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Economic
Q:
Which of the following characteristics best defines a common-resource good?
a. rival and excludable
b. rival and nonexcludable
c. nonrival and nonexcludable
d. nonrival and excludable
e. a good that is never produced by the government
Q:
Club goods tend to be offered at ________ market price and at ________ quantity compared to what society desires.a. a lower; a lower b. a higher; a higher c. a higher; a lowerd. a lower; a highere. the same; a lower
Q:
Club goods are
a. nonrival, like public goods, and excludable, like private goods.
b. nonrival, like private goods, and excludable, like common-resource goods.
c. nonrival, like common-resource goods, and excludable, like public goods.
d. rival, like private goods, and nonexcludable, like public goods.
e. rival, like common-resource goods, and nonexcludable, like private goods.
Q:
A good that is nonrival and excludable is defined as a ________ good.
a. private d. club
b. public e. government
c. common-resource
Q:
Which of the following characteristics best defines a club good?
a. rival and excludable
b. rival and nonexcludable
c. nonrival and nonexcludable
d. nonrival and excludable
e. a good that is never produced by the government
Q:
The city decides to offer a subsidy to each homeowners association that plants more flowers in their common areas. In the market for flowers, this will cause the
a. supply curve to shift to the left.
b. supply curve to shift to the right.
c. demand curve to shift to the left.
d. demand curve to shift to the right.
e. the supply curve to shift to the left and the demand curve to shift to the right.
Q:
Which of the following is a common-resource good?
a. baseball tickets
b. GPS service
c. pay-per-view television
d. free public parking spaces
e. paramedic emergency medical service
Q:
Which of the following is NOT a club good?a. satellite TV b. a timeshare condo c. a subscribers-only websited. educatione. toll roads
Q:
Which of the following is NOT a public good?a. entertainment television b. interstate highwaysc. public-health researchd. open source softwaree. national defense
Q:
Which of the factors listed contributes to making street performances a public good?
a. Music and live theater are art, not science.
b. Performances do not follow a set schedule.
c. Not everyone enjoys street theater.
d. No qualifications are required to perform.
e. Any passerby can enjoy the show.
Q:
A major reason why public goods are NOT supplied by the market is the
a. free-rider problem.
b. existence of negative externalities.
c. fact that no one is willing to pay for them.
d. fact that public goods are rival.
e. fact that no firm would be able to earn a profit by producing them.
Q:
The market works efficiently in the absence of externalities if the good is
a. rival and excludable.
b. nonrival and nonexcludable.
c. rival and nonexcludable.
d. nonrival and excludable.
e. rival and either excludable or nonexcludable.
Q:
Q:
________ goods can be jointly consumed by more than one person, and nonpayers are difficult to exclude.a. Private b. Club c. Common-resourced. Publice. Government
Q:
Q:
What type of good is often provided by the government because it is hard to get people to voluntarily contribute their fair share of the expense?a. private b. club c. common-resourced. publice. government
Q:
Q:
A good that is nonrival and nonexcludable is defined as a ________ good.a. private b. public c. common-resourced. clube. government
Q:
Q:
Which of the following characteristics best defines a public good?
a. rival and excludable
b. rival and nonexcludable
c. nonrival and nonexcludable
d. nonrival and excludable
e. a good that is never produced by the government
Q:
Q:
Which of the following characteristics best defines a private good?
a. rival and excludable
b. rival and nonexcludable
c. nonrival and nonexcludable
d. nonrival and excludable
e. a good that is never produced by the government
Q:
Q:
A good that is rival and excludable is defined as a ________ good.a. private b. public c. common-resourced. clube. government
Q:
Q:
A pizza can be divided among two or more people. Why is it nonetheless a rival good?
a. One and only one person conducts the transaction to buy the pizza.
b. One is allowed a limited number of toppings unless one pays extra.
c. A pizzeria has limited seating capacity.
d. In most towns, more than one pizzeria competes for customers business.
e. Any slice consumed by one person cannot also be consumed by another.
Q:
Q:
What does it mean for a good to be excludable?
a. The good must be paid for before it is used.
b. The good can only be enjoyed by one person at a time.
c. The good is subject to the free-rider problem.
d. The good comes with a natural incentive to protect it.
e. The good does not fall within the scope of the Coase theorem.
Q:
Q:
Consider the production of a private good, such as a car, and a common-resource good, such as fish. What do the markets for these two goods have in common?
a. The quantity of output produced is inefficiently low.
b. The quantity of output produced is inefficiently high.
c. Both create a positive externality.
d. Both markets are likely to arrive at the social optimum without government intervention.
e. The price of both goods is inefficiently high.
Q:
Q:
Which good is nonrival?a. sharing a pizza with ones family b. swimming in a public pool c. driving in a cityd. listening to public radioe. visiting the post office
Q:
Q:
Visiting the public beach during summer is an example of an activity that isa. excludable. b. excludable and rival. c. nonexcludable and rival.d. nonrival.e. excludable and nonrival.
Q:
Q:
Driving in the city is an example of a good that isa. excludable. b. excludable and rival. c. nonexcludable and rival.d. nonrival.e. excludable and nonrival.
Q:
Q:
Museum visits in a particular city are free. This good isa. excludable. b. rival. c. excludable and rival.d. nonrival.e. excludable and nonrival.
Q:
Q:
Which good is excludable?a. apples on a tree in a public park b. a fireworks display c. swimming in the oceand. a walk in a public parke. education at a community college
Q:
Q:
Which goods are sold in markets?
a. private goods
b. private goods and club goods
c. private goods, club goods, and common-resource goods
d. all types of goods
e. public goods
Q:
Q:
A free-rider problem exists when
a. people receive a benefit for which they do not need to pay.
b. firms impose a cost on third parties.
c. negative externalities exist.
d. a private good is produced.
e. any market is in equilibrium.
Q:
Q:
A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence. The accompanying table identifies the annual profit received by each party per year in the event there is, or there is not, a fence. If there is no fence, one can be installed and maintained at an annual cost of $25,000. FenceNo FenceCattle Rancher$40,000$45,000Wheat Farmer$50,000$20,000If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop, then thea. rancher will choose to close his ranch.b. farmer will not allow the rancher to stay in business.c. rancher will pay to build the fence.d. rancher will choose to compensate the farmer for damages.e. rancher is indifferent toward building the fence or compensating the farmer for damages.
Q:
Q:
Q:
Q:
Consider the following scenario when answering the following questions:Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort. At present, Jones is not filtering the water that he dumps into the river. There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river. Jones and Smith have each assessed the situation and come up with the following data:Gains ToNo FactoryFactory with FilterFactory with No FilterJones$0/day$350/day$400/daySmith$200/day$125/day$50/dayIf property rights over the river are assigned to Jones, thena. Jones will force Smith to close his resort.b. Smith will pay Jones up to $75 per day to install the filter.c. Smith will pay Jones up to $125 to install the filter.d. Jones will install a filter and pay Smith at least $75 per day.e. Jones will not install a filter.
Q:
Q:
Q:
According to the Coase theorem, negative externalities can be internalized if
a. property rights are assigned to either party.
b. property rights are assigned to the party who is being damaged.
c. property rights are assigned to the party who is doing the damage.
d. the party causing the damage is forced out of business.
e. the government takes action to solve the problem.
Q:
Q:
The Coase theorem suggests that private parties
a. will never be able to negotiate to correct a negative externality.
b. can always negotiate to correct a negative externality.
c. can negotiate to correct a negative externality if there are no barriers to negotiation.
d. can negotiate to correct a negative externality if the government passes a law allowing them to do so.
e. can never negotiate to correct a negative externality if there are more than two parties involved.
Q:
Q:
Which good has well-defined property rights?a. wild animals b. the ocean c. a country club golf coursed. the aire. a street performance
Q:
SHORT ANSWER1. Explain the difference between an internal cost and an external cost. Give an example of each for a car.
Q:
A major reason why the market equilibrium for a manufactured good may not be efficient is
a. there is too much government regulation.
b. property rights are not well defined.
c. there is likely to be a positive externality associated with production.
d. the industry is likely to be a monopoly.
e. the industry is producing too little output.
Q:
Refer to the following information to answer the following questions.Two firms both emit a pollutant, and the government wants to reduce emissions of this pollutant. Each firm can choose to emit up to six units. As firms reduce emissions, there is a marginal cost per unit. This data is presented in the accompanying table.Firm 1EmissionsFirm 1Marginal CostFirm 2EmissionsFirm 2Marginal Cost0$600$1201$501$1002$402$803$303$604$204$405$105$206$06 $0The government allocates three allowances to each firm, where each allowance allows one unit to be emitted. The optimal outcome in this case is for ________ to sell one permit to the other firm, and a price that will be agreeable to both is ________.a. Firm 1; $10 b. Firm 1; $90 c. Firm 1; $50d. Firm 2; $100e. Firm 2; $40
Q:
Externalities exist because
a. owners of private property have an incentive to maintain their property.
b. owners of private property have little incentive to protect their property.
c. owners of private property are not able to trade with others.
d. property rights are not clearly defined.
e. there is too much private ownership of property.
Q:
Externalities are minimized if
a. private property rights are well established.
b. the government owns all of the productive resources.
c. there are no private goods.
d. there are no public goods.
e. there are no free-riders.
Q:
Clean air becomes polluted because
a. it is a private good.
b. no one owns the air.
c. it is a club good.
d. the air is owned by private corporations.
e. the air is owned by the government.
Q:
External benefits arise from the actions of
a. firms.
b. consumers.
c. firms and consumers.
d. the government.
e. firms, consumers, and the government.
Q:
Which of the following is true?
a. social benefits = internal benefits - external benefits
b. social benefits = internal benefits + external benefits
c. internal benefits = social benefits + external benefits
d. external benefits = social benefits + internal benefits
e. internal benefits - social benefits = external benefits
Q:
What makes an externality positive rather than negative?
a. The deadweight loss is greater than zero, not less.
b. The socially optimal quantity exchanged is less, not greater, than at market equilibrium.
c. The externality affects the demand curve rather than the supply curve.
d. The externality benefits third parties rather than harming them.
e. The externality becomes internalized without government action.
Q:
Refer to the accompanying figure. Which area represents the deadweight loss associated with producing at the market equilibrium instead of the social optimum?a. A b. B c. Cd. A + Be. B + C
Q:
Which of the following correctly describes the deadweight loss associated with any positive externality?
a. the cost borne by third parties if the externality is not internalized
b. the benefit to third parties of keeping the externality in place
c. the cost to consumers of government actions to internalize the externality
d. the cost to producers of government actions to internalize the externality
e. the combined cost, to consumers and producers, of government actions to internalize the externality
Q:
Which of the following supply and demand situations definitely involves a positive externality?
a. An Sinternal or Dinternal curve lies to the right of the corresponding Ssocial or Dsocial curve.
b. An Sinternal or Dinternal curve lies to the left of the corresponding Ssocial or Dsocial curve.
c. An Sinternal curve lies to the left or right of the corresponding Ssocial curve.
d. A Dinternal curve lies to the left or right of the corresponding Dsocial curve.
e. The externality has not been internalized through government intervention.
Q:
Refer to the accompanying figure. The market for college degrees is currently in equilibrium at point A, and the government decides to subsidize the cost of a college education by offering grants to students. The new socially optimal equilibrium will be at pointa. R. b. W. c. T.d. U.e. V.
Q:
Consider the accompanying figure to answer the following questions.When a negative externality exists and the government does not intervene, which point best identifies the market equilibrium?a. A b. B c. Cd. De. either C or D
Q:
Consider the accompanying figure to answer the following questions.When a positive externality exists, which point best identifies the social optimum?a. A b. B c. Cd. De. either A or D
Q:
Consider the accompanying figure to answer the following questions.A positive externality exists and the government does not intervene. Which point best identifies the market equilibrium?a. A b. B c. Cd. De. either C or D
Q:
Standing in line at a small-town grocery store gives people a chance to socialize. Is this a positive externality associated with the act of shopping? Why or why not?
a. Yes, because chatting with others is not inherently part of buying groceries.
b. No, because the benefit is to the shoppers, not to third parties.
c. Yes, because in large cities such socializing would not occur.
d. No, because people can easily socialize elsewhere, as well.
e. Yes, because not every shopper is in a mood to talk.
Q:
Which of the following is an example of a positive externality?
a. Drag racing on urban streets puts pedestrians at risk.
b. Drinking a glass or two of wine makes one feel pleasantly drowsy.
c. Working out at a fitness club makes one more cheerful around others.
d. Failure to save for retirement now means a lower quality of life later on.
e. Rooting for a particular team increases ones enjoyment of sporting events.
Q:
Christophers roommate is studying to be a chef and likes to try new recipes. He leaves his delicious creations in the refrigerator for anyone who wants to eat them. The food he leaves is always gone within a day. This is an example ofa. the third-party problem. b. the tragedy of the commons. c. an internal cost.d. the free-rider problem.e. a positive externality.
Q:
When people elect to spend more years in school, this results in a ________ externality because there are ________ associated with this decision.a. negative; internal costs b. negative; external costs c. positive; external benefitsd. positive; external costse. positive; internal benefits
Q:
Which activity is most likely to create a positive externality?
a. A person drives downtown each day.
b. An oil refinery operates for 16 hours each day.
c. A new airport is built in a big city.
d. A person receives a flu shot.
e. The government offers reduced-cost financing toward the purchase of a new car.
Q:
Positive externalities exist because ________ benefits are ________ than ________ benefits.a. internal; less; external b. internal; greater; external c. external; greater; sociald. internal; greater; sociale. internal; less; social
Q:
Which of the following is true of a positive externality?
a. Some costs are borne by a third party.
b. The government can use taxes to move the market to the social optimum.
c. There are no internal benefits.
d. Some benefits accrue to a third party.
e. Its existence always requires corrective measures by the government.