Econ Chapter 4

Which of the following not only makes private goods available to consumers but also allocates society's resources efficiently to the particular product?

-a competitive market

Completely eliminating pollution may be undesirable for the following reasons:

-additional actions to reduce pollution will lower society's well-being because total cost will rise more than total benefit -at some point, marginal cost may rise so high that it exceeds society's marginal benefit of further pollution abatement

What is achieved at equilibrium quantity?

-allocative efficiency -productive efficiency

Completely eliminating pollution may be undesirable for the following reasons.

-at some point, marginal cost may rise so high that it exceeds societies marginal benefit of further pollution abatement -additional actions to reduce pollution will lower society's well being because total cost will rise more than total benefit

completely eliminating pollution may be undesirable for the following reasons.

-at some point, marginal cost may rise so high that it exceeds society's marginal benefit of further pollution abatement -additional actions to reduce pollution will lower society's well-being because total cost will rise more than total beneift

Which of the following would be considering private goods?

-automobiles -clothing

how can the government deal with the under allocation of resources resulting from positive externalities?

-by providing good via government -by subsidizing consumers -by subsidizing suppliers

The guidelines to follow when comparing different public project plans include:

-do not undertake a project for which the marginal cost exceeds the marginal benefit -stop the activity at, or as close a possible to, the point at which the marginal benefit equals the marginal cost -consider increasing an activity, project, or output as long as the marginal benefit exceeds the marginal cost

the three options available to government in order to correct spillover benefits or the under allocation of resources are:

-government provision of public goods -subsidies to buyers -subsidies to producers

Which of the following highlight the free rider problem associated with a public good?

-non-payers can obtain benefit from the use of a good or service -there is no potential for revenue or profits

Public goods are distinguished by:

-nonrivalry -nonexcludability

suppose that the technology of pollution-control equipment improve noticeably. One would expect:

-society's marginal cost curve to shift rightward -the cost of pollution abatement to fall -the optimal quantity level of abatement to rise

identify policies for coping with the under allocation of resources associated with positive externalities

-subsidies to producers -government provision -subsidies to consumers -private bargaining

market failures in competitive markets can be classified into:

-supply-side -demand-side

Which of the following scenarios represents a reason for firms to "tap the market"?

-the average industry profit margin is 40% for providing cell phone service -the production of vinyl records has not been able to keep up with demand

Adam's willingness to pay $3 for the 2nd unit of the public good can best be explained by which of the following?

adams expects to receive $3 of extra benefit or utility from that unit

A negative externality occurs when

an overproduction of a product occurs and there is an overallocation of resources to this product

Consumer surplus is the area___the demand curve and_____the market price.

below; above

A cost-____analysis involves an assessment of marginal changes

benefit

When marginal___exceeds margins___, additional abatement (reduction) of a community problem may move society toward economic efficiency.

benefit; cost

_____is calculated as the difference between the maximum price a consumer is willing to pay for a product and the actual price paid.

consumer surplus

what is the difference between the maximum price a consumer is willing to pay fora product and the actual price?

consumer surplus

The supply curve for any good, private or public, is its marginal___curve.

cost

Because the____of public good typically are immediate while the benefits often accrue over longer time periods, economist convert both costs and benefits to____values for comparison.

costs; present

Which of the following greeters to reductions of combines consumer and producer surplus associated with underproduction or overproduction of a product?

deadweight loss

Government intervention may be need to achieve:

economic efficiency when externalities affect large numbers of people or when community interests are at stake

What is created when production does not provide the equilibrium quantity?

efficiency losses or deadweight losses

A(n)____causes some of the benefits or costs of a market transaction to be passed on to a third party

eternality

The____characteristic of a private good is the ability of a seller to prevent people who did not pay for a product from obtaining its benefits.

excludability

_____means that buyers who are willing and able to pay the market price for the product obtain its benefits, but those unable or unwilling to pay the price do not.

excludability

a(n)_____is a cost or a benefit accruing to an individual or group, a third party, that is external to a market transactions.

externality

A positive externality (or spillover benefit) resulting in an under allocation of resources to the market is a type of market_____.

failure

The situation when people can receive the benefits from a good without having to pay for it is known as the____problem

free-rider

According to the Coase Theorem, ____should restrict its involvement to remedying external costs or benefits

government

Resources should be shifting from the private to the public sector:

if the benefit from the extra public goods exceeds the cost that results from having fewer private goods

Consumer surplus and price are____related

inversely

Two types of government solutions for negative externalities are:

legislation; specific taxes

Producer surplus is calculated as the difference between the actual price a producer receives and the____acceptable price.

lowest

When markets fail to incorporate all benefits and/or all costs into the market supply and demand curves, then the completive market system is experiencing a:

market failure

Which of the following justifies government intervention in the economy?

market failures

If the benefit from producing extra public goods exceeds the cost that results from having fewer private goods, then:

needed or required resources should be shifted from the private to the public sector

Reducing a____externality has a cost and society must decide how much of a reduction in the externality it wants to pay for

negative

water and air pollution both result in a market failure known as a(n)____, or a spillover cost.

negative externality

if a third party to a market transaction is experiencing an uncompensated cost, then the transactions results in a market failure known as a ____ or ____.

negative externality; spillover cost

When there is no effective way of keeping individuals front the benefit of a good once it comes into existence, the characteristic of the good becomes distinguished by____

nonexludability

____in consumption means that one person consumption of a good does not preclude consumption of the good by others

nonrivalry

Low-interset student loans and government funding of school budgets are examples of correcting for a(n)____externality

positive

What is the difference between the actual price a seller receives and the minimum acceptable price?

producer surplus

If a good is non rival and non excludable then it is known as a(n)___good

public

Fire protection, police protection, libraries, and sewage disposal are all examples of___public goods.

quasi

negative externalities such as pollution___the utility of people and the communities they live and work in, rather than___it

reduce; increase

It has been stated that a cap-and trade program____society's costs by allowing pollution rights to be bough and sold.

reduces

The marginal benefit curve for pollution reduction slopes downward because of the law of diminishing marginal____.

returens

When government subsidizes producers of a product, the supply curve for that particular product will shift to the____.

right

A private good that displays___characteristic means that when someone buys and consumes that good, it is not available for someone else to buy and consume.

rivalry

Characteristics of a private good include ____ and excludability

rivalry

If society wants a public good:

society will have to direct government to provide it

a positive externality is an uncompensated:

spillover benefit

a____to a producer is a payment from the government to decrease the producers cost in order to encourage more output of a produce beneficial to society

subsidy

The marginal cost or___curve measures societies marginal cost of each unit produced

supply

Which curve shows the seller's minimum acceptable price for each unit of the product?

supply curve

Direct controls on pollution raise the marginal cost of production because:

the firms must purchase, operate and maintain pollution control equipment

A deadweight loss declines in size when a unit of output is produced, so that

the maximum willingness to pay exceeds acceptable prices

A policy approach to negative externalities is for government

to levy taxes or fines specifically on the related good

The direct way to reduce negative externalities from a certain activity is:

to pass legislation limiting that activity

The____measure society's marginal benefit of each unit of a particular good

total demand curve

Because some individuals do not consume a beneficial product but accrue benefits from others who do consume the product benefiting society, producers do which of the following?

under allocate resources to the beneficial product