Pure private goods are: Question 22 options: rival in consumption and exhibit no
ID: 1194561 • Letter: P
Question
Pure private goods are:
Question 22 options:
rival in consumption and exhibit nonexcludability.
nonrival in consumption and exhibit excludability.
rival in consumption and exhibit excludability.
nonrival in consumption and exhibit nonexcludability.
Market failure occurs when:
Question 23 options:
quantity supplied does not equal quantity demanded.
drought destroys agricultural crops.
the market does not provide the socially optimal amount of a good.
the market does not provide a profit to perfect competitors in the long run.
Which of the following items is not part of the policy decisions in cost-benefit analysis?
Question 24 options:
opportunity costs
intergenerational aspects
explicit preferences of citizens
market structure
The free rider problem is that:
Question 25 options:
people tend to overuse public transportation if it is offered free of charge.
if people cannot be prevented from consuming a certain good, they have little incentive to pay for it.
there is a tendency for people to overconsume if they are charged a fixed price.
consumers will consume the free items before consuming items that have a price.
The Coase theorem claims that, in the case of tobacco:
Question 26 options:
if victims are given the right to be free of a smoke-filled environment, then tobacco manufacturers will sell tobacco through underground markets.
if smokers are given the freedom to smoke anywhere they want, then consumers will tax tobacco.
if victims are given the right to be free of a smoke-filled environment, tobacco smokers will offer victims the producer surplus to be allowed to smoke.
it doesn't matter who is given the property rights to the air, as long as the parties involved are allowed to bargain.
Economists can infer the value people place on intangibles or on public goods by observing their behavior.
Question 27 options:
True
False
Cost-benefit analysis:
Question 28 options:
provides a rational model for policy decisions.
can be used only for private industry.
can be used only for flood control issues.
was first used in the Civil War.
In the case of marketable permits, regulatory bodies:
Question 29 options:
are not involved at all.
set the price of a pollution permit.
set emission standards for all polluting firms.
set a maximum allowable quantity of pollutants allowed.
Which of the following properties is not a characteristic of a good environmental protection policy?
Question 30 options:
It minimizes abatement costs.
It is enforceable.
It is deemed fair.
It provides polluters with the proper incentives.
Government failure occurs when:
Question 31 options:
public policies do not bring about an optimal allocation of resources.
taxes on polluting firms reduce output to the socially desired level.
subsidies to schools increase the enrollment to the socially optimal level.
the private market fails to achieve the socially desired output level.
Market failures can arise when:
Question 32 options:
externalities exit.
there is a change in quantity demanded.
wages increase.
there is an increase in demand.
If consumer surplus is $40 and producer surplus is $50, then:
Question 33 options:
this is a definitely a situation of market failure.
social welfare is $10.
social welfare is $40.
social welfare is $90.
Consumers of public goods:
Question 34 options:
will have an incentive to purchase only the quantity that they can afford.
will have an incentive to consume without regard to the cost of production.
will not consume the product if it costs too much to produce.
will have an incentive to save and protect the good for a time when the need is greater.
Some economists believe that a command and control policy to reduce emissions is inequitable. One reason for such a conclusion is that:
Question 35 options:
such a policy is equivalent to economic totalitarianism.
historically, such policies have driven firms out of business.
because of the bureaucracy involved, such policies are expensive to implement.
firms with different marginal costs of abatement might not be assigned a pollution level that sets marginal benefit equal to marginal cost.
Explanation / Answer
22. A pure public good is a one which has two characterstics : non-excludability and non-rivalry. The option D is correct. This means that one consumer consuming public good cannot exclude the other consumer from consuming the same. Every citizen can use the public good (eg street light). Non-rivalry implies the consumption by one individual does not prevents the simontaneous consumption of the same by other individual.
23. Market failure occurs when the quantity supply does not equal the quantity demanded, that is, option A. This is because equilibrium is the situation of complete balance from both buyers as well as sellers side. When the market is not in equilibrium, due to certain reasons like externalities, the market failure occurs. The other options can be regarded as the reasons for market failure.
24. Correct option is B, intergenerational aspects. When we talk of cost-benefit analysis, as the name suggests we measure both, the cost involved (opportunity cost and market structure-because pricing is done then accordingly) and the benefit of the project to the society, which includes the consumers and hence the preferences of citizens is necessary.
25. Correct option is B. Undertsnad this with the help of an example. Suppose two friends share a room. One of them wants to get a T.V and asks the other friend to contribute for the purchase. But the other one is not willing to contribute. If the former one buys a T.V without any contribution, and having single common room in the flat, he cannot prevent his roomate (who didn't contribut) to watch it. And now since the latter can enjoy watching T.V for free, he has less incentive to pay for it.
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