ECON201 Final Exam
1Which of the following is a source of market failure? - ANSWER incomplete
property rights or inability to enforce property rights
Governments grant patents to encourage - ANSWER research and development on
new products.
According to( ) in a market with an externality private parties would voluntarily
negotiate an efficient outcome without government intervention - ANSWER Ronald
Coase
Which of the following represents the true economic cost of production when firms
produce goods - ANSWER the private cost of production
Which of the following displays rivalry and excludability in consumption? - ANSWER
quasi-public goods
Suppose the current market equilibrium output of Q1 is not the economically efficient
output because of an externality. The economically efficient output is Q2. In that
case, the diagram shows - ANSWER the effect of a positive externality in the
production of a good.
If, because of an externality, the economically efficient output is Q2 and not the
current equilibrium output of Q1, what does S2 represent? - ANSWER the market
supply curve reflecting social cost
Firms do not have the power to practice price discrimination in which of the following
market structures? - ANSWER Firms do not have the power to practice price
discrimination in which of the following market structures?
According to the PI text, what is the main underlying cause of the "garbage crisis"? -
ANSWER we often don't put a price on garbage in the way we put prices on all
other goods and services
Which category of good (e.g., public good, private good, common resource good)
does a road fall under? - ANSWER depends on the road
Because in the case of negative externalities, producers do not bear the external
cost of pollution - ANSWER private production exceeds the economically efficient
level.
Which of the following is an example of a positive externality? - ANSWER planting
trees along a sidewalk which add beauty and creates shade
Which of the following is a characteristic of a monopoly? - ANSWER There is only
one seller in the market
, Is a monopolistically competitive firm allocatively efficient? - ANSWER No, because
price is greater than marginal cost
The Coase theorem states that - ANSWER if transactions costs are low, private
bargaining will result in an efficient solution to the
problem of externalities
Which of the following displays these two characteristics: nonrivalry and
nonexcludability in consumption? - ANSWER public goods
The difference between the highest price a consumer is willing to pay for a good and
the price the consumer actually pays is called - ANSWER Consumer surplus
According to the PI text, the total ____ ____ _____ associated with a patented
product are lower than they would be if anyone were free to sell it - ANSWER gains
from trade
Which of the following is a necessary condition for successful price discrimination? -
ANSWER the seller must posses market power
Firms do not have market power in which of the following market structures? -
ANSWER perfect competition only
A product is considered to be nonexcludable if - ANSWER you cannot keep those
who did not pay for the item from enjoying its benefits
As discussed in class, and in the PI text, what is the most important problem cartels
(such as OPEC) face in their effort to collude? - ANSWER cheating on agreements
The price of a seller's product in perfect competition is determined by - ANSWER
government regulations
The primary purpose of ________ is to encourage the expenditure of funds on
research and development to create new products - ANSWER the individual
demander
Which of the following is an example of a product that is non-excludable and
rivalrous? - ANSWER free concert (with limited seating) in a park
Which of the following is not a characteristic of a perfectly competitive market
structure? - ANSWER There are restrictions on exit of firms
Lucinda buys a new GPS system for $250. She receives consumer surplus of $75
from the purchase.
How much does Lucinda value her GPS system? - ANSWER $325
A United States government patent lasts - ANSWER 20 years
Suppose a negative externality exists in a market. If transactions costs are low and
parties are
1Which of the following is a source of market failure? - ANSWER incomplete
property rights or inability to enforce property rights
Governments grant patents to encourage - ANSWER research and development on
new products.
According to( ) in a market with an externality private parties would voluntarily
negotiate an efficient outcome without government intervention - ANSWER Ronald
Coase
Which of the following represents the true economic cost of production when firms
produce goods - ANSWER the private cost of production
Which of the following displays rivalry and excludability in consumption? - ANSWER
quasi-public goods
Suppose the current market equilibrium output of Q1 is not the economically efficient
output because of an externality. The economically efficient output is Q2. In that
case, the diagram shows - ANSWER the effect of a positive externality in the
production of a good.
If, because of an externality, the economically efficient output is Q2 and not the
current equilibrium output of Q1, what does S2 represent? - ANSWER the market
supply curve reflecting social cost
Firms do not have the power to practice price discrimination in which of the following
market structures? - ANSWER Firms do not have the power to practice price
discrimination in which of the following market structures?
According to the PI text, what is the main underlying cause of the "garbage crisis"? -
ANSWER we often don't put a price on garbage in the way we put prices on all
other goods and services
Which category of good (e.g., public good, private good, common resource good)
does a road fall under? - ANSWER depends on the road
Because in the case of negative externalities, producers do not bear the external
cost of pollution - ANSWER private production exceeds the economically efficient
level.
Which of the following is an example of a positive externality? - ANSWER planting
trees along a sidewalk which add beauty and creates shade
Which of the following is a characteristic of a monopoly? - ANSWER There is only
one seller in the market
, Is a monopolistically competitive firm allocatively efficient? - ANSWER No, because
price is greater than marginal cost
The Coase theorem states that - ANSWER if transactions costs are low, private
bargaining will result in an efficient solution to the
problem of externalities
Which of the following displays these two characteristics: nonrivalry and
nonexcludability in consumption? - ANSWER public goods
The difference between the highest price a consumer is willing to pay for a good and
the price the consumer actually pays is called - ANSWER Consumer surplus
According to the PI text, the total ____ ____ _____ associated with a patented
product are lower than they would be if anyone were free to sell it - ANSWER gains
from trade
Which of the following is a necessary condition for successful price discrimination? -
ANSWER the seller must posses market power
Firms do not have market power in which of the following market structures? -
ANSWER perfect competition only
A product is considered to be nonexcludable if - ANSWER you cannot keep those
who did not pay for the item from enjoying its benefits
As discussed in class, and in the PI text, what is the most important problem cartels
(such as OPEC) face in their effort to collude? - ANSWER cheating on agreements
The price of a seller's product in perfect competition is determined by - ANSWER
government regulations
The primary purpose of ________ is to encourage the expenditure of funds on
research and development to create new products - ANSWER the individual
demander
Which of the following is an example of a product that is non-excludable and
rivalrous? - ANSWER free concert (with limited seating) in a park
Which of the following is not a characteristic of a perfectly competitive market
structure? - ANSWER There are restrictions on exit of firms
Lucinda buys a new GPS system for $250. She receives consumer surplus of $75
from the purchase.
How much does Lucinda value her GPS system? - ANSWER $325
A United States government patent lasts - ANSWER 20 years
Suppose a negative externality exists in a market. If transactions costs are low and
parties are
