Question 1:

John and Jack are both trying to sell a used car to Jim. John's car is a lemon, a car that has a serious but nonobvious problem. Jack's car is a cherry, a car that has no problems. Jim cannot tell the difference between the cars. Economists say this information problem might be solved with signaling. Who has an incentive to find a way to signal quality?

Multiple Choice

A. Both Jack and John

B. Jack but not John

C. Jim

D. John but not Jack

Question 13:

All of the following are considered sources of market failure except:

Multiple Choice

A. profit-maximizing behavior.

B. public goods.

C. externalities.

D. imperfect information.

Question 27:

Under the Texas law known as "rule of capture," land owners "get to pump as much of the water under it as they want. . . . 'This means whoever sucks it out first, it's their water'?even if that means there isn't enough left for others." Under this law, pumping large amounts of water:

Multiple Choice

A. is a private decision with no effects on others.

B. imposes a negative externality on others.

C. imposes a positive externality on others.

D. imposes the free rider effect on others

Question 20

The marginal cost, marginal social cost, and demand for fish are represented by the curves in the graph below. Suppose that there are no restrictions on fishing. a. Assuming perfect competition, demonstrate graphically what the catch is going to be, and at what price it will be sold. Instructions: In the graph below, use the tool 'Private' to identify the equilibrium quantity and price in perfect competition. Then use the tool 'Social' to identify the socially optimalquantity and price.