Question 1

The construction of the TransCanada highway is an example of government intervention through

Accepted Answer

A)  public provision.
B)  regulation.
C)  subsidization.
D)  restructuring of economic incentives.
E)  redistribution.

Question 2

FIGURE 16- 1 
-Refer to Figure 16- 1.Suppose the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC0 and MB0,respectively,then there exists

Accepted Answer

A)  a negative external benefit.
B)  a negative external cost.
C)  no externality whatsoever.
D)  a positive external cost.
E)  a positive external benefit.

Question 3

A homeowner decides to buy three large dogs that sleep outdoors and howl at the moon.An externality associated with this decision is

Accepted Answer

A)  the increased work for the homeowner in yard cleanup.
B)  the veterinary costs of keeping the dogs healthy.
C)  the neighbours' lost sleep.
D)  the cost of purchasing the dogs.
E)  the homeowner's lost sleep.

Question 4

Moral hazard is said to exist when one party to a transaction

Accepted Answer

A)  has the incentive to,and is able to,shift costs to another party in the transaction.
B)  is not able to take advantage of the other party.
C)  has no morals.
D)  purchases insurance because they know they are involved in risky activities.
E)  is subject to a hostile corporate takeover.

Question 5

Economists generally agree that government intervention in the economy is appropriate

Accepted Answer

A)  whenever the costs of market failure are greater than the benefits of the existence of markets.
B)  whenever the costs of the intervention are greater than the value of the correction of the market failure.
C)  whenever there is a market failure.
D)  only when the market fails to provide a socially useful good.
E)  whenever the benefits of the correction of the market failure through intervention are greater than the costs of the intervention itself.

Question 6

Which of the following proposals could be an example of an effort to correct for an adverse selection problem?

Accepted Answer

A)  An employer requires all employees to submit to drug testing.
B)  The government subsidizes the consumption of fitness activities.
C)  An employer that requires all employees to purchase the employer- sponsored dental insurance program.
D)  The government imposes a tax on factory- emissions of a toxic substance.
E)  The government subsidizes the development of eco- friendly production methods.

Question 7

Economic losses in an industry are a signal that

Accepted Answer

A)  the economy is in a recession.
B)  a government subsidy is necessary.
C)  all of the firms should leave the industry.
D)  too few resources are allocated to the industry.
E)  will lead resources to leave the industry (until the losses disappear) .

Question 8

Consider a childhood vaccination program that is fully effective if all children are vaccinated.Now suppose that all children except one are vaccinated - and as a result that one child will not contract the disease.In economics,we can compare this situation to

Accepted Answer

A)  the free- rider problem.
B)  asymmetric information.
C)  common property problem.
D)  moral hazard.
E)  adverse selection.

Question 9

An example of a public good is

Accepted Answer

A)  air travel.
B)  municipal transit service.
C)  insurance.
D)  apples on a tree in a public park.
E)  street lighting.

Question 10

The government prohibits individuals from paying someone else to replace them when they are selected to perform jury duty.What broader social goal is being met in this case?

Accepted Answer

A)  preference for public provision
B)  income distribution
C)  protecting individuals from others or themselves
D)  policies for economic growth
E)  social responsibility

Exam 16: Market Failures and Government Intervention

FIGURE 16- 1 -Refer to Figure 16- 1.Suppose the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC0 and MB0,respectively,then there exists

Correct Answer
verified

A homeowner decides to buy three large dogs that sleep outdoors and howl at the moon.An externality associated with this decision is

Correct Answer
verified

Economic losses in an industry are a signal that

Correct Answer
verified

Which of the following proposals could be an example of an effort to correct for an adverse selection problem?

Correct Answer
verified

Economists generally agree that government intervention in the economy is appropriate

Correct Answer
verified

Moral hazard is said to exist when one party to a transaction

Correct Answer
verified

An example of a public good is

Correct Answer
verified

The government prohibits individuals from paying someone else to replace them when they are selected to perform jury duty.What broader social goal is being met in this case?

Correct Answer
verified

The construction of the TransCanada highway is an example of government intervention through

Correct Answer
verified

Consider a childhood vaccination program that is fully effective if all children are vaccinated.Now suppose that all children except one are vaccinated - and as a result that one child will not contract the disease.In economics,we can compare this situation to

Correct Answer
verified

Exam 16: Market Failures and Government Intervention

FIGURE 16- 1 -Refer to Figure 16- 1.Suppose the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC0 and MB0,respectively,then there exists

Correct AnswerverifiedShow Answer

A homeowner decides to buy three large dogs that sleep outdoors and howl at the moon.An externality associated with this decision is

Correct AnswerverifiedShow Answer

Economic losses in an industry are a signal that

Correct AnswerverifiedShow Answer

Which of the following proposals could be an example of an effort to correct for an adverse selection problem?

Correct AnswerverifiedShow Answer

Economists generally agree that government intervention in the economy is appropriate

Correct AnswerverifiedShow Answer

Moral hazard is said to exist when one party to a transaction

Correct AnswerverifiedShow Answer

An example of a public good is

Correct AnswerverifiedShow Answer

The government prohibits individuals from paying someone else to replace them when they are selected to perform jury duty.What broader social goal is being met in this case?

Correct AnswerverifiedShow Answer

The construction of the TransCanada highway is an example of government intervention through

Correct AnswerverifiedShow Answer

Consider a childhood vaccination program that is fully effective if all children are vaccinated.Now suppose that all children except one are vaccinated - and as a result that one child will not contract the disease.In economics,we can compare this situation to

Correct AnswerverifiedShow Answer

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