Question 1

Exhibit 30-5
​
 
-Refer to Exhibit 30-5. If a positive externality exists, then curve __________ represents the marginal social benefit curve and the area __________ represents the market failure.

Accepted Answer

A)  2; BDC
B)  1; ABC
C)  3; ABC
D)  2; ABC
E)  1; BDCF) A) and C)
G) C) and E)

Question 2

The Coase theorem

Accepted Answer

A)  shows that under certain conditions the market can internalize externalities.
B)  states that economic units should specialize in the production of those goods in which they have a comparative advantage.
C)  asserts that the firm should produce that output at which marginal cost is equal to marginal revenue.
D)  holds that the firm should produce that output at which marginal factor cost is equal to marginal revenue product.E) A) and D)
F) A) and C)

Question 3

If an asymmetry of information is removed and laborers' preferences change against employment, this will shift the equilibrium in the labor market to the

Accepted Answer

A)  northwest.
B)  northeast.
C)  southwest.
D)  southeast.E) A) and C)
F) None of the above

Question 4

Asymmetric information can exist before, but not after, a transaction.

Accepted Answer

A) True 
 B)False

Question 5

In the case of a negative externality, the socially optimal output naturally exists if

Accepted Answer

A)  the external costs associated with the negative externality are extremely small.
B)  the external costs divided by price is equal to price divided by marginal private cost.
C)  there are no free riders.
D)  the public good aspects of the negative externality outweigh the costs incurred by the negative externality.
E)  none of the aboveF) A) and E)
G) A) and C)

Question 6

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a

Accepted Answer

A)  negative externality.
B)  positive externality.
C)  substitute good.
D)  complementary good.E) A) and B)
F) A) and C)

Question 7

Moral hazard occurs when the parties on once side of the market, who have information not known to others, self select in a way that adversely affects the parties on the other side of the market.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 30-5
​
 2 B) B and D; Q1 C) C and A; Q1 D) B and C; Q1 E) b and c" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points __________, and the market output is __________.

Accepted Answer

A)  A and C; Q2
B)  B and D; Q1
C)  C and A; Q1
D)  B and C; Q1
E)  b and cF) B) and E)
G) B) and D)

Question 9

Hank goes to a Korean restaurant for the first time and he has no prior knowledge of Korean. He orders the Daenjang Chigae prepared medium hot and hopes for the best. Here an information __________ is __________ a market outcome.

Accepted Answer

A)  symmetry; affecting
B)  symmetry; not affecting
C)  asymmetry; affecting
D)  asymmetry; not affectingE) B) and C)
F) C) and D)

Question 10

A good is a nonexcludable if

Accepted Answer

A)  its consumption by one person does not reduce its consumption by others.
B)  it is impossible to prevent people from obtaining the benefits of the good once it has been produced.
C)  no negative externalities are associated with its production and consumption.
D)  it is free in the first place; that is, it is so abundant that people can get all they want at zero price.E) A) and B)
F) A) and C)

Question 11

Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.

Accepted Answer

The Coase theorem states that in the cas...

Question 12

Exhibit 30-3
 
-Refer to Exhibit 30-3. Suppose that Firms A, B, and C are the only polluters in the state and that each emits 4 tons of pollution into the atmosphere. To cut the level of pollution in half, the government mandates system whereby each firm must reduce its pollution level by one-half. The total cost of complying with the mandate is

Accepted Answer

A)  $433.
B)  $1,540.
C)  $2,750.
D)  $8,570.
E)  $11,650.F) C) and D)
G) C) and E)

Question 13

Exhibit 30-5
​
 1. B) D and B; Q1. C) D and B; Q2. D) A and B; Q2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points ____________ and the socially optimal output is

Accepted Answer

A)  C and A; Q1.
B)  D and B; Q1.
C)  D and B; Q2.
D)  A and B; Q2.E) B) and D)
F) A) and D)

Question 14

Which of the following statements is false?

Accepted Answer

A)  A subsidy can be used to internalize a negative externality; a tax can be used to internalize a positive externality.
B)  Ronald Coase stressed the reciprocal nature of externalities.
C)  One way to deal with negative externalities is for government to apply regulations directly to the activity that generates the externalities.
D)  Simply because taxes and subsidies are sometimes used to adjust for negative and positive externalities, respectively, it does not necessarily follow that the socially optimal level of output will be reached.E) B) and D)
F) B) and C)

Question 15

Exhibit 30-1
​
 2 to Q1 is the area of A) ABC. B) Q2BCQ1. C) Q2BAQ1. D) Q2EAQ1." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the social cost of expanding output from Q2 to Q1 is the area of

Accepted Answer

A)  ABC.
B)  Q2BCQ1.
C)  Q2BAQ1.
D)  Q2EAQ1.E) C) and D)
F) B) and C)

Question 16

Exhibit 30-3
 
-Refer to Exhibit 30-3. The government issues two pollution permits to each firm. Firm C will pay up to __________ to buy a permit from Firm A or B.

Accepted Answer

A)  $2,200
B)  $1,000
C)  $600
D)  $500E) B) and D)
F) All of the above

Question 17

A positive externality is internalized when

Accepted Answer

A)  demand shifts to the right until the socially optimum level of output is obtained.
B)  demand shifts to the left until the socially optimum level of production is obtained.
C)  supply shifts to the left until the socially optimum level of production is obtained.
D)  b and c
E)  none of the aboveF) A) and B)
G) D) and E)

Question 18

Which of the following statements is true?

Accepted Answer

A)  If a good is nonrivalrous in consumption then it is nonexcludable, too.
B)  A good can be rivalrous in consumption but not nonexcludable, too.
C)  An apple is nonrivalrous in consumption.
D)  Many economists maintain that the market fails to produce nonexcludable private goods.
E)  none of the aboveF) A) and E)
G) B) and E)

Question 19

Positive externalities can be internalized using persuasion, but persuasion is not effective with negative externalities.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 30-4
​
 3 - P1. B) P4 - P3. C) P3 - P2. D) P2 - P1." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 30-4. If a negative externality exists, then the external costs associated with the negative externality equal

Accepted Answer

A)  P3 - P1.
B)  P4 - P3.
C)  P3 - P2.
D)  P2 - P1.E) A) and C)
F) B) and D)

Exam 30: Market Failure Externalities Public Goods and Asymmetric Information

Exhibit 30-1 -Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the social cost of expanding output from Q₂ to Q₁ is the area of

Correct Answer
verified

Correct Answer
verified

Exhibit 30-3 -Refer to Exhibit 30-3. The government issues two pollution permits to each firm. Firm C will pay up to __________ to buy a permit from Firm A or B.

Correct Answer
verified

If an asymmetry of information is removed and laborers' preferences change against employment, this will shift the equilibrium in the labor market to the

Correct Answer
verified

Exhibit 30-5 -Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points , and the market output is .

Correct Answer
verified

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a

Correct Answer
verified

Exhibit 30-5 -Refer to Exhibit 30-5. If a positive externality exists, then curve represents the marginal social benefit curve and the area represents the market failure.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

In the case of a negative externality, the socially optimal output naturally exists if

Correct Answer
verified

A positive externality is internalized when

Correct Answer
verified

Asymmetric information can exist before, but not after, a transaction.

Correct Answer
verified

Exhibit 30-5 -Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points ____________ and the socially optimal output is

Correct Answer
verified

Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.

Correct Answer
verified
The Coase theorem states that in the cas...
View Answer

Which of the following statements is false?

Correct Answer
verified

A good is a nonexcludable if

Correct Answer
verified

Positive externalities can be internalized using persuasion, but persuasion is not effective with negative externalities.

Correct Answer
verified

Exhibit 30-4 -Refer to Exhibit 30-4. If a negative externality exists, then the external costs associated with the negative externality equal

Correct Answer
verified

Hank goes to a Korean restaurant for the first time and he has no prior knowledge of Korean. He orders the Daenjang Chigae prepared medium hot and hopes for the best. Here an information is a market outcome.

Correct Answer
verified

The Coase theorem

Correct Answer
verified

Moral hazard occurs when the parties on once side of the market, who have information not known to others, self select in a way that adversely affects the parties on the other side of the market.

Correct Answer
verified

Exam 30: Market Failure Externalities Public Goods and Asymmetric Information

Exhibit 30-1 ​ -Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the social cost of expanding output from Q2 to Q1 is the area of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 30-3 -Refer to Exhibit 30-3. The government issues two pollution permits to each firm. Firm C will pay up to __________ to buy a permit from Firm A or B.

Correct AnswerverifiedShow Answer

If an asymmetry of information is removed and laborers' preferences change against employment, this will shift the equilibrium in the labor market to the

Correct AnswerverifiedShow Answer

Exhibit 30-5 ​ -Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points __________, and the market output is __________.

Correct AnswerverifiedShow Answer

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a

Correct AnswerverifiedShow Answer

Exhibit 30-5 ​ -Refer to Exhibit 30-5. If a positive externality exists, then curve __________ represents the marginal social benefit curve and the area __________ represents the market failure.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

In the case of a negative externality, the socially optimal output naturally exists if

Correct AnswerverifiedShow Answer

A positive externality is internalized when

Correct AnswerverifiedShow Answer

Asymmetric information can exist before, but not after, a transaction.

Correct AnswerverifiedShow Answer

Exhibit 30-5 ​ -Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points ____________ and the socially optimal output is

Correct AnswerverifiedShow Answer

Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.

Correct AnswerverifiedThe Coase theorem states that in the cas...View AnswerShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

A good is a nonexcludable if

Correct AnswerverifiedShow Answer

Positive externalities can be internalized using persuasion, but persuasion is not effective with negative externalities.

Correct AnswerverifiedShow Answer

Exhibit 30-4 ​ -Refer to Exhibit 30-4. If a negative externality exists, then the external costs associated with the negative externality equal

Correct AnswerverifiedShow Answer

Hank goes to a Korean restaurant for the first time and he has no prior knowledge of Korean. He orders the Daenjang Chigae prepared medium hot and hopes for the best. Here an information __________ is __________ a market outcome.

Correct AnswerverifiedShow Answer

The Coase theorem

Correct AnswerverifiedShow Answer

Moral hazard occurs when the parties on once side of the market, who have information not known to others, self select in a way that adversely affects the parties on the other side of the market.

Correct AnswerverifiedShow Answer

Exhibit 30-1 -Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the social cost of expanding output from Q₂ to Q₁ is the area of

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 30-5 -Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points , and the market output is .

Correct Answer
verified

Correct Answer
verified

Exhibit 30-5 -Refer to Exhibit 30-5. If a positive externality exists, then curve represents the marginal social benefit curve and the area represents the market failure.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 30-5 -Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points ____________ and the socially optimal output is

Correct Answer
verified

Correct Answer
verified
The Coase theorem states that in the cas...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 30-4 -Refer to Exhibit 30-4. If a negative externality exists, then the external costs associated with the negative externality equal

Correct Answer
verified

Hank goes to a Korean restaurant for the first time and he has no prior knowledge of Korean. He orders the Daenjang Chigae prepared medium hot and hopes for the best. Here an information is a market outcome.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified