Externalities
1 Which of
the following occurs if firms are able to restrict output and raise price?
a resources
are misallocated
b wealth is
shifted from consumers to government
c wealth
is shifted from producers to consumers
d P = MC
2 Production
by a monopoly would result in the socially optimal allocation of resources if
a price is
set equal to marginal cost
b marginal
revenue is set equal to price
c marginal
revenue is set equal to marginal cost
d price is
set equal to average total cost
3 If firms
accused of antitrust violations sign a consent decree, they have
a admitted
guilt and accept the lawful penalties
b admitted
guilt, but are relieved of any penalties by agreeing to cease the violations
c agreed
to cease the alleged wrongdoing, without admitting guilt
d denied
the accusation and requested a formal hearing or trial
4 Generally,
people are more satisfied with private market outcomes than with public voting
outcomes because
a each
consumer in the private market can choose the quantity he or she desires
b most
people are near the median
c the
prices are lower
d markets
are involuntary
5 Rationality
implies that in order to get what they want, people will spend the most time
and effort
a making
private market decisions
b getting
politically involved
c investigating
political candidates’ platforms
d debating
social issues
6 Special-interest
groups have little incentive to
a earn
profits
b redistribute
wealth
c lobby
Congress
d make the
economy more efficient
7 Property
rights can be defined and enforced
a only by
the government
b only
through constant renegotiation
c by
government, by informal social actions, and by ethical norms
d by the
government and by ethical norms
8 At the
market output and price for a good whose production causes pollution, (Points:
1)
a pollution
is eliminated
b the
marginal social cost of production exceeds the marginal social benefit of
production
c the
private cost of production equals the private benefit of production
d the
marginal social benefit of production equals the marginal social cost of
production
9 When a
citizens’ group opposes expansion of the prison located in town, the basis of
the opposition is that the larger prison will produce
a a
negative externality for the community
b a
positive externality for the community
c more
jobs in the community
d tax
revenue for the community
10 If
education creates positive externalities,
a private
markets provide less than the socially optimal quantity of education
b private
markets provide more than the socially optimal quantity of education
c the
marginal private benefit curve is higher than the marginal social benefit curve
d the marginal
private cost curve is higher than the marginal social cost curve