Exam 4 (Practice)
Consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. The efficient level of output for this good is_____units. a) 4,200 b) 6,750 c) 12,500 d) 8,375
b) 6,750
"Government Failure" is defined as a situation in which Question 22 options: a) the free market outcome is inefficient, in that there is a positive Deadweight Loss at the free market level of trade b) a situation in which Total Social Surplus is decreased by government intervention in a market c) the sum of gains and losses over all people in society is positive in value d) None of the above are true.
b) a situation in which Total Social Surplus is decreased by government intervention in a market
Kenny is trying to sell his used XBOX one; however, none of the potential buyers is willing to pay the price Kenny desires. Kenny's wife Zeynep, an economist, thinks this might be due to a lack of information on the part of buyers. Zeynep uses the concept of __________ to explain to Kenny why he cannot sell his XBOX one at the price he is asking a) supply and demand b) adverse selection c) moral hazard d) None of the above answers are correct
b) adverse selection
Lucy is trying to sell her used CyberPowerPC Gamer Xtreme MSAAG1000 Gaming PC; however, none of the potential buyers is willing to pay the price Lucy desires. Lucy's friend Zeynep, an economist, thinks this might be due to a lack of information on the part of buyers. Zeynep uses the concept of __________ to explain to Lucy why she cannot sell her computer at the price she is asking a) supply and demand b) adverse selection c) moral hazard d) None of the above answers are correct
b) adverse selection
The Gini-Coefficient provides a quantitative measure of Question 27 options: a) the rate at which a society is depleting its natural resources b) income equality/inequality within a society c) average levels of income in society d) the rate at which prices are increasing in an economy over time
b) income equality/inequality within a society
_______________ is an environment of extreme corruption in which government officials unabashedly seek personal gain at the expense of the public interest. Question 12 options: a) regulatory capture b) kleptocracy c) rational ignorance d) capital light
b) kleptocracy
Consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. To maximize profit, this monopolist firm should charge a price of ______ and sell _______units Question 24 options: a) $28.60; 4,980 b) $13.75; 4,130 c) $19.10; 2,500 d) $8.50; 2,500
c) $19.10; 2,500
Consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. To maximize profit, this firm should charge a price of_________ and sell____ units. a) $3.60; 6,750 b) $2.25; 4,200 c) $7.35; 12,500 d) $5.45; 4,200
d) $5.45; 4,200
Which of the following is NOT one of the market failure discussed in lecture? Question 33 options: a) Public Good b) Market Power c) Moral Hazard d) Logrolling
d) Logrolling
Which of the following is NOT one of the seven sources of government failure discussed in lecture? Question 32 options: a) Corruption b) Regulatory Capture c) Logrolling d) Market Power
d) Market Power
In a competitive market, a negative externality creates a deadweight loss because. Question 35 options: a) free markets provide more than the optimal amount (i.e., too much) of the good b) a cost of an activity borne by someone not engaging in the activity c) "Marginal Social Cost" greater than "Marginal Private Cost d) More than one (perhaps all) of the above answers is correct
d) More than one (perhaps all) of the above answers is correct
Which of the potential policies to reduce the DWL associated with a "negative externality for air-pollution?" Question 19 options: a) ban the activity entirely ("i.e illegal to emit any pollution") b) establish minimum compliance standards for manufacturer c) "cap and trade" - issue a certain number of "pollution permits" for society as a whole, and allow people to trade these permits amongst themselves d) More than one (perhaps all) of the above answers is correct
d) More than one (perhaps all) of the above answers is correct
Consider a good for which there is a positive externality. If this good were provided by the market, then Question 1 options: a) trade would have to take place at a price of $0 b) less than the efficient amount of the good would be traded c) every single unit of the good for which any consumer has a positive reservation price would be traded d) None of the above answers are correct
d) None of the above answers are correct
Which of the following is one of the sources of GOVERNMENT failure discussed in lecture? Question 9 options: a) Profit maximization by a firm with market power b) Market provision of a good which generates an externality c) Market provision of a public good d) Regulatory capture
d) Regulatory capture
A firm operating in a "Perfectly Competitive Market" has "No Market Power," which implies that the firm Question 30 options: a) would lose all its customers if it attempted to increase price above the prevailing market price b) must decrease its price in order to increase the quantity of output sold c) faces a "horizontal demand curve" for its output d) more than one (perhaps all) of the above answers is correct
d) more than one (perhaps all) of the above answers is correct
Consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. At which quantity deadweight loss is ZERO? Question 25 options: a) 4,980 b) 4,130 c) 2,500 d) 0
b) 4,130
On April 29, 2017, former heavyweight boxing champion Wladimir Klitschko will fight Anthony Joshua at Wembley Stadium in London, England in an attempt to regain the IBF, IBO, and WBA Super Heavyweight Championships of the world. This fight will only be available in the U.S. on "Pay Per View TV." The broadcast of this bout on "Pay Per View TV" will be excludable but non-rival, and is therefore best described as a Question 40 options: a) Club Good. b) Common Good. c) Public Good. d) None of the above are true
a) Club Good.
_________ is a method of tackling the inefficiency caused by an externality, by awarding property rights to the externality to one party and allowing the parties concerned to bargain their way to an efficient solution a) Coasian solution b) Regulatory Capture c) Logrolling d) free rider problem
a) Coasian solution
____________________ is defined as a situation in which the free market outcome is inefficient, in that there is a positive deadweight loss at the free market level of trade Question 4 options: a) Market Failure b) Rational Ignorance c) Corruption d) Government Failure
a) Market Failure
_______________ is a good that is non-excludable and non-rival in consumption Question 14 options: a) National Defense b) Personal Car c) Burger from McDonalds d) Netflix
a) National Defense
Negative externalities are created when Question 36 options: a) a driver drives recklessly on a busy highway b) an increase in the price of butterfat drives up the price of ice cream c) a driver pulls over to help a stranded motorist fix a flat tire d) All of the above are true
a) a driver drives recklessly on a busy highway
__________is a COST of an activity borne by someone not engaging in the activity Question 13 options: a) negative externality b) positive externality c) moral hazard d) corruption
a) negative externality
__________is a BENEFIT of an activity borne by someone not engaging in the activity Question 8 options: a) positive externality b) Logrolling c) negative externality d) Rent seeking
a) positive externality
_____________________ is refraining from acquiring knowledge when the supposed cost of educating oneself on an issue exceeds the expected potential benefit that the knowledge would provide. Question 3 options: a) rational ignorance b) capital flight c) regulatory capture d) kleptocracy
a) rational ignorance
Which of the following scenarios illustrates the Free Rider Problem? Question 23 options: a) Mario grew up in Mexico. After earning a medical degree at a prestigious school in Chicago he decided to practice medicine in the U.S. instead of moving back to Mexico. b) At the risk of potentially alienating some of his firm's customers with different political views, John Mackey (Co-Founder and Co-CEO of Whole Foods Market) endorsed Gary Johnson for President. c) Chance lives in a town with a public library that is funded entirely by voluntary contributions. Chance regularly takes his kids to the library to check out books, even though nobody from his household ever volunteers time or gives money to the library. d) Steph manages the only gas station in a rural town. In order to maximize her profit, she charges a price above her marginal costs of production
c) Chance lives in a town with a public library that is funded entirely by voluntary contributions. Chance regularly takes his kids to the library to check out books, even though nobody from his household ever volunteers time or gives money to the library.
_________is a good that is excludable and non-rival in consumption Question 15 options: a) National Defense b) Chicken Wings from Zaxby's c) Computer Software d) Stock of fish in the ocean
c) Computer Software
___________is a claim that the government should aim to maximize the well-being of the worst off person in society Question 28 options: a) Utilitarian Justice. b) Labor Theory of Value c) Maximin Criterion d) None of the above answer is correct
c) Maximin Criterion
________is a good that is non-excludable and rival in consumption Question 17 options: a) Public Sanitation b) Personal Computer c) Sidewalks d)Netflix
c) Sidewalks
Debbie's income is higher than Hunter's income. Two of the notable differences between their jobs are that Debbie must work outside year round (even when it is very hot in the summer and very cold in the winter) and Debbie runs a greater risk of being injured on the job. This would seem to suggest that the difference in incomes between the two individuals is Question 20 options: a) due to gender discrimination b) an indication of the Labor Theory of Value c) a compensating differential d) a consequence of Debbie being paid a wage rate below the minimum wage
c) a compensating differential
If Victoria rides her motorcycle less carefully after obtaining her insurance Question 10 options: a) there are no information costs b) the reason is adverse selection c) a moral hazard exists d) that person is feeling buyer's remorse
c) a moral hazard exists
The "Economic Calculation Problem," argues that Question 16 options: a) calculating the true economic value of a worker can only be done under a socialist system b) market outcomes are more likely to be efficient when large and significant costs of complying with government bureaucracy are present c) a system of planning will never be able to achieve efficient outcomes, precisely because under such a system the planners do not have access to the information generated by market transactions d) market outcomes will never be efficient, unless the good being traded is sold by a monopolist
c) a system of planning will never be able to achieve efficient outcomes, precisely because under such a system the planners do not have access to the information generated by market transactions
Sidewalks, clean water, fish stocks in open water are a Question 18 options: a) public good b) private good c) common good d) club good
c) common good
This graph illustrates "Marginal Private Benefits," "Marginal Private Costs," "Marginal Social Benefits," and "Marginal Social Costs" in the market for "Good X." Based upon this graph, it appears as if this good Question 2 options: a) is sold by a firm with substantial market power b) generates a positive externality c) generates a negative externality d) is a "club good."
c) generates a negative externality
Suppose that the Lorenz Curve for the U.S. in 2019 lies completely below theLorenz Curve for Switzerland in 2019. This implies that Question 21 options: a) Per Capita Incomes are higher in Switzerland than in the U.S b) the Unemployment Rate is lower in the U.S. than in Switzerland c) incomes are distributed more equally in Switzerland than in the U.S d) incomes are distributed more equally in the U.S. than in Switzerland
c) incomes are distributed more equally in Switzerland than in the U.S
A good is "Non-excludable" if Question 5 options: a) it is easy (or relatively costless) to prevent consumption by those who do not pay for the good b) consumption by one person does not diminish the quantity/quality of consumption by others c) it is difficult (or very costly) to prevent consumption by those who do not pay for the good d) consumption by one person does diminish the quantity/quality of consumption by others
c) it is difficult (or very costly) to prevent consumption by those who do not pay for the good
Incomes may differ across different individuals in a free market society due to Question 26 options: a) only factors which are beyond the control of the individual (such as their"endowment at birth of natural talent and ability") b) only factors which are under the direct control of the individual (such as"how much education to acquire"). c) some factors which are under the control of the individual (such as "how much education to acquire") and some factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability") d) None of the above answers are correct (since, in general, income levels in a free market society are "entirely random").
c) some factors which are under the control of the individual (such as "how much education to acquire") and some factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability")
The Lorenz curve provides a picture of how income is distributed among members of a population. If the Lorenz curve bows down, far away from the line of income equality, then Question 31 options: a) the equality of the distribution of income is greater b) the population is likely to be highly educated c) the inequality of the distribution of income is greater d) the population is likely to be less educated
c) the inequality of the distribution of income is greater
Which of the following represent a positive externality? Question 34 options: a) When you consume education you get a private benefit. But there are also benefits to the rest of society. (e.g. you are able to educate other people and therefore they benefit as a result of your education.) b) A beekeeper who keeps the bees for their honey. A side effect or externality associated with such activity is the pollination of surrounding crops by the bees. The value generated by the pollination may be more important than the value of the harvested honey c) If you walk to work, it will reduce congestion and pollution, benefiting everyone else in the city d) more than one (perhaps all) of the above answers is correct
d) more than one (perhaps all) of the above answers is correct
In advance of the election for KSU Student Government Senators, Dawson and Vincent are discussing the different candidates. Dawson states: "I haven't really researched the positions and backgrounds of the different candidates. In order to do so properly I would have to invest a great deal of time, and, after all, the chance of my vote deciding the election is very small and I don't think things will be very different for me regardless of who wins." His statement is most closely related to the issue/concept of a) brain drain b) logrolling. c) capital flight. d) rational ignorance.
d) rational ignorance.
A large "Brooklyn Style" pizza (i.e., a hand tossed pizza topped with a red sauce base, mozzarella cheese, sausage, ground beef, and apple-wood smoked bacon) from Domino's Pizza is Question 29 options: a) non-rival in consumption and non-excludable b) non-rival in consumption and excludable c) rival in consumption and non-excludable d) rival in consumption and excludable
d) rival in consumption and excludable
