Question 1

Which of the following describes how a negative externality affects a competitive market?

Accepted Answer

A)  The externality causes a difference between the private cost of production and the social cost.
B)  The externality causes a difference between the private cost of production and the private benefit from consumption.
C)  The externality causes consumer surplus to exceed producer surplus.
D)  The externality causes a difference between the private cost of production and the equilibrium price.E) A) and B)
F) B) and C)

Question 2

Governments can increase the consumption of a product that creates positive externalities by

Accepted Answer

A)  subsidizing the production of the product so that the supply is increased and market price is reduced.
B)  taxing the production and consumption of the product.
C)  convincing everyone to consume the good.
D)  assigning property rights to the producers of the product.E) A) and D)
F) A) and C)

Question 3

Economist A.C.Pigou argued that to deal with a negative externality in production,the government should impose a tax equal to the cost of the externality.What did Pigou believe should be done in the case of a positive externality in consumption? How would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality?

Accepted Answer

Pigou believed that,in the case of a pos...

Question 4

Which of the following statements best describes the concept of consumer surplus?

Accepted Answer

A)  "Safeway was having a sale on Dreyer's ice cream so I bought 3 quarts."
B)  "I was all ready to pay $300 for a new leather jacket that I had seen in Macy's but I ended up paying only $180 for the same jacket."
C)  "I paid $130 for a printer last week.This week the same store is selling the same printer for $110."
D)  "I sold my Blu-ray copy of Ben-Hur for $18 at a garage sale even though I was willing to sell it for $10."E) C) and D)
F) B) and C)

Question 5

Which of the following is a source of market failure?

Accepted Answer

A)  unforeseen circumstances which leads to the bankruptcy of many firms
B)  a lack of government intervention in a market
C)  incomplete property rights or inability to enforce property rights
D)  an inequitable income distributionE) C) and D)
F) All of the above

Exam 4: Market Efficiency and Market Failure

Which of the following is a source of market failure?

Correct Answer
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Which of the following statements best describes the concept of consumer surplus?

Correct Answer
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Correct Answer
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Pigou believed that,in the case of a pos...
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Which of the following describes how a negative externality affects a competitive market?

Correct Answer
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Governments can increase the consumption of a product that creates positive externalities by

Correct Answer
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Exam 4: Market Efficiency and Market Failure

Which of the following is a source of market failure?

Correct AnswerverifiedShow Answer

Which of the following statements best describes the concept of consumer surplus?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPigou believed that,in the case of a pos...View AnswerShow Answer

Which of the following describes how a negative externality affects a competitive market?

Correct AnswerverifiedShow Answer

Governments can increase the consumption of a product that creates positive externalities by

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified
Pigou believed that,in the case of a pos...
View Answer

Correct Answer
verified

Correct Answer
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