1) To derive a market demand curve for a public good, we simply add up individual demand curves vertically.

True

False

2) Market failure is a situation in which

A.there are too many buyers but not enough sellers.

B.prices are too high for "average" people to buy necessities.

C.the market does not provide the productively efficient amount of a particular good.

D.the equilibrium output does not maximize economic surplus.

3) Bluefin tuna, which travel thousands of miles across oceans, are an example of a good which is

A.parthenogenetic.

B.nonrival in consumption.

C.nondepletable.

D.nonexcludable.

4) Producers of computer software are plagued with the problem of "pirating;" that is, many people copy software from disks legally purchased by others. The industry estimates that for each legal copy of a program, there are two pirated copies in use. The industry wants strict laws for the enforcement of their "intellectual property rights," but enforcement is obviously very difficult. The problem here revolves around an issue that economists refer to as

A.durability.

B.depletability.

C.nonexcludability.

D.externalities.

5) From an allocative efficiency perspective, the Coase Theorem argues that it does not matter too whom the property rights are assigned as long as transaction costs are low and property rights are easily enforceable.

True

False

6) If new technology lowers the marginal cost of pollution abatement, it makes allocative sense to reduce pollution further.

True

False

7) Private firms cannot provide public goods because these goods are non-rival in consumption.

True

False

8) Which of these is not true of market failure?

A.The market does not produce the allocatively efficient amount of a particular good.

B.A deadweight loss occurs.

C.MPC does not equal MPB for the last unit produced.

D.MSC does not equal MSB for the last unit produced.

9) In the case of a positive externality, the entire demand curve lies

A.above the entire marginal social benefit curve.

B.below the entire marginal social benefit curve.

C.above the entire supply curve.

D.below the entire supply curve.

E.B and C

10) A negative externality is being generated in the course of producing a good. If this market is left alone, which of the following will be true at equilibrium?

A.P_E< MSC

B.MPB > MPC

C.output will be inefficiently small

D.MSC < MPC