Econ Exam 2

Which of the following best represents collectivization costs? a.) Rafael has to spend time determining whether the fertilizer manufacturer, the lead smelter, or the oil refinery is the cause of pollution seeping into the groundwater in his local community. b.) Laila needs to come up with enough cash to pay the owners of the paper manufacturing plant, its attorneys, accountants, and negotiators so that a bargain can be reached with the paper manufacturer to reduce air pollution. c.) Esperanza has to spend time and effort locating and organizing all the other people who have been adversely affected by the strong odors emanating from the local slaughterhouse in order to initiate the bargaining process. d.) Dinesh has to spend time and effort to make sure that the chemical factory is living up to the agreed upon bargain that it will reduce the pollution it is releasing into the local river by 50 percent.

Esperanza has to spend time and effort locating and organizing all the other people who have been adversely affected by the strong odors emanating from the local slaughterhouse in order to initiate the bargaining process.

True or False? A common pool resource is nonrival and nonexcludable.

False

True or False? An amusement park is an example of a pure private good.

False

True or False? An example of a common pool resource is a broadcast television signal.

False

True or False? Economists generally advocate for the complete elimination of pollution.

False

True or False? Legal constraints will always reduce the size of the economic pie.

False

True or False? The Coase theorem asserts that government intervention is a prerequisite for addressing externality problems.

False

True or False? The higher the transactions costs, the easier it is to negotiate an agreement involving negative externalities.

False

True or False? The world is more likely to run out of gold than it is to run out of bald eagles.

False

Which of the following best illustrates the free rider problem? a.) Carly does her homework but refuses to share her answers with Neil b.) For every purchase of a $100 season pass, you are entitled to free entry to an amusement park for the entire summer. c.) Homeowners in a small neighborhood decide that security lighting is good for the neighborhood. One homeowner installs the lighting and asks you to contribute toward the cost, but you choose not to contribute. d.) Since no one owns rhinos and rhinos are valued for their horns, rhinos can be hunted to extinction.

Homeowners in a small neighborhood decide that security lighting is good for the neighborhood. One homeowner installs the lighting and asks you to contribute toward the cost, but you choose not to contribute.

When the government uses a cap-and-trade approach in dealing with pollution, it a.) distributes information to consumers and producers on how to reduce pollution. b.) uses taxes in order to internalize the externalities caused by the pollution. c.) imposes quantitative limits on the amount of pollution firms are allowed to generate. d.) uses subsidies to encourage firms to use new technology that reduces pollution.

Imposes quantitative limits on the amount of pollution firms are allowed to generate.

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified? a.) Does the intervention program minimize environmental damage? b.) Does the intervention program maximize economic surplus? c.) Is the intervention program economically efficient? d.) Does the intervention program reduce pollution to zero?

Is the intervention program economically efficient?

What is the rationale behind a cap-and-trade emission allowance system? a.) It provides firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance. b.) It creates a market for externalities. c.) It disciplines polluting firms by specifying the maximum amount of emissions allowed and gives them permits to pollute up to their allowance. d.) It raises revenue for the government through the sale of permits.

It provides firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance.

Of the following OECD countries, which has the lowest infant mortality rate? a.) Canada b.) the United States c.) Japan d.) the United Kingdom

Japan

Which of the following would result in a positive externality? a.) A solar panel manufacturer raises its prices due to increased demand. b.) A local government sets a maximum price on gasoline. c.) Taco Bell adds 15 new items to its dollar menu. d.) Medical research results in a cure for Ebola.

Medical research results in a cure for Ebola.

What is the name of the 1994 U.S. Housing and Urban Development program which randomly assigned families who applied into three groups and gave families the chance to leave their old neighborhoods? a.) Choose It or Lose It b.) Moving to Opportunity c.) the Neighborhood Gentrification Program d.) the Housing Choice Voucher Program

Moving to Oppurtunity

According to ________, the law's assignment of property rights would have no effect on the way resources would end up being used. a.) George Stigler b.) Milton Friedman c.) Ronald Coase d.) Aaron Director

Ronald Coase

Which of the following exemplifies the tragedy of the commons? a.) British citizens receive free universal health care administered by the government. b.) Residents of the southern coast of Alaska receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. c.) The Tibetan Antelope, distinguished for its fur which is commonly used as a light wool, is a target for poachers. d.) The Lakeview Estates community is growing so fast that the city's only fire station is not able to keep pace with the population growth in the community.

The Tibetan Antelope, distinguished for its fur which is commonly used as a light wool, is a target for poachers.

Which of the following describes how a negative externality affects a competitive market? a.) The externality causes a difference between the private cost of production and the equilibrium price. b.) The externality causes consumer surplus to exceed producer surplus. c.) The externality causes a difference between the private cost of production and the private benefit from consumption. d.) The externality causes a difference between the private cost of production and the social cost.

The externality causes a difference between the private cost of production and the social cost.

Which of the following assertions about pollution is generally agreed with by economists? a.) Pollution is never a problem because those who pollute and the victims of pollution can always bargain with one another and arrive at a suitable outcome. b.) The problem we face in dealing with pollution is determining the optimal amount of pollution. c.) The ideal amount of pollution is no pollution. d.) Due to the demand for products made by those who pollute, it is best to not restrict pollution.

The problem we face in dealing with pollution is determining the optimal amount of pollution.

What does it mean for a producer to internalize an externality? a.) The producer is prohibited from producing products which generate externalities. b.) The producer is forced to factor into production costs the cost of the externalities created in their production of output. c.) The producer is limiting outsourced production. d.) The producer must find ways to address externality problems which extend beyond geographic borders.

The producer is forced to factor into production costs the cost of the externalities created in their production of output.

Which of the following must be present to reach a negotiated solution to an externality problem? a.) A large number of people must be involved to justify negotiating a solution. b.) A majority of the parties involved must agree to a solution. c.) The government must approve the solution. d.) The transaction costs to negotiate the solution must be relatively low.

The transactions costs to negotiate the solution must be relatively low.

Which of the following must be present to reach a negotiated solution to an externality problem? a.) A large number of people must be involved to justify negotiating a solution. b.) The transactions costs to negotiate the solution must be relatively low. c.) The government must approve the solution. d.) A majority of the parties involved must agree to a solution.

The transactions costs to negotiate the solution must be relatively low.

The tragedy of the commons was avoided in the Middle Ages in much the same way economist Elinor Ostrom's research suggested. Which of the following ways reflects Ostrom's findings, and was actually conducted in the middle ages? a.) The government imposed a tax for the use of the commons. b.) Common grounds were sold to individuals. c.) There was social pressure to uphold traditionally accepted limits on family. d.) Local law enforcement monitored entry into the commons.

There was social pressure to uphold traditionally accepted limits on family.

The economist who developed the checkerboard model of neighborhood segregation was a.) John Nash. b.) Thomas Schelling. c.) David Ricardo. d.) Milton Friedman.

Thomas Schelling.

True or False? A negative externality imposes a burden or cost on others.

True

True or False? An excludable good is a good that a producer can prevent people from consuming.

True

True or False? As oil prices increase, it becomes more economical to extract oil from sources like tar sands.

True

True or False? Economists use regression analysis to separate the effects of productivity-related characteristics from the effect of gender alone.

True

True or False? Laws regulating pollution emissions can change the size of the economic pie.

True

True or False? Pollution and depletion both occur because of poorly defined property rights.

True

True or False? Resources that are privately owned are less likely to be depleted than resources that are not privately owned.

True

True or False? The Coase theorem asserts that under certain conditions, the property rights to an activity will be acquired by the party that values it most.

True

True or False? The San Diego Zoo is an example of a club good.

True

True or False? The tragedy of the commons is the tendency of a society to overuse and deplete open-access resources.

True

True or False? When it comes to pollution problems, the polluter and the victim can bargain to arrive at an outcome that benefits both parties.

True

True or False? When it comes to pollution problems, the polluter and the victim can bargain to arrive at the outcome desired by the benevolent social planner.

True

Which of the following is an example of a product that is excludable and nonrival? a.) a NASCAR event b.) the court system c.) a motorcycle d.) Western lowland gorillas

a NASCAR event

An externality is a.) anything that is external or not relevant to the production of a good or service. b.) a cost paid for by the producer of a good or service. c.) a by-product of an activity that hurts or helps someone who is not involved in that activity. d.) a benefit realized by the producer of a good or service.

a by-product of an activity that hurts or helps someone who is not involved in that activity.

Which of the following displays these two characteristics: rivalry and nonexcludability? a.) a pure public good b.) a club good c.) a common pool resource d.) a pure private good

a common pool resource

If Florida issues an alligator hunting permit to Jackson, who values an alligator hunt at $2,500, instead of Oliver, who values an alligator hunt at $4,000, the $1,500 difference in values is a.) a transactions cost. b.) the social cost of the alligator hunt. c.) a deadweight loss. d.) a negative externality.

a deadweight loss

Which of the following is an example of a club good? a.) a lighthouse b.) redwood forests c.) burritos d.) a high school football game

a high school football game

Negative externalities and the tragedy of the commons are problems that have a common source. What is this common source? a.) elf-interest motives of producers and consumers b.) an overabundance of resources c.) a lack of clearly defined and enforced property rights d.) a lack of competition

a lack of clearly defined and enforced property rights

Which of the following is an example of a pure public good? a.) high school football game b.) a lighthouse c.) redwood forests d.) burritos

a lighthouse

Which of the following is an example of a product that is excludable and rival? a.) the courtsystem b.) Western lowland gorillas c.) a NASCAR event d.) a motorcycle

a motorcycle

Free riding is primarily a characteristic of which type of good? a.) a pure private good b.) a common pool resource c.) a pure public good d.) a club good

a pure public good

Suppose pollution, which generates a negative externality, exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem, a.) an efficient solution can be reached regardless of the initial assignment of property rights. b.) quitable solution can only be reached if property rights are assigned to the polluters, and not the victims of pollution. c.) an equitable solution can only be reached if property rights are assigned to the victims of pollution and not the polluters. d.) government intervention is necessary to reach an efficient and equitable solution.

an efficient solution can be reached regardless of the initial assignment of property rights.

Suppose a tax equal to the value of the external cost of producing car batteries is imposed by government on all car battery manufacturers. All of the following will result from the tax except a.) a decrease in the market supply of car batteries. b.) an increase in demand for car batteries. c.) a decrease in the equilibrium quantity of car batteries produced and consumed. d.) an increase in the equilibrium price of car batteries.

an increase in demand for car batteries.

Private Costs a.) are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good. b.) are borne by consumers of a good while social costs are borne by government. c.) are borne by the producers of a good or service while social costs are borne by government. d.) are borne by producers of a good while external costs are borne by society at large.

are borne by producers of a good while external costs are borne by society at large.

Private costs a.) are borne by producers of a good while external costs are borne by society at large. b.) are borne by the producers of a good or service while social costs are borne by government. c.) are borne by consumers of a good while social costs are borne by government. d.) are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.

are borne by producers of a good while external costs are borne by society at large.

External costs a.) are borne by government. b.) are borne by those who do not produce the good or service. c.) are borne by those who cannot afford to purchase the good. d.) are borne by the producers of a good or service.

are borne by those who do not produce the good or service.

External costs a.) are borne by those who do not produce the good or service. b.) are borne by the producers of a good or service. c.) are borne by government. d.) are borne by those who cannot afford to purchase the good.

are borne by those who do not produce the good or service.

Economists Leigh Linden and Jonah Rockoff researched the effect of the proximity of the residences of registered sex offenders to the values of other homes in the same area and found that the effects of having a sex offender in the neighborhood a.) are highly localized and diminish rapidly with distance. b.) are virtually nonexistent. c.) are widespread and tend to remain unchanged with distance. d.) reduce the average home value in the area by 50 percent.

are highly localized and diminish rapidly with distance.

Resources that ________ protected by well-defined property rights are in ________ of being depleted. a.) are not; the greatest danger b.) are; great danger c.) are; absolutely no danger d.) are not; little danger

are not; the greatest danger

If an environmental group wanted to prevent the habitat destruction of the Wyoming pocket gopher, the Coase theorem would direct the group to a.) protest the destruction while gaining media attention for their cause. b.) physically block any efforts to destroy the habitat. c.) try to get laws enacted to protect the species. d.) bargain in order to obtain the property rights of the gopher habitat.

bargain in order to obtain the property rights of the gopher habitat.

If an environmental group wanted to prevent the habitat destruction of the Wyoming pocket gopher, the Coase theorem would direct the group to a.) try to get laws enacted to protect the species. b.) bargain in order to obtain the property rights of the gopher habitat. c.) protest the destruction while gaining media attention for their cause. d.) physically block any efforts to destroy the habitat.

bargain in order to obtain the property rights of the gopher habitat.

Asymmetric information contributes to a.) the moral hazard problem. b.) the adverse selection problem. c.) neither the adverse selection problem nor the moral hazard problem. d.) both the adverse selection problem and the moral hazard problem.

both the adverse selection problem and the moral hazard problem.

Which of the following is an example of a pure private good? a.) redwood forests b.) burritos c.) a high school football game d.) a lighthouse

burritos

In the United States, private health insurance companies a.) can be either for-profit or not-for-profit firms. b.) are all for-profit firms. c.) are all not-for-profit firms. d.) are all government-run firms.

can be either for-profit or not-for-profit firms.

Club goods differ from pure private goods in that a.) club goods are nonrival while pure private goods are rival. b.) club goods are nonexcludable while pure private goods are excludable. c.) club goods are nonexcludable while pure private goods are excludable. d.) club goods are excludable while pure private goods are nonexcludable.

club goods are nonrival while pure private goods are rival.

In the context of the environment, the type of transactions costs that includes finding, coordinating, and motivating victims of pollution emissions to help with the bargaining process are called a.) monitoring and enforcement costs. b.) negotiation costs. c.) search costs. d.) collectivization costs.

collectivization costs.

The costs of organizing all the affected parties so that bargaining can take place are called a.) search costs. b.) collectivization costs. c.) monitoring and enforcement costs. d.) negotiation costs.

collectivization costs.

All else equal, when oil prices decrease, people are ________ to look for oil substitutes. This will ________ the number of years it will take to deplete the stock of oil. a.) iscouraged; decrease b.) encouraged; decrease c.) discouraged; increase encouraged; increase

discouraged; decrease

Parents who do not have their children immunized and attempt to benefit from other parents who did have their own children immunized are exhibiting an economic behavior known as a.) selfishness. b.) public rivalry. c.) excludability. d.) free riding.

free riding

Overuse of a common resource may be avoided by all of the following methods of government intervention except a.) restricting access to the resource. b.) issuing tradeable permits for the use of the common resource. c.) restricting the intensity of the use of the resource. d.) government taking over ownership of all common resources.

government taking over ownership of all common resources.

All else equal, if oil prices decrease, annual oil consumption will ________ and the years it will take to deplete the stock of oil will most likely ________. a.) decrease; decrease b.) increase; decrease c.) increase; increase d.) decrease; increase.

increase; decrease

It is difficult for a private market to provide the economically efficient quantity of a public good because a.) it is too expensive to produce the efficient quantity of the good. b.) public goods produce negative externalities. c.) the economically efficient quantity is never known. d.) individual preferences are not often revealed in the market for the good.

individual preferences are not often revealed in the market for the good.

All of the following are advantages of risk pooling in the health insurance market except a.) it is easier for an insurance company to estimate the average number of claims likely to be filed under a group policy than it is to predict the number of claims likely to be filed under an individual policy. b.) individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to overuse those services. c.) it gives very sick people in the pool the same access to health care and pay the same premiums as healthy individuals. d.) by insuring large groups as opposed to individuals, health insurance companies reduce adverse selection.

individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to overuse those services.

In the case of public goods, the ability to free ride on the efforts of others is an example of a.) insecure property rights. b.) mutual assurance. c.) low transactions costs. d.) government subsidization.

insecure property rights

Assume that production from an automobile manufacturer caused acid rain. If the government imposed a tax on the manufacturer equal to the cost of the acid rain, the government's action would a.) internalize the externality b.) force the manufacturer to move production to another location. c.) eliminate all acid rain. d.) externalize the externality.

internalize the externality

When a negative externality exists, the private cost of production ________ the social cost of production. a.) is equal to b.) is less than c.) eliminates d.) is greater than

is less than

Which of the following activities creates a negative externality? a.) keeping an old refrigerator on your front porch b.) using a pooper-scooper every time you walk your dog c.) cleaning up a public garden in your neighborhood d.) graduating from college

keeping an old refrigerator on your front porch

The proven-reserves figure used in most years-to-depletion calculations encompasses oil reserves that are ________ and ________ to extract. a.) known; economical b.) known; both economical and uneconomical c.) both known and unknown; economical d.) both known and unknown; both economical and uneconomical

known; economical

Which of the following are assumptions behind the Coase theorem? a.) low levels of pollution b.) low transactions costs c.) the necessity of government intervention d.) high levels of pollution

low transaction costs

Privatizing a commons gives the person who owns it an incentive to a.) manage it carefully. b.) make it available to everyone without restriction. c.) restrict it from being used at all. d.) exploit the resource until it is depleted.

manage it carefully

The costs of ensuring that the parties live up to the promises they made in bargaining are called a.) monitoring and enforcement costs. b.) search costs. c.) negotiation costs. d.) collectivization costs.

monitoring and enforcement costs.

When people purchase health insurance and then change their behavior after the purchase because the insurance protects them from loss, the health insurance market is said to face the problem of a.) moral hazard b.) asymmetric information. c.) adverse selection. d.) the rationality paradox.

moral hazard

Pollution is an example of a a.) deadweight loss. b.) market failure. c.) positive externality. d.) negative externality.

negative externality

In the context of the environment, the type of transactions costs that includes covering all the costs associated with the bargaining process, such as fees for attorneys, negotiators, and accountants, are called a.) monitoring and enforcement costs. b.) collectivization costs. c.) negotiation costs. d.) search costs.

negotiation costs

The costs of the actual bargaining process are called a.) earch costs. b.) collectivization costs. c.) monitoring and enforcement costs. d.) negotiation costs.

negotiation costs

The costs of the actual bargaining process are called a.) search costs. b.) negotiation costs. c.) monitoring and enforcement costs. d.) collectivization costs.

negotiation costs.

People who live in apartment buildings across from a football stadium are able to watch football games from the balconies of their apartments instead of paying for tickets to sit inside the stadium. For these free riders, the football games are a.) nonrival and excludable. b.) rival and nonexcludable. c.) nonrival and nonexcludable. d.) rival and excludable.

nonrival and nonexcludable.

Consider a situation in which a factory emits high levels of air pollution and the factory is not liable for the damages its pollution causes. According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution. a.) not necessary; efficient. b.) necessary; efficient c.) not necessary; equitable d.) necessary; equitable

not necessary; effcient

When dealing with negative externalities, government action is required a.) only if transactions costs preclude bargaining between polluter and victim. b.) for any bargain to be successful. c.) only if transactions cost are low. d.) only in environmental disputes.

only if transactions costs preclude bargaining between polluter and victim.

Altogether, total health care spending per person in the United States is a.) about $50,000. b.) roughly $26,000. c.) about $3,600. d.) over $11,000.

over $11,000

For resources whose property rights are not well-defined or well-enforced, a.) people have an incentive to acquire as much of the resource as possible for themselves before someone else does. b.) people have no incentive to acquire the resource since they do not have the property rights to that resource. c.) people have an incentive to acquire a limited amount of that resource for personal use, but no more than they can use personally. d.) people have little incentive to acquire the resource because if the property rights are not well-defined or well-enforced, they are most likely of little value.

people have an incentive to acquire as much of the resource as possible for themselves before someone else does

The "tragedy of the commons" refers to a phenomenon where a.) individuals are not allowed to use a common resource. b.) people overuse a common resource. c.) people do not internalize an externality. d.) people have distinct property rights to a resource.

people overuse a common resource.

A positive externality results when a.) someone pays for a good or service even though she is not directly affected by the production or consumption of it. b.) people who live in one country benefit from the production of a good or service that occurs in another country. c.) economists are sure that a good or service provides benefits to consumers. d.) people who are not directly involved in producing or paying for a good or service benefit from it.

people who are not directly involved in producing or paying for a good or service benefit from it.

You choose to get a flu shot each fall and your roommate chooses not to get a flu shot. For your roommate, you getting a flu shot confers a a.) property right. b.) positive externality. c.) negative externality. d.) transactions cost.

positive externality.

Because producers do not bear the external cost of pollution, a.) private production exceeds the economically efficient level. b.) the market price for the product being produced by the pollution-generating company is too high. c.) private production is below the economically efficient level. d.) the economically efficient level of production is achieved.

private production is below the economically efficient level

Resources that are ________ tend to be carefully managed to provide profits, which ensures that they will last a long time. a.) scarce b.) abundant c.) privately owned d.) publicly held

privately owned

OPEC's incentives to produce a stream of long-term profits for its member nations means that oil stocks will a.) not be used or needed in the near future. b.) most likely run out quickly. c.) increase indefinitely. d.) probably last quite a while.

probably last quite a while

The key distinction that separates endangered resources from sustainable resources is the nature of a.) overall consumption. b.) externalities. c.) property rights. d.) transactions costs.

property rights

Leaving open-access resources open to all people but restricting the intensity of the use of the resources assigns a.) property rights to no one since the intensity of the use of the resource has been restricted. b.) permanent property rights to the government. c.) temporary property rights to those people given permission to use the resource. d.) property rights to everyone since the resource is available to be used by everyone.

property rights to everyone since the resource is available to be used by everyone.

In Zimbabwe and Namibia, a limited number of permits to hunt elephants are sold to hunters, and the revenue from the permits is shared with local residents. This gives the residents a financial incentive to ________, and as a result, the elephant populations have ________ in those countries. a.) protect elephants from poachers; rebounded b.) preserve elephant habitat; disappeared c.) stop protecting elephants from poachers; grown d.) stop protecting elephants from poachers; dwindled

protect elephants from poachers; rebounded

The report that concluded that the world will run out of oil in about 40 years used which formula to calculate the number of years to depletion? a.) (proven reserves + unknown reserves) ÷ annual consumption = number of years to depletion b.) proven reserves ÷ annual consumption = number of years to depletion c.) proven reserves ÷ unknown reserves = number of years to depletion d.) total reserves ÷ total consumption = number of years to depletion

proven reserves ÷ annual consumption = number of years to depletion

If the United States and other developed nations pay the cost of reducing carbon emissions from the atmosphere, developing nations such as India could benefit from the reduction while not contributing to it. In this sense, reducing carbon emissions is essentially a a.) transactions good. b.) club good. c.) private good. d.) public good.

public good.

Markets are generally more effective at providing ________ and governments are most effective at providing ________. a.) club goods; pure private goods b.) pure private goods; pure public goods c.) common pool resources; club goods d.) pure public goods; common pool resources

pure private goods; pure public goods

Which of the following is an example of a common pool resource? a.) redwood forests b.) burritos c.) a lighthouse d.) a high school football game

redwood forests

A statistical technique used to isolate the individual effects of a number of factors on a single outcome is called a.) taste-based discrimination. b.) the audit method. c.) statistical discrimination. d.) regression analysis.

regression analysis

Which of the following would likely be the most effective possible solution when a scarce resource is subject to the tragedy of the commons? a.) offer subsidies to the users of the commons b.) persuade people to use less of the scarce resource through an advertising campaign c.) restrict access to the commons through community norms and laws d.) force people to move a great distance away from the commons

restrict access to the commons through community norms and laws

Which of the following will tend to make oil extraction more economical? a.) development of oil substitutes b.) rising oil prices c.) conservation measures d.) additional oil exploration

rising oil prices

In the context of the environment, the type of transactions costs that includes sampling the emissions of many companies to determine which company or companies are emitting pollution are called a.) search costs. b.) monitoring and enforcement costs. c.) negotiation costs. d.) collectivization costs.

search costs

The costs of determining who to bargain with are called a.) search costs. b.) monitoring and enforcement costs. c.) collectivization costs. d.) negotiation costs.

search costs.

One reason why adverse selection problems arise in the market for health insurance is because a.) as people live longer, a greater portion of their medical bills will have to be paid by younger generations. b.) sick people are more likely to want health insurance than are healthy people. c.) fewer people are choosing careers in the medical field because of increases in the cost of education. d.) advances in medical technology are costly, and drive up the price of medical insurance.

sick people are more likely to want health insurance than are healthy people.

When production generates a negative externality, the true cost of production is the ________ cost of production. a.) average b.) private c.) external d.) social

social

Of the following resources, which one is the world most likely to run out of? a.) titanium b.) shrimp c.) spotted owls d.) kiwi fruit

spotted owls

Discrimination that occurs because the discriminator dislikes another person's gender, race, or some other personal characteristic is known as a.) taste-based discrimination. b.) indirect discrimination. c.) statistical discrimination. d.) justifying discrimination.

taste-based discrimination

Restricting access to endangered common resources assigns a.) property rights to society in general since the resource is a common resource. b.) temporary property rights to those people given permission to use the resource. c.) property rights to no one since access has been restricted to only a select few. d.) permanent property rights to those people given permission to use the resource.

temporary property rights to those people given permission to use the resource.

Classifying a good as excludable means a.) that anyone who does not pay for the good cannot consume it. b.) that someone can be barred from consuming the good based on race, ethnicity, or some other irrelevant characteristic. c.) that consumption of the good generates no externalities. d.) that a producer with patent or copyright protection can exclude any other producer from selling the product.

that anyone who does not pay for the good cannot consume it.

Classifying a good as a rival means a.) that when one person consumes the good no one else can consume it. b.) Anyone who does not pay for the good cannot consume it. c.) that the good is produced in a competitive market. d.) that there is a shortage of the good.

that when one person consumes the good no one else can consume it.

Most doctors and hospitals operate as private businesses in all of the following countries except a.) the United States. b.) Canada. c.) the United Kingdom. d.) Japan.

the United Kingdom

The individual transferrable quota system (ITQ) used to control overfishing is a variation of a.) a negative externality. b.) the cap-and-trade system. c.) the tragedy of the commons. d.) a prisoner's dilemma game.

the cap-and-trade system.

What is a "social cost" of production? a.) the total costs, both implicit and explicit, of producing the product b.) the cost of the natural resources used in production c.) the cost of environmental damage caused by production d.) the sum of all costs to individuals in society, regardless of who bears the costs of production

the cost of the natural resources used in production

Which of the following is an example of a product that is nonexcludable and nonrival? a.) a motorcycle b.) Western lowland gorillas c.) the court system d.) a NASCAR event

the court system

In economics, the optimal level of pollution is a.) the level for which the net benefit from reducing the pollution is greatest. b.) the level for which the total benefit from reducing the pollution is greatest. c.) zero. d.) the level which generates a positive externality.

the level for which the NET benefit from reducing the pollution is greatest.

The cost of group health insurance is generally lower than if a person buys an individual policy because a.) it is easier for an insurance company to deny claims from a group policy. b.) this eliminates the problem of moral hazard. c.) insuring a group of people eliminates the problem of policy holders having more information than the insurance company. d.) the problem of adverse selection is reduced.

the problem of adverse selection is reduced

A good is considered to be nonexcludable if a.) the producer finds it difficult to keep those who did not pay for the good from consuming the good. b.) the producer can keep those who did not pay for the good from consuming the good. c.) your consumption of the good reduces the quantity available for others to consume. d.) it is jointly owned by all members of a community.

the producer finds it difficult to keep those who did not pay for the good from consuming the good.

A good is considered to be nonexcludable if a.) your consumption of the good reduces the quantity available for others to consume. b.) the producer finds it difficult to keep those who did not pay for the good from consuming the good. c.) the producer can keep those who did not pay for the good from consuming the good. d.) it is jointly owned by all members of a community.

the producer finds it difficult to keep those who did not pay for the good from consuming the good.

Which of the following represents the true economic cost of production when firms produce goods that generate negative externalities? a.) the private cost of production b.) the explicit cost of production c.) the social cost of production d.) the external cost of production

the social cost of production

Which of the following represents the true economic cost of production when firms produce goods that generate negative externalities? a.) the social cost of production b.) the explicit cost of production c.) the external cost of production d.) the private cost of production

the social cost of production

What is a "social cost" of production? a.) the cost of environmental damage caused by production b.) the cost of the natural resources used in production c.) the total costs, both implicit and explicit, of producing the product d.) the sum of all costs to individuals in society, regardless of who bears the costs of production

the sum of all costs to individuals in society, regardless of who bears the costs of production

An efficient way to get a tire manufacturer to produce the socially optimal output level is a.) grant a subsidy to enable the manufacturer to internalize the external costs of production. b.) to impose a tax to make the tire manufacturer bear the external cost it creates. c.) for government to set a quota on the quantity of tires that it can produce. d.) to assign property rights to the tire manufacturer.

to impose a tax to make the tire manufacturer bear the external costs it creates

If your lawn and shrubs were killed by the fumes from a nearby factory and you hired a lawyer to sue the polluting firm, your legal fees would be considered a.) sunk costs. b.) external costs. c.) the social costs of pollution. d.) transactions costs.

transactions costs.

The Coase theorem states that a.) assigning property rights is the only thing the government should do in a market economy. b.) a free-market equilibrium is the best solution to address externalities. c.) government intervention is always needed if externalities are present. d.) under certain conditions, the property right to an activity will be acquired by the party that values it most.

under certain conditions, the property right to an activity will be acquired by the party that values it most.

Common pool resources differ from pure public goods in that a.) common pool resources are collectively owned by a group of people while pure public goods are owned by the government. b.) unlike pure public goods, common pool resources are rival in consumption. c.) common pool resources are nonexcludable while pure public goods are excludable to those who do not pay of the good. d.) common pool resources are resources that cannot be renewed but the production of pure public goods can be increased at any time.

unlike pure public goods, common pool resources are rival in consumption.

Suppose that instead of $350, Angus earns only $250 by playing the bagpipes, but all other earnings remain the same. The Coase theorem predicts that Angus ________ play the bagpipes with no city ordinance banning loud music, and Angus ________ play the bagpipes if the city passes an ordinance banning loud music. a.) will; will b.) will; will not c.) will not; will not d.) will not; will

will not; will not

A good is considered to be a rival good if a.) you can keep those who did not pay for the good from enjoying its benefits. b.) your consumption of the good reduces the quantity available for others to consume. c.) it is jointly owned by all members of a community. d.) you cannot keep those who did not pay for the good from enjoying its benefits.

your consumption of the good reduces the quantity available for others to consume

A good is considered to be a rival good if a.) it is jointly owned by all members of a community. b.) your consumption of the good reduces the quantity available for others to consume. c.) you cannot keep those who did not pay for the good from enjoying its benefits. d.) you can keep those who did not pay for the good from enjoying its benefits.

your consumption of the good reduces the quantity available for others to consume.