Chapter 17

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Author:
Anonymous
ID:
182010
Filename:
Chapter 17
Updated:
2012-11-06 05:41:15
Tags:
spillover
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Description:
external goods, public goods and spillover benefits
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  1. If the production of a good or service entails rather sizeable spillover benefits, government might correct the:
    A. Under allocation of resources to its production by imposing an excise tax.
    B. Under allocation of resources to its production by granting a subsidy.
    C. Over allocation of resources to its production by granting a subsidy.
    D. Over allocation of resources to its production by imposing an excise tax.
    B. Under allocation of resources to its production by granting a subsidy.
    (this multiple choice question has been scrambled)
  2. A subsidy:
    A. Should be provided when there are external costs.
    B. Should be provided when there are external benefits.
    C. Should be provided only when a public good is being produced.
    D. Is appropriate when firms are guilty of pollution.
    B. Should be provided when there are external benefits.
    (this multiple choice question has been scrambled)
  3. External costs arise:
    A. Only in capitalistic societites.
    B. When firms 'use' resources without being compelled to pay for them.
    C. When firms pay more than the opportunity cost of resources.
    D. When the demand curve for a product is located too far to the left.
    B. When firms 'use' resources without being compelled to pay for them.
    (this multiple choice question has been scrambled)
  4. The market system fails to produce public goods because:
    A. There is no need or demand for such good.
    B. Private firms cannot restrict the benefits of such goods to consumers who are willing to pay for them.
    C. Public enterprises can produce such goods at a lower cost than can private enterprises.
    D. Their production seriously distorts the distribution of income.
    B. Private firms cannot restrict the benefits of such goods to consumers who are willing to pay for them.
    (this multiple choice question has been scrambled)
  5. If a product entails substantial spillover costs and goverment adopts a policy that forces producers to pay these costs, the:
    A. Equilibrium quantity of the product will increase.
    B. Equilibrium quantity of the product will decrease.
    C. Initial misallocation of resources will be intensified.
    D. Price of the product will decrease.
    B. Equilibrium quantity of the product will decrease.
    (this multiple choice question has been scrambled)
  6. If a good's production entails substantial spillover benefits and no spillover costs, then:
    A. Too much of the good will be produced, unless firms are taxed.
    B. Too little of the good will be produced, unless firms are taxed.
    C. Too much of the good will be produced, unless firms are subsidised.
    D. Too little of the good will be produced, unless firms are subsidised.
    D. Too little of the good will be produced, unless firms are subsidised.
    (this multiple choice question has been scrambled)
  7. External benefits refer to:
    A. The benefit that a consumer receives from buying a good.
    B. Benefits that accrue to parties other than the producer and buyer of a good.
    C. The benefits that resource suppliers obtain from the production and sale of a good.
    D. The combined benefits that the buyer and seller receive from a voluntary market transatction.
    B. Benefits that accrue to parties other than the producer and buyer of a good.
    (this multiple choice question has been scrambled)
  8. Pollution:
    A. Is an example of a spillover or external cost.
    B. Is an example of private production costs.
    C. Should be correct by the subsidisation of offending firms.
    D. Is not an economic problem because it is external to the market system.
    A. Is an example of a spillover or external cost.
    (this multiple choice question has been scrambled)
  9. If there are important spillover benefits associated with the consumption of a product, it can be said that:
    A. Special excise taxes should be levied on producers of the product.
    B. Government should enact legislation to prohibit the production of the commodity.
    C. The market supply curve for the product lies toofar to the right to provide an efficient allocation of resources.
    D. The market demand curve understates the relative importance of the product, and resources are therefore under allocated to its production.
    D. The market demand curve understates the relative importance of the product; and resources are therefore under allocated to its production.
    (this multiple choice question has been scrambled)
  10. In a competitive market:
    A. Demand will always reflect all spillover costs.
    B. Supply will always reflect all spillover costs and/or spillover benefits.
    C. Demand will always reflect all spillover benefits.
    D. None of the answers given hold true.
    D. None of the answers given hold true.
    (this multiple choice question has been scrambled)

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