1. What are the two characteristics that differentiate private goods from public goods?
a-Negative externality and positive externality
b-Rivalry and excludability
c-Marginal cost and marginal benefit
d-Ownership and usage
2. People enjoy outdoor holiday lighting displays, and would be willing to pay to see these displays, but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a:
a-negative externality
b-supply-side market failure
c-demand-side market failure
d-government failure
3. Which of the following is an example of market failure?
a-negative externalities
b-positive externalities
c-public goods
d-all of these
4. The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?
a-Positive externality
b-Demand-side market failure
c-Supply-side market failure
d-All of these.
5. Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:
a-a producer surplus of $9 and Nathan experiences a producer surplus of $12.
b-a producer surplus of $9 and Nathan experiences a consumer surplus of $3.
c-a consumer surplus of $12 and Nathan experiences a producer surplus of $3.
d-a consumer surplus of $9 and Nathan experiences a producer surplus of $3.
6. Consumer surplus arises in a market because:
a-At the current market price, quantity supplied is greater than quantity demanded
b-At the current market price, quantity demanded is greater than quantity supplied
c-The equilibrium market price is below what some consumers are willing to pay for the product
d-The equilibrium market price is higher than what some consumers are willing to pay for the product
7. At the output where the combined amounts of consumer and producer surplus are largest:
a-the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.
b-marginal benefit exceeds marginal cost by the greatest amount.
c-the areas of consumer and producer surplus necessarily are equal.
d-consumer surplus exceeds producer surplus by the greatest amount.