Correct Answer
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A demand curve for a public good is determined by:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The marginal benefit to society of reducing pollution declines with increases in pollution moderation because of the law of:

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

Productive efficiency means that the society is producing the combination of the output most desirable by consumers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consumer surplus and the market price are positively related.

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Examples of quasi-public goods include:

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Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good.Also, assume that the marginal cost of the third unit is $17.We can conclude that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One condition for individual bargaining to occur according to the Coase Theorem is that there must be:

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Correct AnswerverifiedShow Answer

A demand curve for a public good is determined by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The marginal benefit to society of reducing pollution declines with increases in pollution moderation because of the law of:

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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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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