1. Which of the following could lead to an externality?

A. Increased competition

B.Regulation of production or consumption

C.Minimal or zero transaction costs

D.Perfectly symmetric information

E.Unclear property rights

2.A per-unit tax on a good with relatively inelastic supply will result in

more deadweight loss than if demand were elastic

a higher tax burden on consumers than on producers

less tax revenue than if demand were elastic

a lower tax burden on consumers than on producers

a tax burden that is equally distributed between consumers and producers

3.Which of the following scenarios could describe a market experiencing a negative production externality?

A.Optimal social quantity will be less than the private unregulated quantity, and the optimal social price will be greater than the private price.

B.Optimal social quantity will equal private quantity, and social price will equal private price.

C.Optimal social quantity will be less than the private unregulated quantity, and social price will be less than private price.

D.Optimal social quantity will be greater than the private unregulated quantity, and social price will be less than private price.

E.Optimal social quantity will be greater than the private unregulated quantity, and social price will be greater than private price.

4.There is a small town with only wooden structures. The local leaders impose a property tax to fund a fire department because of persistent free riders refusing to pay for the non-profit firefighting service. What type of good best describes this fire department?

A.Public good

B.Private good

C.Survival good

D.Artificially scarce good

E.Common pool resource

5.If Country S has greater income inequality than Country T, which of the following must be true?

A.Country S will have greater wealth overall.

B.Country T will have greater wealth overall.

C.Country S will have a higher Gini coefficient than Country T.

D.Country S will have a lower Gini coefficient than Country T.

E.Country S will have more people in poverty than Country T.

6.A per-unit subsidy would be an effective remedy for

a natural monopoly

underproduction of a good

overconsumption of a good

a negative production externality

insurmountable barriers to market entry