1. A situation in which a market does not coordinate choices in a way that achieves efficient use of resources is called: A) a market failure. B) a negative externality. C) a transaction cost. D) a positive externality. 2. Exclusion and rivalry are features of: A) common resources. B) private goods. C) public goods. D) externalities. 3. Which of the following is not presented in the textbook as a source of market failure? A) Insufficient competition B) Public goods C) Transaction costs D) Externalities 4. Which of the following is NOT mentioned in the chapter as a way in which the government can correct a market failure? A) Preserving competition B) Enforcing licensure requirements C) Regulating monopolies D) Providing public goods
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The correct term for this is "a market failure." Therefore, the answer to the first question is: A) a market failure. Show more…
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Efficiency in a market is achieved when a. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. b. the sum of producer surplus and consumer surplus is maximized. c. all firms are producing the good at the same low cost per unit. d. no buyer is willing to pay more than the equilibrium price for any unit of the good. Which of the following is correct? a. Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced. b. Equality can be judged on positive grounds whereas efficiency requires normative judgments. c. Efficiency is more difficult to evaluate than equality. d. Equality and efficiency are both maximized in a society when total surplus is maximized. The supply curve for a good is a. a line that relates profit and quantity supplied. b. a line that relates input prices and quantity supplied. c. a line that relates price and quantity supplied. d. a line that relates price and profit.
1. A. If the production of a good yields a negative externality, then the social-cost curve lies (above, below) the supply curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each.) B. If the production of a good yields a positive externality, then the social-value curve lies to the (left, right) of the demand curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each) C. With government intervention, a market will tend to (over, under) supply products that produce positive externalities. Whereas with negative externalities, a market will tend to (over, under) supply products when there is no government intervention. (Circle the correct answer for each.)
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