Question 1

The market produces too few public goods because:

Accepted Answer

A)   The link between payment and consumption is broken.
B)   They must be paid for by wealthy individuals.
C)   Only the government can produce public goods.
D)   The market distributes goods to those with the most money.E) A) and B)
F) A) and C)

Question 2

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s) below.
Table 9.1-Costs of reducing water pollution 
-According to the schedule presented in Table 9.1,which rate of pollution is optimal?

Accepted Answer

A)   50 PPM
B)   35 PPM
C)   25 PPM
D)   10 PPME) C) and D)
F) B) and C)

Question 3

When firms have the ability to change the market price of a good or service,the market failure involved is:

Accepted Answer

A)   Market power.
B)   Public goods.
C)   Externalities.
D)   Inequities.E) All of the above
F) C) and D)

Question 4

Which of the following is not considered to be a source of market power for a firm?

Accepted Answer

A)   Externalities.
B)   Patents.
C)   Restrictive production agreements.
D)   Economies of scale.E) A) and B)
F) All of the above

Question 5

By breaking up AT&T the Justice Department expected that the telecommunications market would change from:

Accepted Answer

A)   An oligopoly to a perfectly competitive market.
B)   A competitive market toward a monopoly.
C)   A monopoly toward a competitive market.
D)   A contestable market to a monopoly.E) A) and D)
F) B) and C)

Question 6

When the economy experiences high unemployment,there is:

Accepted Answer

A)   Government failure.
B)   Microeconomic failure.
C)   Macroeconomic failure.
D)   Government waste.E) All of the above
F) A) and D)

Question 7

One News Wire article in the text links secondhand smoke to cancer and other health issues.Which type of market failure does the article illustrate?

Accepted Answer

A)   Negative externality.
B)   A failure to produce public goods.
C)   Market power by the cigarette producers.
D)   External benefits.E) A) and C)
F) None of the above

Question 8

Which of the following is not an income transfer?

Accepted Answer

A)   Unemployment benefits
B)   Social Security payments
C)   Food stamps
D)   WelfareE) A) and C)
F) A) and D)

Question 9

The market will:

Accepted Answer

A)   Always provide the optimal mix of output.
B)   Overproduce goods that yield external benefits.
C)   Produce an optimal amount of goods that generate external costs.
D)   Under produce goods that generate external benefits.E) C) and D)
F) A) and C)

Question 10

The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

Accepted Answer

A)   Inequity.
B)   Externalities.
C)   Market power.
D)   Macro failure.E) C) and D)
F) A) and D)

Question 11

The market mechanism always leads the economy to the optimal mix of output.

Accepted Answer

A) True 
 B)False

Question 12

A public good is a good that:

Accepted Answer

A)   Can be jointly consumed.
B)   Can be consumed by just one person.
C)   Is financed by the public sector,not the private sector.
D)   affects a third party.E) B) and C)
F) All of the above

Question 13

The free-rider problem arises because those who:

Accepted Answer

A)   Do not pay cannot be excluded.
B)   Pay are not willing to share.
C)   Demand the goods are excluded.
D)   Supply the goods are greedy.E) C) and D)
F) A) and D)

Question 14

Patents and copyrights contribute to market power for a firm.

Accepted Answer

A) True 
 B)False

Question 15

One News Wire article in the text links secondhand smoke to cancer,heart attacks and strokes.This implies that:

Accepted Answer

A)   The social demand and market demand for smoking are equal.
B)   Cigarette smoking produces inequities.
C)   Cigarette producers have market power.
D)   There are external costs associated with smoking.E) A) and C)
F) A) and B)

Question 16

Which of the following created an agency to identify anticompetitive practices?

Accepted Answer

A)   The Sherman Act
B)   The Clayton Act
C)   The Federal Trade Commission Act
D)   The Federal Reserve ActE) All of the above
F) None of the above

Question 17

Market failure occurs when:

Accepted Answer

A)   Market prices signal producers to produce the optimal mix of output.
B)   The economy produces at a point on the production possibilities curve.
C)   Producers supply the goods that earn the greatest profit.
D)   An imperfection in the market mechanism prevents an optimal outcome.E) A) and B)
F) A) and C)

Question 18

Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

Accepted Answer

A) True 
 B)False

Question 19

Market failure implies that a policy of laissez-faire:

Accepted Answer

A)   Leads the economy to a point beyond the production possibilities curve.
B)   Leads the economy to an undesirable point on the production possibilities curve.
C)   Is superior to government intervention.
D)   Causes government failure.E) B) and D)
F) A) and D)

Question 20

Explain the impact of external costs and external benefits on the production of public verses private goods.

Accepted Answer

Whenever external costs are present then...

Exam 9: Government Intervention

By breaking up AT&T the Justice Department expected that the telecommunications market would change from:

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Explain the impact of external costs and external benefits on the production of public verses private goods.

Correct AnswerverifiedWhenever external costs are present then...View AnswerShow Answer

Which of the following created an agency to identify anticompetitive practices?

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Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

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A public good is a good that:

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Market failure implies that a policy of laissez-faire:

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Market failure occurs when:

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Which of the following is not an income transfer?

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The market produces too few public goods because:

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Patents and copyrights contribute to market power for a firm.

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The free-rider problem arises because those who:

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The market mechanism always leads the economy to the optimal mix of output.

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When firms have the ability to change the market price of a good or service,the market failure involved is:

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Which of the following is not considered to be a source of market power for a firm?

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The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

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The market will:

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This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s) below. Table 9.1-Costs of reducing water pollution -According to the schedule presented in Table 9.1,which rate of pollution is optimal?

Correct AnswerverifiedShow Answer

One News Wire article in the text links secondhand smoke to cancer and other health issues.Which type of market failure does the article illustrate?

Correct AnswerverifiedShow Answer

When the economy experiences high unemployment,there is:

Correct AnswerverifiedShow Answer

One News Wire article in the text links secondhand smoke to cancer,heart attacks and strokes.This implies that:

Correct AnswerverifiedShow Answer

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Whenever external costs are present then...
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