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Exam 11: Government Intervention in the Market

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Question 131

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An externality is an example of a market failure.

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Question 132

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Which of the following conditions holds in economically efficient competitive market equilibrium?

A) The deadweight loss is positive but at a minimum
B) Producer and consumer surplus are exactly equal in size
C) There are no positive and no negative external effects from consumption and production
D) The marginal benefit of the last unit produced and consumed is maximised

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Question 133

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An example,from the list below,of a common resource is

Common resources differ from public goods in that

The private cost of a good or service is the cost borne by the producer.

What does a market demand curve reflect?

Consider a situation in which a utility company emits high levels of sulphur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is ________ to achieve an ________ amount of pollution.

A product is considered to be rival if

What is the common source of negative externalities and the tragedy of the commons?

All of the following are examples of public goods except

Which of the following is an example of a command and control approach to reducing pollution?

Figure 11.6 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source. Figure 11.6 shows the paper market. Use this Figure to answer the following question(s) . -Refer to Figure 11.6.What is the deadweight loss from producing at the market equilibrium?

What is moral hazard? -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------

Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection.

Issuing marketable emission allowance permits to polluting firms will result in those firms polluting more than is socially desirable.

Private producers have no incentive to provide public goods because

When people who buy insurance change their behaviour after the purchase because they are protected from loss by the insurance,the insurance market is said to face the problem of

Goods differ on the basis of whether their consumption is rival and excludable.Explain the terms 'rivalry' and 'excludability' as they are used to define goods.List the four categories of goods,and define these categories in terms of rivalry and excludability. -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------

'When it comes to public goods,individuals do not reveal their true preferences because it is not in their self-interest to do so.' Evaluate this statement. -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------

The Coase theorem asserts that government intervention is a prerequisite for addressing externality problems.