Econ - Exam 3
D - will have difficulty estimating the value of the highway.
A cost-benefit analysis of a highway is difficult to conduct because analysts a. cannot estimate the explicit cost of a project that has not been completed. b. are unlikely to have access to costs on similar projects. c. are not able to consider the opportunity cost of resources. d. will have difficulty estimating the value of the highway.
C - implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
A difference between explicit and implicit costs is that a. explicit costs must be greater than implicit costs. b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. d. implicit costs must be greater than explicit costs.
A - average fixed cost is 50 cents
A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000, a. average fixed cost is 50 cents b. average variable cost is $2. c. average total cost is $2.50 d, average total cost is 50 cents.
A - assigning limited tasks to its employees, so they can master those tasks.
A firm that wants to achieve economies of scale could do so by a. assigning limited tasks to its employees, so they can master those tasks. b. employing a smaller number of workers. c. producing a smaller quantity of output. d. producing an output level higher than the efficient scale.
B - receives the benefit of a good but avoids paying for it.
A free rider is a person who a. will only purchase a product on sale. b. receives the benefit of a good but avoids paying for it. c. can produce a good at no cost. d. rides public transit regularly
D - people can be prevented from using it.
A good is excludable if a. one person's use of the good diminishes another person's enjoyment of it. b. the government can regulate its availability. c. it is not a normal good. d. people can be prevented from using it.
D - If left unregulated, the elephant population will likely increase.
A regional elephant management board recently proposed a five-year moratorium on elephant hunting in Botswana based on a study of the elephant population. Which of the following statements is not correct? a. Elephants are rival but not excludable. b. The elephant population is an example of the tragedy of the commons. c. The elephant population is an example of the tragedy of the commons. d. If left unregulated, the elephant population will likely increase.
C - a common resource when it is congested, but it is a public good when it is not congested.
A state-owned bridge is a. always a public good, whether or not it is congested. b. a public good when it is congested, but it is a common resource when it is not congested. c. a common resource when it is congested, but it is a public good when it is not congested. d. always a common resource, whether or not it is congested.
B - not rival in consumption.
A television broadcast is an example of a good that is a. private. b. not rival in consumption. c. social. d. excludable.
B - private good and the knowledge that one gains from reading the book is a public good.
A textbook is a a. private good and the knowledge that one gains from reading the book is a common resource. b. private good and the knowledge that one gains from reading the book is a public good. c. common resource and the knowledge that one gains from reading the book is a public good. d. common resource and the knowledge that one gains from reading the book is a private good.
D - a corrective tax.
A toll on a congested road is in essence a. an interstate highway subsidy. b. a hidden tax. c. a gasoline tax. d. a corrective tax.
D - not rival and not excludable in consumption.
A traffic light at an intersection is a. rival and excludable in consumption. b. not rival but excludable in consumption. c. rival but not excludable in consumption d. not rival and not excludable in consumption.
C - one person's actions on the well-being of a bystander.
An externality is the uncompensated impact of a. society's decisions on the well-being of society. b. a person's actions on that person's well-being. c. one person's actions on the well-being of a bystander. d. society's decisions on the poorest person in the society.
A - increases the value of other properties in the neighborhood.
Ashlyn installed a wooden sculpture in her front yard. A positive externality arises if the sculpture a. increases the value of other properties in the neighborhood. b. increases the value of Ashlyn's home. c. is visually unappealing to Ashlyn's neighbors. d. creates a safety hazard for neighborhood children.
B - average fixed cost is high
Average total cost is very high when a small amount of output is produced because a. average variable cost is high. b. average fixed cost is high. c. marginal cost is high. d. marginal product is high.
C - conduct a cost-benefit analysis and compare the total cost and total benefits of the project.
Before considering any public project, the government should a. only measure the total benefits of the project. b. only measure the cost of the project. c. conduct a cost-benefit analysis and compare the total cost and total benefits of the project. d. infer that citizens who vote for a project are willing to pay equally for it.
D - nonexcludable.
Both public goods and common resources are a. rival in consumption. b. nonrival in consumption. c. excludable. d. nonexcludable.
C - self-interested paper producers will not consider the full cost of the dioxin pollution they create.
Dioxin emission that results from the production of paper is a good example of a negative externality because a. self-interested paper firms are generally unaware of environmental regulations. b. there are fines for producing too much dioxin. c. self-interested paper producers will not consider the full cost of the dioxin pollution they create. d. toxic emissions cause firms to produce less than the socially optimal amount of paper.
B - long-run average total costs fall as output increases.
Economies of scale occur when a. long-run average total costs rise as output increases. b. long-run average total costs fall as output increases. c. average fixed costs are falling d. average fixed costs are constant.
C - a more educated population tends to result in lower crime rates.
Education yields positive externalities. For example, a. colleges and universities have benefited, in recent years, from increases in tuition paid by students. b. as a result of earning a college degree, a person becomes a more productive worker and benefits by earning higher wages. c. a more educated population tends to result in lower crime rates. d. when students go to school, they reinforce the demand for teachers.
D - a transaction cost.
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of a. an opportunity cost b. an implicit cost. c. a sunk cost d. a transaction cost.
B - large management structures are bureaucratic and inefficient.
Firms may experience diseconomies of scale when a. they are too small to take advantage of specialization. b. large management structures are bureaucratic and inefficient. c. there are too few employees, and managers do not have enough to do. d. average fixed costs begin to rise again.
B - The cost of the steel that is used in producing automobiles
For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? a. The $20 million payment that the firm pays each year for accounting services b. The cost of the steel that is used in producing automobiles c. The rent that the firm pays for office space in a suburb of St. Louis d. The cost of internet advertising incurred each year
A - prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.
For private goods allocated in markets, a. prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources. b. prices guide the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources. c. the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources. d. the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources.
D - private goods and club goods.
Goods that are excludable include both a. club goods and public goods. b. public goods and common resources. c. common resources and private goods. d. private goods and club goods.
B - common resources.
Goods that are rival in consumption but not excludable would be considered a. club goods. b. common resources. c. public goods. d. private goods.
C - common resources and private goods.
Goods that are rival in consumption include both a. club goods and public goods. b. public goods and common resources. c. common resources and private goods. d. private goods and club goods.
A - both rival in consumption and excludable.
Hoa owns 40 acres of land. Hoa sells the land to a real estate developer who builds a subdivision with 20 houses. The land is an example of a good that is a. both rival in consumption and excludable. b. neither rival in consumption nor excludable. c. excludable, but not rival in consumption. d. rival in consumption, but not excludable.
B - Be horizontal
If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would a. Slope downward. b. Be horizontal c. Slope upward d. Slope downward for low output levels and upward for high output levels.
A - the number of workers and the quantity of output.
If a firm uses labor to produce output, the firm's production function depicts the relationship between a. the number of workers and the quantity of output. b. marginal product and marginal cost. c. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. d. fixed inputs and variable inputs in the short run.
A - Negative externality
If a highway is congested, then use of that highway by an additional person would lead to a a. Negative externality b. Positive externality c. Pigovian externality d. free-rider problem with rush-hour drivers stuck in traffic.
C - the government can raise economic well-being through noise-control regulations.
If a sawmill creates too much noise for local residents, a. noise restrictions will force residents to move out of the area. b. a sense of social responsibility will cause owners of the mill to reduce noise levels. c. the government can raise economic well-being through noise-control regulations. d. the government should avoid intervening because the market will always allocate resources efficiently.
A - economies of scale.
If long-run average total cost decreases as the quantity of output increases, the firm is experiencing a. economies of scale. b. diseconomies of scale. c. coordination problems arising from the large size of the firm. d. fixed costs greatly exceeding variable costs.
C - marginal product must be falling.
If marginal cost is rising, a. average variable cost must be falling. b. average fixed cost must be rising. c. marginal product must be falling. d. marginal product must be rising.
D - cost-benefit analysis.
If the government decides to build a new community center, the first step would be to conduct a study to determine the value of the project. The study is called a a. budget analysis. b. project analysis. c. reimbursement analysis. d. cost-benefit analysis.
C - command-and-control policy.
If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a a. corrective tax. b. subsidy. c. command-and-control policy. d. market-based policy.
A - encourage the production of computer chips with subsidies
If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should a. encourage the production of computer chips with subsidies b. discourage the production of potato chips with taxes. c. encourage the production of potato chips with subsidies. d. discourage the production of computer chips with taxes.
C - if too many people use it, one person's use diminishes other peoples' use.
Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking, and the trash cans overflow with food wrappers on summer afternoons. Otherwise, it is a great place. The park is a common resource because a. people can be prevented from using it. b. people can be prevented from using it. c. if too many people use it, one person's use diminishes other peoples' use. c. anyone can use it without affecting anyone else.
C - weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.
It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that a. resources would be used more efficiently if the government produced the weapons. b. resources would be used more efficiently if private firms provided national defense. c. weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable. d. national defense is rival in consumption and excludable, but weapons are not rival in consumption and not excludable.
A- −$39,000.
Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is a. −$39,000. b. $124,000. c. $163,000. d. $184,000.
B - $25
Kachina is a senior majoring in graphic design at Awesome University (AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 per hour for her consulting services. She also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Kachina $20 per hour. Refer to Scenario 13-2. If Kachina can work additional hours at either job, what is the opportunity cost if she spends one hour reading a novel? a. $20 b. $25 c. $100 d. $125
D - 8 bouquets
Kate is a florist. Kate can arrange 15 bouquets per day. She is considering hiring her husband Amir to work for her. Together Kateand Amir can arrange 23 bouquets per day. What is Amir's marginal product? a. 38 bouquets b. 23 bouquets c. 17 bouquets d. 8 bouquets
C - $170
Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business? a. $30 b. $140 c. $170 d. $300
D - club good, whereas knowledge that is not patented is a public good.
Knowledge that is patented is a a. public good, whereas knowledge that is not patented is a common resource. b. private good, whereas knowledge that is not patented is a club good. c. common resource, whereas knowledge that is not patented is a private good. d. club good, whereas knowledge that is not patented is a public good.
I don't know.
Lim Industries has average variable costs of $1 and average total costs of $12 when it produces 500 units of output. The firm's total fixed costs equal a. $11 b. $13 c. $5,500 d. $6,500
C - Install the playground equipment because the benefits outweigh the costs.
Luis, Mina, and Daniel all would like a play area while waiting at their children's bus stop. The neighborhood association is considering installing playground equipment at the bus stop. Luis values the equipment at $150, Mina at $100, and Daniel at $100. The equipment and labor for installation cost $300. If Luis, Mina, and Daniel are the only residents who value the equipment, what should the neighborhood association do? a. Install the playground equipment because people would like a play area. b. Do not install the playground equipment because the costs outweigh the benefits. c. Install the playground equipment because the benefits outweigh the costs. d. Do not install the playground equipment to prevent the Tragedy of the Commons problem of overuse.
B - benefits that accrue to those who don't pay.
Market failure associated with the free-rider problem is a result of a. a problem associated with pollution. b. benefits that accrue to those who don't pay. c. benefits that accrue to providers of the product. d. market power
C - property rights are not well established.
Markets fail to allocate resources efficiently when a. demanders and suppliers cannot agree on a price b. goods are rival in consumption and excludable. c. property rights are not well established. d. too many buyers and sellers exist in the same market.
D - is less costly to society.
Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because the market-based solution a. is less efficient. b. can result in a greater increase in pollution. c. lowers revenue for the government. d. is less costly to society.
A - greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.
Negative externalities lead markets to produce a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels. b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels. c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
A - greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
Negative externalities lead markets to produce a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels. b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels. c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels. d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
B - club goods
Pay-per-view broadcasts are a. private goods b. club goods. c. common resources. d. public goods.
C - public good or a common resource.
People cannot be prevented from using a good if the good is a a. private good or a public good b. private good or a common resource. c. public good or a common resource. d. public good or a club good.
D - negative externality that can be viewed as a common-resource problem.
Pollution is a a. problem that is entirely unrelated to the parable called the Tragedy of the Commons. b. problem that cannot be remedied with regulations or corrective taxes. c. negative externality that can be viewed as a public-goods problem. d. negative externality that can be viewed as a common-resource problem.
C - inefficient allocation of resources and external effects.
Private decisions about consumption of common resources and production of public goods usually lead to an a. efficient allocation of resources and external effects. b. efficient allocation of resources and no external effects. c. inefficient allocation of resources and external effects. d. inefficient allocation of resources and no external effects.
C - excludable and rival in consumption.
Private goods are both a. excludable and nonrival in consumption. b. nonexcludable and rival in consumption. c. excludable and rival in consumption. d. nonexcludable and nonrival consumption.
C - There is a free-rider problem
Producers have little incentive to produce a public good because a. The social benefit is less than the private benefit. b. The social benefit is less than the social cost. c. There is a free-rider problem d. There is a Tragedy of the Commons
C - there is a free-rider problem.
Producers have little incentive to produce a public good because a. the social benefit is less than the private benefit. b. the social benefit is less than the social cost. c. there is a free-rider problem. d. there is a Tragedy of the Commons.
B - it takes into account the external costs imposed on society by tobacco consumption.
Refer to Figure 10-1. The social cost curve is above the supply curve because a. it takes into account the effect no smoking policies at local restaurants. b. it takes into account the external costs imposed on society by tobacco consumption. c. tobacco costs more to consumers than it does for firms to make it. d. people who stand next to smokers can inhale second-hand smoke for free.
D - each dish would be both excludable and rival in consumption.
Six friends decide to meet at a Greek restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except a. each person has an incentive to eat as much as possible since their individual rate of consumption will not affect their individual cost. b. there is an externality associated with eating the food on the table. c. when one person eats, he may not take into account how his choice affects his friends. d. each dish would be both excludable and rival in consumption.
B - The equilibrium quantity is greater than the socially optimal quantity.
Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal? a. They are equal. b. The equilibrium quantity is greater than the socially optimal quantity. c. The equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.
A - Private good
The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case? a. Private good b. Club good c. Common resource d. Public good
D - not rival in consumption.
The U.S. military defends Ngoc from foreign conflict. The fact that Ngoc enjoys this protection does not detract from other Americans' enjoyment of it. For this reason, we say that national defense is a. excludable. b. not excludable. c. rival in consumption. d. not rival in consumption.
A - externalities or as a problem of common resources.
The failure of markets to adequately protect the environment can be viewed either as a problem of a. externalities or as a problem of common resources. b. externalities or as a problem of private goods. c. the overprovision of public goods or as a problem of the underprovision of private goods. d. club goods or as a problem that arises when the quantity of excludable goods exceeds the socially-efficient quantity.
A - reduce the use of a common resource.
The goal of requiring licenses for hunting and fishing is to a. reduce the use of a common resource. b. ensure that the people hunting and fishing are qualified. c. promote hunting and fishing. d. monitor compliance with federal gun laws.
B - specialization of labor.
The most likely explanation for economies of scale is a. coordination problems. b. specialization of labor. c. increasing marginal cost. d. decreasing marginal cost.
B - the Tragedy of the Commons.
The overuse of a common resource relative to its economically efficient use is called a. the free-rider problem. b. the Tragedy of the Commons. c. a public good. d. cost-benefit analysis.
D - Public goods
The phenomenon of free riding is most closely associated with which type of good? a. Private goods b. Club goods c. Inferior goods d. Public goods
A - charities and the Golden Rule.
Two types of private solutions to the problem of externalities are: a. charities and the Golden Rule. b. charities and subsidies. c. the Golden Rule and taxes. d. taxes and subsidies.
D - Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.
Under which of the following scenarios would a park be considered a common resource? a. Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. b. Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use. c. Visitors can enter the park free of charge and there are always plenty of empty picnic tables. d. Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.
D - Social and private incentives differ, and common resources are not excludable but are rival in consumption.
What causes the Tragedy of the Commons? a. Social and private incentives are the same. b. Social and private incentives differ, and common resources are not rival in consumption and are not excludable. c. Common resources are not rival in consumption and are not excludable. d. Social and private incentives differ, and common resources are not excludable but are rival in consumption.
A - long-run average total cost is unchanged, even when output increases.
When a firm experiences constant returns to scale, a. long-run average total cost is unchanged, even when output increases. b. long-run marginal cost is greater than long-run average total cost. c. long-run marginal cost is less than long-run average total cost. d. the firm is experiencing coordination problems.
D - inefficient, and the equilibrium does not maximize the total benefit to society as a whole.
When an externality is present, the market equilibrium is a. efficient, and the equilibrium maximizes the total benefit to society as a whole. b. efficient, but the equilibrium does not maximize the total benefit to society as a whole. c. inefficient, but the equilibrium maximizes the total benefit to society as a whole. d. inefficient, and the equilibrium does not maximize the total benefit to society as a whole.
C - average total cost is falling.
When marginal cost is less than average total cost, a. marginal cost must be falling. b. average variable cost must be falling. c. average total cost is falling. d. average total cost is rising.
B - social benefits will be greater than private benefits.
When positive externalities are present in a market a. private benefits will be greater than social benefits. b. social benefits will be greater than private benefits. c. Only government regulation will solve the problem. d. the market will not be able to generate an equilibrium.
B - markets fail to allocate resources efficiently
When property rights are not well established, a. private goods become public goods. b. markets fail to allocate resources efficiently. c. the distribution of private goods is unfair d. government resources are used inefficiently
B - markets fail to allocate resources efficiently.
When property rights are not well established, a. private goods become public goods. b. markets fail to allocate resources efficiently. c. the distribution of private goods is unfair d. government resources are used inefficiently
A - accounting profit = economic profit + implicit costs
Which of the following expressions is correct? a. accounting profit = economic profit + implicit costs b. accounting profit = total revenue − implicit costs c. economic profit = accounting profit + explicit costs d. economic profit = total revenue − implicit costs
D - A congested toll road
Which of the following goods is rival and excludable? a. An uncongested toll road b. An uncongested nontoll road c. A congested nontoll road d. A congested toll road
B - Music that is broadcast over the airwaves by a privately-owned FM radio station.
Which of the following goods is the best example of a public good? a. Garbage-collection services that are provided by a municipal government. b. Music that is broadcast over the airwaves by a privately-owned FM radio station. c. Electricity that is provided to farmhouses by a rural electric cooperative. d. Cable TV services that are provided by a privately-owned firm that is regulated by the government of the city in which it operates.
C - Your sleep is disrupted by a neighbor's loud music.
Which of the following illustrates the concept of a negative externality? a. A college professor plays a vigorous game of racquetball with the racquet she recently purchased. b. You have an adverse reaction to a medication your doctor prescribed for you. c. Your sleep is disrupted by a neighbor's loud music. d. A flood wipes out a farmer's corn crop.
D - Taxes
Which of the following is NOT a way of internalizing technology spillovers? a. Subsidies b. Patent protection c. Industrial policy d. Taxes
A - The government lacks information about the value people place on the good.
Which of the following is a disadvantage of government provision of a public good? a. The government lacks information about the value people place on the good. b. The government does not provide enough of any public good. c. The private sector can provide all public goods at a lower cost. d. There are no disadvantages of government provision of a public good.
B - Your neighbor plants a nice garden in front of his house
Which of the following is an example of a positive externality? a. A college student buyers a new car when she graduates. b. Your neighbor plants a nice garden in front of his house. c. A person litters in a public park. d. Your friend pays to get her hair cut and colored at the salon.
B - A type of duck becomes extinct due to overhunting.
Which of the following is an example of the Tragedy of the Commons? a. The number of professional soccer teams increases to the point where the quality of the games decreases, as does television viewership. b. A type of duck becomes extinct due to overhunting. c. An amusement park becomes so crowded that it institutes a lottery for admissions. d. A monkey breeding program becomes so successful that local zoos have to build additional exhibits so that visitors can view the primates.
D - Because it is a free good, there is no opportunity cost.
Which of the following is not a characteristic of a public good? a. It is not excludable. b. It is not diminished or depreciated as additional people consume the good. c. Its benefits cannot be withheld from anyone. d. Because it is a free good, there is no opportunity cost.
B - Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation.
Which of the following is not a characteristic of pollution permits? a. Prices are set by supply and demand. b. Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation. c. Real-world markets for pollution permits include sulfur dioxide and carbon. d. Firms for whom pollution reduction is very expensive are willing to pay more for permits than firms for whom pollution reduction is less expensive.
C - an ice cream cone
Which of the following is not a common resource? a. Lions in the wild b. A small pond in a public park c. An ice cream cone d. Trees in a forest
D - The government wants to attract the brightest researchers away from private research firms.
Which of the following is not a reason why government agencies subsidize basic research? a. The private market devotes too few resources to basic research. b. The general knowledge developed through basic research can be used without charge. c. The social benefit of additional knowledge is perceived to be greater than the cost of the subsidies. d. The government wants to attract the brightest researchers away from private research firms.
B - Turning the common resource into a club good
Which of the following is not a typical solution to the "Tragedy of the Commons?" a. Taxing the use of the common resource b. Turning the common resource into a club good c. Turning the common resource into a private good d. Regulating the use of the common resource
C - They subsidize the production of goods with positive externalities.
Which of the following is not an advantage of corrective taxes? a. They raise revenues for the government. b. They enhance economic efficiency. c. They subsidize the production of goods with positive externalities. d. They move the allocation of resources closer to the social optimum.
C - People do not have to pay an explicit fee to enjoy these goods.
Which of the following is usually true about government-provided goods? a. These goods have a zero opportunity cost. b. These goods are not scarce. c. People do not have to pay an explicit fee to enjoy these goods. d. The invisible hand is at work to ensure these goods are provided in the market
B - Tablet computer, national defense
Which of the following pairs of goods includes a good that is excludable and rival in consumption as well as a good that is not excludable and not rival in consumption? a. Tablet computer, membership at a gym that always has plenty of open equipment and classes b. Tablet computer, national defense c. Congested nontoll road, national defense d. Online music subscription, streetlight
C - A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood.
Which of the following statements about a well-maintained yard best conveys the general nature of the externality? a. A well-maintained yard conveys a positive externality because it increases the home's market value. b. A well-maintained yard conveys a negative externality because it increases the property tax liability of the owner. c. A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood. d. A well-maintained yard cannot provide any type of externality.
D - Government policies cannot improve upon private market outcomes.
Which of the following statements is not correct. a. A patent is a way for the government to encourage the production of a good with technology spillovers. b. A tax is a way for the government to reduce the production of a good with a negative externality. c. A tax that accurately reflects external costs produces the socially optimal outcome. d. Government policies cannot improve upon private market outcomes.
D - The government cannot improve upon the outcomes of private markets.
Which of the following statements is not correct? a. Government policies may improve the market's allocation of resources when negative externalities are present by taxing these goods. b. A negative externality is an example of a market failure. c. Markets allocate scarce resources with the forces of supply and demand. d. The government cannot improve upon the outcomes of private markets.
D - Cable TV service
Which of the following would not be considered a private good? a. A pencil b. A sweater c. A jeep d. Cable TV service
A - Mike listens to National Public Radio, but does not contribute to any fundraising efforts.
Who among the following is a free rider? a. Mike listens to National Public Radio, but does not contribute to any fundraising efforts. b. Greg takes the commuter rail to work, but he purchases the discounted monthly passes rather than buying tickets each day. c. Peter sends his five children to a private school rather than to the public school in his neighborhood. d. Bobby goes to Marsha's house to watch a basketball game on the local commercial television channel.
D - $95
Zaid's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal a. $65 b. $75 c. $85 d. $95
D - $360
Ziva is an organic brocolli farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting herservices than she has time to help if she maintains her farming business. Farmer Ziva charges $40 an hour for her home-organization services. One spring day, Ziva spends 9 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds sheplanted will yield $300 worth of brocolli. Refer to Scenario 13-3. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting brocolli? a. $130 b. $490 c. $300 d. $360
