Question 1

Market failure

Accepted Answer

A)   is a problem only in the United States
B)   does not occur in socialist economies
C)   means a good is free or has a price of zero
D)   can result from externalitiesE) A) and D)
F) A) and C) D

Question 2

If society had to pay external costs plus production costs, the supply of goods would

Accepted Answer

A)   increase
B)   decrease
C)   not change
D)   cannot be determinedE) None of the above
F) A) and B)

Question 3

In the case of an open access resource, a(n)  ________ takes place due to a lack of ________.

Accepted Answer

A)   externality; regulation
B)   free rider problem; ethical behavior
C)   market failure; property rights
D)   external benefit; rivalry in consumptionE) C) and D)
F) A) and D)

Question 4

When we drive our cars, we get the ________ of transportation services, while others experience the detrimental effects such as pollution and congestion which environmental economists refer to as a(n)  ________.

Accepted Answer

A)   positive externality; negative externality
B)   direct benefit; opportunity cost
C)   direct benefit; negative externality
D)   positive externality; opportunity costE) A) and B)
F) All of the above

Question 5

If social values are not reflected in the market values determined by the market demand and market supply curves, the competitive market equilibrium output will ______________.

Accepted Answer

A)   always be the socially efficient level of output
B)   not be the socially efficient level of output
C)   always be higher than the socially efficient level of output
D)   always be lower than the socially efficient level of outputE) All of the above
F) None of the above

Question 6

By definition, a free rider is a person _______________.

Accepted Answer

A)   who underpays for a public good relative to the benefits that they receive
B)   who refuses to pay for a public good because they receive no value from it
C)   who contributes less than others toward payment of a public good
D)   who pays less than the marginal cost of producing a public goodE) B) and C)
F) A) and C)

Question 7

In judging whether people from Chicago can justifiably claim that they have been damaged by species endangerment in Africa, the presence or absence of ___________ is the economic index used to validate that claim.

Accepted Answer

A)   public goods
B)   social costs
C)   willingness to pay
D)   market efficiencyE) B) and C)
F) None of the above

Question 8

The ________ level of pollution can be negotiated privately based on property rights when only a few parties are involved and the source, amount, and type of pollution is clearly identifiable.

Accepted Answer

A)   cost-effective
B)   zero-emissions
C)   fair
D)   socially efficientE) C) and D)
F) B) and C) D

Question 9

Efficiency means

Accepted Answer

A)   equality
B)   maximum net benefits
C)   fairness
D)   equilibriumE) A) and D)
F) A) and C)

Question 10

External benefits can drive a wedge between the _______ and the _______ resulting in a market failure.

Accepted Answer

A)   private marginal WTP curve; social marginal WTP curve
B)   market demand curve; social marginal WTP curve
C)   market supply curve; social marginal costs
D)   None of the choices are correct.E) A) and B)
F) A) and C)

Question 11

Equity means

Accepted Answer

A)   equality
B)   maximum net benefits
C)   fairness
D)   equilibriumE) A) and B)
F) A) and C)

Question 12

Due to free riding, public goods are typically ____________.

Accepted Answer

A)   under supplied
B)   supplied by private firms who can restrict access
C)   taxed
D)   over suppliedE) All of the above
F) C) and D)

Question 13

Suppose for a given market that the MWTP and MC curves are represented in Figure 4.1. Assuming all market and non-market values are incorporated into the data, the MWTP at the socially efficient level of output is equal to ________.

Accepted Answer

A)   100 units
B)   140 units
C)   $230
D)   $250E) A) and C)
F) A) and D)

Question 14

A small coastal community with the power to control access to its scallop fishery is an example of ________.

Accepted Answer

A)   common property rights
B)   private property rights
C)   an open access resource
D)   a positive externalityE) B) and D)
F) A) and C)

Question 15

Refer to Figure 4.5. If the group living in the house consists of Students A, B, and C, the aggregate willingness to pay to reduce CO concentration to 80 ppm is ______.

Accepted Answer

A)   $65/yr
B)   $140/yr
C)   $85/yr
D)   indeterminateE) None of the above
F) B) and D)

Question 16

When the rate of output is at the socially efficient level, _______________.

Accepted Answer

A)   net social value which is equal to total WTP minus total costs is as large as possible
B)   the total willingness to pay is as large as possible
C)   profit is a large as possible
D)   output is as large as possibleE) B) and C)
F) None of the above

Question 17

In the case of open access resources and public goods, the competitive market output level will be ___________.

Accepted Answer

A)   equal to the socially efficient level of output
B)   lower than the socially efficient level of output
C)   unequal to the socially efficient level of output
D)   higher than the socially efficient level of outputE) All of the above
F) A) and C)

Question 18

When you enjoy the view of your next-door neighbor's prize-winning garden, this is an example of ________.

Accepted Answer

A)   common property rights
B)   a positive externality
C)   a negative externality
D)   a public goodE) All of the above
F) B) and C) B

Question 19

When production results in environmental degradation, private firms do not take the ________ into consideration when making their output decisions resulting in ________.

Accepted Answer

A)   external costs; a market failure
B)   market failure; an externality
C)   marginal costs; pollution
D)   market failure; pollutionE) All of the above
F) A) and B)

Question 20

Refer to Figure 4.7. As MWTP _______, total willingness to pay _______.

Accepted Answer

A)   increases; increases
B)   declines; declines
C)   declines; increases
D)   The table does yield enough information.E) C) and D)
F) B) and D)

Exam 4: Economic Efficiency and Markets

Market failure

Correct AnswerverifiedD

If society had to pay external costs plus production costs, the supply of goods would

Correct AnswerverifiedShow Answer

In the case of an open access resource, a(n) ________ takes place due to a lack of ________.

Correct AnswerverifiedShow Answer

When we drive our cars, we get the ________ of transportation services, while others experience the detrimental effects such as pollution and congestion which environmental economists refer to as a(n) ________.

Correct AnswerverifiedShow Answer

If social values are not reflected in the market values determined by the market demand and market supply curves, the competitive market equilibrium output will ______________.

Correct AnswerverifiedShow Answer

By definition, a free rider is a person _______________.

Correct AnswerverifiedShow Answer

In judging whether people from Chicago can justifiably claim that they have been damaged by species endangerment in Africa, the presence or absence of ___________ is the economic index used to validate that claim.

Correct AnswerverifiedShow Answer

The ________ level of pollution can be negotiated privately based on property rights when only a few parties are involved and the source, amount, and type of pollution is clearly identifiable.

Correct AnswerverifiedD

Efficiency means

Correct AnswerverifiedShow Answer

External benefits can drive a wedge between the _______ and the _______ resulting in a market failure.

Correct AnswerverifiedShow Answer

Equity means

Correct AnswerverifiedShow Answer

Due to free riding, public goods are typically ____________.

Correct AnswerverifiedShow Answer

Suppose for a given market that the MWTP and MC curves are represented in Figure 4.1. Assuming all market and non-market values are incorporated into the data, the MWTP at the socially efficient level of output is equal to ________.

Correct AnswerverifiedShow Answer

A small coastal community with the power to control access to its scallop fishery is an example of ________.

Correct AnswerverifiedShow Answer

Refer to Figure 4.5. If the group living in the house consists of Students A, B, and C, the aggregate willingness to pay to reduce CO concentration to 80 ppm is ______.

Correct AnswerverifiedShow Answer

When the rate of output is at the socially efficient level, _______________.

Correct AnswerverifiedShow Answer

In the case of open access resources and public goods, the competitive market output level will be ___________.

Correct AnswerverifiedShow Answer

When you enjoy the view of your next-door neighbor's prize-winning garden, this is an example of ________.

Correct AnswerverifiedB

When production results in environmental degradation, private firms do not take the ________ into consideration when making their output decisions resulting in ________.

Correct AnswerverifiedShow Answer

Refer to Figure 4.7. As MWTP _______, total willingness to pay _______.

Correct AnswerverifiedShow Answer

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D

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In the case of an open access resource, a(n) takes place due to a lack of .

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When we drive our cars, we get the of transportation services, while others experience the detrimental effects such as pollution and congestion which environmental economists refer to as a(n) .

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D

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External benefits can drive a wedge between the _ and the _ resulting in a market failure.

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B

When production results in environmental degradation, private firms do not take the into consideration when making their output decisions resulting in .

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Refer to Figure 4.7. As MWTP _, total willingness to pay _.

Correct Answer
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