Chapter 5

Question 1

Demand-Side market failures arise when demand curves do not reflect consumer’s full willingness to pay for a product.

Answer 1

True

Question 2

If demand and supply reflected all the benefits and costs of producing a product, there would be economic efficiency in the production of the product.

Answer 2

True

Question 3

Consumer surplus is the difference between the minimum and maximum price a consumeris willing to pay for a good.

Answer 3

false

Question 4

consumer surplus is a utility surplus that reflects a gain in total utility or satisfaction

Answer 4

false

Question 5

consumer surplus and price are directly or positively related

Answer 5

true

Question 6

producer surplus is the difference between the actual price a producer receives for a product in the minimum price the producer would have been willing to accept for the product

Answer 6

true

Question 7

the higher the actual price of the less the amount of producer surplus

Answer 7

false

Question 8

efficiency losses are increased in the combined consumer and product surplus

Answer 8

false

Question 9

private goods are characterized by the rivalry and exclude ability and public goods are characterized by non-rivalry and not excludeability

Answer 9

true

Question 10

when determining the collective demand for a public good year at the prices people are willing to pay for the lastunit of the public good at each possible quantity demanded

Answer 10

true

Question 11

on the marginal benefit of a public good exceeds the marginal cost will be an over allocation of all resources to the public good use

Answer 11

false

Question 12

the optimal allocation the public is determined by the rule that marginal cost equals marginal revenue

Answer 12

false

Question 13

connection malady is a cost or benefit of curing to an individual or group a third party which is external to the market transaction

Answer 13

true

Question 14

in a competitive product market and in the absence of negative externalities the supply curve reflects the cost of producing a product

Answer 14

true

Question 15

if demand and supply reflected all the benefits and costs of a product equilibrium output of a competitive market would be identical with its optimum output

Answer 15

false

Question 16

there is an under allocation of resources to the production of a commodity when negative externalities are present

Answer 16

false

Question 17

one way for government to correct for a negative externality from the production of a product is to increase the demand for the product

Answer 17

false

Question 18

when negative externalities are involved in the production of a product more resources are allocated to the production of the product and more of the product is produced and is also more or most efficient

Answer 18

true

Question 19

the Coase theorem suggests that government intervention is required whenever there are negative or positive action externalities

Answer 19

false

Question 20

taxes that are imposed on businesses that created nationality will lower the marginal cost of production and increase supply

Answer 20

false

Question 21

subsidizing the firms producing goods that provide positive externalities we usually result in better allocation of resources

Answer 21

true

Question 22

if this society has marginal cost of $10 for pollution abatement and marginal benefit of pollution abatement is eight dollars to achieve an optimal amount of pollution the society which would increase the amount of pollution abatement

Answer 22

false

Question 23

changes in technology or changes in society’s attitudes towards pollution can affect the optimal amount of pollution abatement

Answer 23

true

Question 24

one solution to the negative externalities caused by pollution is to create a market for pollution rights in which the negative externalities from pollution are turning to private costs

Answer 24

true

Question 25

political pressure can make it difficult to find and implement an economically efficient solution to an extra problem

Answer 25

true

Question 26

**Katie is willing to pay $50 for a product and Tom is willing to pay $40 for product. The actual price that they have to pay is $30. What is the amount of the consumer surplus for Katie and Tom combined?** A $30 B. $40 C.$50 D $60

Answer 26

A $30

Question 27

**given demand curve the consumer surplus is** A. decreased by higher prices and increase by lower prices B. decreased by higher prices increased by lower prices C.increase by higher prices, but not affected by lower prices D.decreased by lower prices, but not affected by higher prices

Answer 27

B. decreased by higher prices increased by lower prices

Question 28

**the difference between the actual price that a producer receives in the minimum acceptance price is producer** A.cost B.wealth C.surplus D.investment

Answer 28

C.surplus

Question 29

**the minimum acceptable price for a product that were on is willing to receives $20. It is $15 for Carlos. The actual price they receive is $25. What is the amount of the producer surplus for Ron and Carlos combined** A.$10 B.$15 C.$20 D.$25

Answer 29

B.$15

Question 30

**when the combine consumer producer surplus is at a maximum for product** A.the quantity supplied is greater than the quality demanded B.the market finds alternative ways to ration the product C.the market is allocatively efficient D.the product is a non-priced good

Answer 30

C.the market is allocatively efficient

Question 31

when the output is greater than the optimum level of output for product there are efficiency A. Gains from the underproduction of the product B. Losses from the underproduction of the product C. Gains from the overproduction of the product D. Losses from the overproduction the product

Answer 31

D. Losses from the overproduction the product

Question 32

**how do public goods differ from private goods? Public goods are characterized by** A. Robbery and exclude ability B.rivalry and non-excludeability C. Non-rivalry and excludeability D. Non-rivalry and non-excludeability

Answer 32

D. Non-rivalry and non-excludeability

Question 33

**there is a free rider problem when people** A. Are willing to pay for what they want B. Are not willing to pay for what they want C. Benefit from a good without paying for its cost D. Want to buy more than is available for purchase in the market

Answer 33

C. Benefit from a good without paying for its cost

Question 34

when the production and consumption of the product and tail negative externalities, a competitive product market is an A. Under allocation of resources to the product B. Over allocation of resources to the product C. Optimal allocation of resource to the product D. Higher price for the product

Answer 34

B. Over allocation of resources to the product

Question 35

**how does government try to capture more of the benefits of for society when there is a positive externality?** A. By taxing consumers B. By taxing producers C. By subsidizing producers D.by ignoring the free rider problem

Answer 35

C. By subsidizing producers