Market failure is said to occur whenever: |
private markets do not allocate resources in the most economically desirable way. |
The two main characteristics of a public good are: |
nonrivalry and nonexcludability. |
Nonrivalry and nonexcludability are the main characteristics of: |
public goods. |
Unlike a private good, a public good: |
has benefits available to all, including nonpayers. |
Which of the following is an example of a public good? |
A weather warning system. |
A public good: |
is available to all and cannot be denied to anyone. |
The market system does not produce public goods because: |
private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them. |
Public goods are those for which there: |
are nonrivalry and nonexcludability. |
If one person’s consumption of a good does not preclude another’s consumption, the good is said to be: |
nonrival in consumption. |
Nonexcludability describes a condition where: |
there is no effective way to keep people from using a good once it comes into being. |
Which of the following statements is not true? |
Public goods are only provided by government. |
Because of the free-rider problem: |
the market demand for a public good is nonexistent or understated. |
At the optimal quantity of a public good: |
marginal benefit equals marginal cost. |
(Last Word) In a cap-and-trade program: |
government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other. |
(Last Word) A cap-and-trade program: |
assigns a property right to polluting the atmosphere. |
Because there are so many sources of carbon dioxide, making monitoring difficult and costly, many economists: |
prefer a carbon tax to cap-and-trade for reducing carbon dioxide emissions. |
Which of the following is an example of a market failure? |
uccessful public schools provide benefits to the students who attend them, as well as to the community as a whole including those who don’t go to those public schools |
Which of the following situations is not an example of market failure: |
Ben cannot afford to buy a high-end Mercedes Benz luxury car |
Which of the following statements about market failure is not true: |
Market failure always results from some government action or policy in a market |
When there is overproduction of a good: |
The marginal cost of the good exceeds its marginal benefit |
When the marginal benefit of an output exceeds the marginal cost: |
Production of that output should be increased, in order to achieve efficiency |
What are the two characteristics that differentiate private goods from public goods? |
Rivalry and excludability |
Private firms can hardly produce a public good profitably because of: |
The free-rider problem |
Among the following examples, the one that best illustrates a public good is: |
The bike paths around a city or town |
A public good: |
Can’t be provided to one person without making it available to others as well |
Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called: |
Nonexcludability |
Which of the following statements concerning a pure public good is false? |
All benefits associated with the production and use of a public good are received by the government |
For the music industry, the rise of Internet file-sharing of music has: |
Worsened the free-rider problem |
Government can reallocate resources away from private goods towards public goods, usually through: |
Taxes and government spending |
From an economist’s perspective, an important consideration for policies to address global warming is: |
The marginal cost and marginal benefit of the policies |
Oftentimes, the socially optimal quantity for a product that imposes external costs on the society is not zero, but something greater than zero. This is because completely eliminating the externality would involve: |
A much greater marginal cost than marginal benefit |
Sometimes, public goods whose benefits are less than their costs still get produced because: |
The benefits accrue to politically powerful government officials and their constituents |
chp. 4
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