Economics MCQs

Page No. 271

Markets fail to produce an efficient allocation of resources, but government also fail because ?


a elected officials will act selflessly for the good of society and ignore their own self interest

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bthe managers of government agencies are trying to maximize the profit of their agency and they ignore the implications that this has on other departments

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cthe optimal level of public goods may be too expensive for the society to produce

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dthe measurement of social damages and benefits is difficult and imprecise

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The idea that when externalities are present private parties can arrive at the efficient solution without government intervention under certain circumstance is known as ?


aThe coase theorem

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bThe coase theorem

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c the drop -in-the bucket problem.

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dthe free rider problem

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View Answer The coase theorem

If a large number of individuals are affected by an external benefit, private bargaining will not work because of ?


anon-rivalry

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bthe free-rider problem

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cthe Coase theorem

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d the fallacy of composition

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If one person’s enjoyment of the benefits of a good does not interfere with another’s consumption of it, the good is said to be ?


alimitless in utility

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bnon-rival in consumption

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ccongestible in consumption

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d non-excludable

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An example of public good is ?


a a beautifully landscaped lawn.

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bpreservation of wetlands

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ca public utility.

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da book

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Private goods are ?


anon-rival in consumption and their benefits are nonexcludable:

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b rival in consumption and their benefits are excludable

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c rival in consumption and their benefits are non-excludable

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d non-rival in consumption and their benefits excludable

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The conclusion that free, unregulated markets will produce an efficient outcome breaks down if ?


ahouseholds do not have perfect information

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b firms are not price takers in input markets

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c firms are not price takers in the output market

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d all of the above

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View Answer all of the above

The government increase the minimum wage. The National Association of Fast Food Restaurants hires you to determine the impact that this higher minimum wage will have on it industry. This is an example of ?


a industry equilibrium analysis

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bspecific equilibrium analysis

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cpartial equilibrium analysis

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d general equilibrium analysis

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When you consume good Q, not only do you benefit form consuming the good but other people benefit from your consumption as well, if firms produce good Q where P = MC, firms will be producing ?


aless than the efficient level of output

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b more than the efficient level of output

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c so that consumer surplus is zero

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dthe efficient level of output

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The total cost to society of producing an additional unit of a good or service is the ?


amarginal damage cost

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bmarginal social cost

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cmarginal private cost

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d marginal external cost

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View Answer marginal social cost

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