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Chapter 5 - Extra Practice Questions

This document contains 10 multiple choice questions that test understanding of key concepts related to public goods, externalities, and market failures. Question topics include examples of public and private goods, excludable vs. nonexcludable goods, positive and negative externalities, and how markets may under or overproduce goods with externalities. The last question indicates that if a good creates pollution, its marginal social cost curve will lie above the marginal private cost curve.

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49 views3 pages

Chapter 5 - Extra Practice Questions

This document contains 10 multiple choice questions that test understanding of key concepts related to public goods, externalities, and market failures. Question topics include examples of public and private goods, excludable vs. nonexcludable goods, positive and negative externalities, and how markets may under or overproduce goods with externalities. The last question indicates that if a good creates pollution, its marginal social cost curve will lie above the marginal private cost curve.

Uploaded by

professorkactus2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1) An example of a public good is

A) national defence.
B) a Ford truck.
C) a loaf of bread.
D) a home computer.
E) a television.
A

2) Which one of the following goods is excludable?


A) a city bus
B) a bridge that does not charge a toll
C) the atmosphere
D) protection from the police force
E) air traffic control
A
3) A view of the sunset is
A) excludable and rival.
B) nonexcludable and nonrival.
C) nonexcludable and rival.
D) excludable and nonrival.
E) a private good
B

4) Figure 16.3.2 shows the marginal private cost curve, marginal social cost curve, and marginal
social benefit curve for raising goats on a common pasture. The equilibrium in an unregulated
market is
A) 0 goats.
B) 40 goats.
C) 50 goats.
D) 55 goats.
E) 35 goats.
C
5) Figure 16.3.2 shows the marginal private cost curve, marginal social cost curve, and marginal
social benefit curve for raising goats on a common pasture. The efficient quantity is
A) 0 goats.
B) 40 goats.
C) 50 goats.
D) 55 goats.
E) 35 goats.
B

6) An example of an activity that creates a negative externality is


A) logging, which pollutes rivers.
B) locating beehives next to an orange orchard.
C) smoking, which harms the health of a bystander.
D) a flu vaccination.
E) a sales tax.
C

7) Refer to Figure 15.3.1. The figure shows the marginal private benefit curve, the marginal
social benefit curve, and the market supply curve. If production is left to the private market, then
the price is
A) P1.
B) P3.
C) P2.
D) greater than P4.
E) P4.
C
8) A market economy tends to ________ goods with negative externalities and ________ goods
with positive externalities.
A) overproduce; overproduce
B) overproduce; underproduce
C) underproduce; overproduce
D) underproduce; underproduce
E) produce; consume
B

9) Post-secondary education in Canada is subsidized. This fact suggests that


i. less than the efficient amount of education would be provided by an unregulated market.
ii. the marginal private benefit from education equals the marginal social benefit from
education.
iii. post-secondary education has no externalities.
Which statements are correct?
A) i only
B) ii only
C) iii only
D) i and ii only
E) i, ii, and iii
A

10) If the production of a good creates pollution, then the


A) marginal social benefit curve lies above the marginal private benefit curve.
B) marginal social cost curve lies above the marginal private cost curve.
C) marginal social benefit curve lies below the marginal private benefit curve.
D) marginal social cost curve lies below the marginal private cost curve.
E) marginal social benefit curve intersects the marginal private cost curve at the efficient
quantity.

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