1. Adam Smith argued that the result of everyone pursuing their own interests will be:

a. The maximization of the interests of no one

b. The maximization of the interests of society

c. The end of capitalism

d. A market failure.

e. None of the above

2. The benefit surplus received by a consumer or consumers in a market is called:

a. Positive Externality

b. Negative Externality

c. Consumer Surplus

d. Producer Surplus

e. None of the above

3. The benefit surplus received by a producer or producers in a market is called:

a. Positive Externality

b. Negative Externality

c. Consumer Surplus

d. Producer Surplus

e. None of the above

4. A producer's minimum acceptable price is equal to their:

a. Marginal Cost

b. Marginal Benefit

c. Average Cost

d. Total Cost

e. None of the above

5. The reduction of total surplus resulting from an underproduction or overproduction of a good:

a. Public Good

b. Public Bad

c. Negative Externality

d. Deadweight Loss

e. None of the above

6. When everyone pursues their own interests does not lead to the maximization of the interests

of society, you have a(n):

a. Market Failure

b. Efficient Market

c. Optimized Market

d. Winner Takes All

e. None of the Above

7. Which of the following is not a type of market failure:

a. Market Power

b. Externality

c. Public Goods

d. Private Goods

8. The concept that in the absence of transaction costs, if property rights are well-defined and

tradeable, voluntary negotiations will lead to efficiency:

a. Market Power

b. Pareto Optimality

c. Invisible Hand

d. Coase Theorem

e. None of the above

9. A position in which no change will make one individual better off without making someone

else worse off.

a. Market Power

b. Pareto Optimality

c. Invisible Hand

d. Coase Theorem

e. None of the above

10. A move that makes one person better off without making another person worse off:

a. Efficiency Move

b. Pareto Optimal Move

c. Invisible Move

d. Coasian Move

e. None of the above

11. As the number of individuals affected by an externality increases, the government may get

involved to:

a. Limit damages

b. Increase payouts

c. Help the environment

d. Reduce transaction costs

e. None of the above

12. A tax levied on each unit of a polluter's output in an amount just equal to the marginal

damage it inflicts at the efficient level of output.

a. Pigouvian Tax

b. Coasian Tax

c. Pareto Optimal Tax

d. Efficiency Tax

e. None of the above

13. Private goods are:

a. Rivalrous and Excludable

b. Nonrivalrous and nonexcludable

c. Rivalrous and nonexcludable

d. Nonrivalrous and excludable

e. None of the above

14. Public goods are:

a. Rivalrous and Excludable

b. Nonrivalrous and nonexcludable

c. Rivalrous and nonexcludable

d. Nonrivalrous and excludable

e. None of the above

15. Common resources are:

a. Rivalrous and Excludable

b. Nonrivalrous and nonexcludable

c. Rivalrous and nonexcludable

d. Nonrivalrous and excludable

e. None of the above

16. Someone who enjoys a public good without paying for it is:

a. A free-rider

b. A lone ranger

c. An entrepreneur

d. A capitalist

e. None of the above

17. For a private good, the market demand is:

a. The average of quantity demanded at a given price

b. The horizontal summation of quantity demanded at a given price

c. The vertical summation of quantity demanded at a given price

d. The horizontal summation of price at a given demand

e. None of the above

18. For a public good, the market demand is:

a. The horizontal summation of price at a given quantity demanded

b. The horizontal summation of quantity demanded at a given price

c. The vertical summation of quantity demanded at a given price

d. The vertical summation of price at a given quantity demanded

e. None of the above

19. Demand-side market failures happen when:

a. Demand curves reflect producers' full willingness to sell a good or service

b. Demand is greater than supply

c. Supply is greater than demand

d. Demand curves do not reflect consumers' full willingness to pay for a good or service

e. None of the above

20. Supply-side market failures happen when:

a. A firm does not have to pay the full cost of producing its output.

b. Demand is greater than supply

c. Supply is greater than demand

d. Demand curves do not reflect consumers' full willingness to pay for a good or service

e. None of the above