Quiz 8

Efficiency means 1) maximum net benefits 2) equilibrium 3) fairness 4) equality

1) maximum net benefits

The central idea of economic efficiency is that ___________________. 1) there is a balance between aggregate marginal willingness to pay and the marginal costs of production 2) the marginal willingness to pay of all consumers is equal to the total cost of production 3) all people must value the production of the goods that society produces 4) production is maximized

1) there is a balance between aggregate marginal willingness to pay and the marginal costs of production

In judging whether people from Chicago can justifiably claim that they have been damaged by species endangerment in Africa, the presence or absence of ___________ is the economic index used to validate that claim. 1) willingness to pay 2) market efficiency 3) social costs 4) public goods

1) willingness to pay

If society had to pay external costs plus production costs, the supply of goods would 1) cannot be determined 2) decrease 3) increase 4) not change

2) decrease

Each of the following is a cause of market failure, except ______________. 1) external costs 2) time 3) public goods 4) external benefits

2) time

In the case of open access resources and public goods, the competitive market output level will be ___________. 1) lower than the socially efficient level of output 2) unequal to the socially efficient level of output 3) higher than the socially efficient level of output 4) equal to the socially efficient level of output

2) unequal to the socially efficient level of output

By definition, a free rider is a person _______________. 1) who pays less than the marginal cost of producing a public good 2) who underpays for a public good relative to the benefits that they receive 3) who refuses to pay for a public good because they receive no value from it 4) who contributes less than others toward payment of a public good

2) who underpays for a public good relative to the benefits that they receive

Refer to the Figure above. If the group living in the house consists of Students A, B, and C, the aggregate willingness to pay to reduce CO concentration to 80 ppm is ______. 1) $65/yr 2) indeterminate 3) $140/yr 4) $85/yr

3) $140/yr

Refer to Figure above. If the group living in the house consists of Students A, B, and C, the socially optimal level of CO concentrations is _________. 1) $95/yr 2) $70/yr 3) 70 ppm 4) 50 ppm

3) 70 ppm

Market failure 1) means a good is free or has a price of zero 2) is a problem only in the United States 3) can result from externalities 4) does not occur in socialist economies

3) can result from externalities

Refer to Figure above. If the group living in the house is reduced to Students A and C, aggregate willingness to pay for most CO levels _________. 1) increases 2) remains unchanged 3) declines 4) is unpredictable

3) declines

Refer to the Figure below. If the marginal cost to provide the park is $3/hectare, __________. 1) there is no socially efficient solution 2) the socially efficient size of the park is 3 hectares 3) the socially efficient size of the park is 4 hectares 4) None of the above are true

3) the socially efficient size of the park is 4 hectares

Due to free riding, public goods are typically ____________. 1) taxed 2) supplied by private firms who can restrict access 3) under supplied 4) over supplied

3) under supplied

Refer to the Figure below. At quantities lower than the socially efficient level, __________. 1) quantity demanded is greater than the willingness to supply, the good is over supplied 2) the graph does not depict quantities that are lower than the socially efficient level 3) MWTP is less than willingness to supply, the good will not be produced 4) MWTP is higher than the marginal cost of production, the good is under supplied

4) MWTP is higher than the marginal cost of production, the good is under supplied

Equity means 1) equilibrium 2) maximum net benefits 3) equality 4) fairness

4) fairness

An example of an external cost of driving automobiles is 1) flat tire replacement 2) fuel or energy for the vehicle 3) insurance and registration 4) road congestion

4) road congestion