Module 5 complete quiz

A free rider problem arises whenever: A. Goods cannot be provided exclusively to those who pay for them B. Goods cease to be scarce C. The government provides goods and services D. The price of a good is very low

A

Fin consumers were able to receive the full social benefits associated with the consumption of goods involving positive externalities, other things being equal, there would probably be: A. An increase in consumption B. A decrease in consumption C. A decrease in the market price of the product D. A great misallocation of resources

A

If a corrective tax equal to the external cost imposed on third parties is levied on polluters it will: A. Force polluters to internalize the external cost resulting from their actions B. Usually have no impact whatsoever on pollution levels, but will generate tax revenue for the government C. Increase the level of pollution D. Eliminate all pollution

A

If the negative externalities are created in the production of a good, then society will: A. Produce too much of the good since the marginal private cost to firms is less than the marginal social costs B. Produce too little of the good since the marginal private costs to firms is less than the marginal social costs C. Produce too little of the good since the marginal private costs to firms is greater than the marginal social costs D. Always produce the most efficient quantity of output E. Produce too much of the good since the marginal private cost to firms is greater than the marginal social cost

A

In the market for insurance, the moral hazard problem leads: A. Those who buy insurance to take fewer precaution to avoid the insured risks B. To none of the other answers is correct C. Those with more prior insurance claims to be charged a higher premium D. Those most likely to collect on insurance to buy it

A

Negative externalities are: A. Cost incurred by individuals other than buyers and sellers in a particular market B. Cost incurred by individuals other than sellers C. Cost incurred by individuals other than buyers D. Cost incurred by buyers, sellers and others

A

The market system fails to provide the efficient output of public goods b/c: A. Private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them B. People place no value on public goods C. Public goods create widespread spillover costs D. Public enterprises can produce those goods at a lower cost than private firms

A

Where free rider problem exist, goods tend to be: A. Underproduced B. High priced and available only to the rich C. Low priced and available only to the poor D. Overproduced

A

Which of the following will most likely generate positive externalities? A. Public education B. A polluting factory C. A grocery factory D. An automobile E. A hot dog vendor

A

A public good is: A. Any good or service that is produced by the government B. A good or service that can be consumed by both paying and non paying customers C. A good or service for which it is relatively easy to exclude non paying customers from consumption D. A good or service that is consumed by private individuals and financed by private contributions

B

A situation in which the winner of an auction is worse off than the loser b/c of inaccurate valuation is known as: A. Adverse selection B. Winner's curse C. Native externality D. Free rider problem

B

If there are important spillover benefits from consumption of a good: A. The market demand curve for the good overstates the value of the product to society and resources are therefore overallocated to its production B. The market demand curve for the good understates the value of the product to society and resources are therefore under allocated to its production C. Government should prohibit its production C. Taxes should be imposed on producers of the product

B

If, after she buys a car with air bags, Maria Andretti starts to drive recklessly, that would be an illustration of: A. the free rider problem B. The moral hazard problem C. The adverse selection problem D. The lemon problem

B

The consumption of public goods is: A. Excludable and non rivalrous B. Non excludable and non rivalrous C. Excludable and rivalrous D. Non excludable and rivalrous

B

To internalize a negative externality: A. None of the other answers is correct B. A producer's cost could be increases by an amount equal to the external cost resulting from the production of a good C. A producer could receive a subsidy equal to the external cost resulting from the production of a good D. A producers costs could be reduced by an amount equal to the external cost resulting from the production of a good

B

When a good is non rivalrous in consumption, then: A. Consumption by an additional individual will significantly reduce the benefits derived by others from a public good B. Consumption by an additional individual does not prevent others from benefiting from a public good C. Individuals who refuse to pay for a public good cannot be excluded from benefiting from it D. Individuals who refuse to pay for a public good can be excluded from benefiting from it

B

Which of the following activities, if any, represents an external costs? A. The increase in promoter values of vacant lots in an area near where a new park is dedicated B. None other answers is correct C. The benefits that accrue to society when an individual receives a college education D. The price you pay for a slice of pizza E. The pollination of apple trees that occurs when a beekeeper locates next door to an apple orchard

B

Which of the following goods is least likely to be provided by the private sector? A. A good for which the marginal private benefit to an individual exceeds the marginal costs of producing the good B. A good characterized by non rivalry in consumption from which nonpaying customers cannot be excluded C. A good characterized by non rivalry in consumption from which non paying customers can be excluded D. A good characterized by rivalry in consumption from which non paying customers can be excluded

B

Which of the following is not true of adverse selection? A. It can result when both parties to a transaction have little information about the quality of the goods involved B. It can be difficult problem to overcome, b/c it is often not in the self interest of the transactor with the superior information to provide a truthful and complete disclosure C. All of the other answers are true D. It can cause the quality of a good traded to fall, if quality detection costs are high

C

If the production of a good created both external costs and external benefits, but the external costs were greater, without government intervention, a market economy will: A. Produce the optimal mount of the product B. Produce too little of the product C. Produce too much of the product D. Not produce the product at all

C

In a market where firms are able to reduce their private costs by shift costs onto others, which of the following will not happen: A. Negative externalities will be observed B. The market prices of products produced by firms will be too low relative to social optimum C. Output of the good being produced will be too slow D. Inefficiencies will occur

C

Which of the following is a rival good that is nonexcludable? A. A public good B. A private good C. A common resource D. Both a and c

C

Which of the following is true? A. In the case of external benefits, a tax equal to external benefits would result in an efficient level of output B. The private market provides too much of a good and services that generate external benefits C. In the case of public goods, when people act as free riders, some goods and services having benefits greater than costs will not be produced D. In the case of external benefits, if we could add the benefits that are derived by non paying consumers, the supply curve would shift to the girth, increasing output

C

If the production of a particular good involves significant external costs, to force the externality to be internalized the government might: A. Offer a subsidy for production of the good in order to increase production B. Offer a subsidy for production of the good in order to decrease production C. Impose a tax on production of the good in order to increase production D. Impose a tax on production of the good in order to decrease production

D

The median voter model implies that: A. Most voters will have about the same preferences for goods and services provided through government B. Many people will be dissatisfied with the amount of spending on government funded projects C. A candidate may adopt more extreme views when seeking her parties nomination than during the general election D. Political voting will be as economically efficient as voting with dollars in competitive markets E. Both b and c could be common

E

By imposing the tax, the firm faces:

Higher cost and the supply curve shifts to the right

None one can be excluded from consumption

The good is non excludable

The consumption by one individual does prevent the simultaneous consumption by others

The good is rivalrous

To internalize a negative externality implies:

To take into account the external costs