Chapter 5: Online Quizzes

Markets may have difficulty providing the proper quantity of a public good because a.individuals will tend to become free riders, and private firms will have difficulty generating enough revenue to produce an efficient quantity of the good. b.the good generally has a very large value to consumers relative to its cost of production. c. the good is one that tends to benefit a large number of people. d.the large profit involved in the production of a public good is generally too much for private firms to effectively pay out to shareholders.

a.individuals will tend to become free riders, and private firms will have difficulty generating enough revenue to produce an efficient quantity of the good.

Competitive markets generally give consumers and producers correct incentives when a.externalities are present in the market. b.property rights are well-defined and enforced. c.the good being produced and consumed is a pure public good. d.there is a substantial lack of information on the part of either buyers or sellers.

b.property rights are well-defined and enforced.

Which of the following correctly describes a positive externality resulting from an individual's purchase of a winter flu shot? a.The flu shot is cheaper than the cost of treatment when you get the flu, therefore saving hospital resources. b.The income of doctors increases when you get the flu shot. c.The flu shot reduces the likelihood others will catch the flu. d.The flu shot reduces the likelihood you will miss work as the result of sickness; therefore, you will earn more income.

c.The flu shot reduces the likelihood others will catch the flu.

When production of a good generates external costs, the a.demand curve for the good will overstate the true social benefits from consumption of the good. b.demand curve for the good will understate the true social benefits from consumption of the good. c.supply curve for the good will overstate the true social cost of producing the good. d. supply curve for the good will understate the true social cost of producing the good.

d. supply curve for the good will understate the true social cost of producing the good.

Economic efficiency requires that a.individuals produce at their maximum level. b.only long-lasting, high-quality products be produced without regard to cost. c.income be distributed equally among consumers. d.all economic activity generating more benefits than costs be undertaken.

d.all economic activity generating more benefits than costs be undertaken.

Which of the following is an example of a public good? a.a government-run health care system b. public tennis courts in a public park c.the U.S. Postal Service d.none of the above meets the criteria of a public good

d.none of the above meets the criteria of a public good