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1. Markets do not ensure that the air we breathe is clean because
a.
clean air has no value.
b.
the government prevents markets from doing so.
c.
property rights are not well established for clean air.
d.
clean air is impossible to produce .
2. Property rights are well established for
a.
private goods.
b.
public goods.
c.
common resources.
d.
both (b) and (c).
3. Consider the following problems: overcrowded public highways, overfishing in the ocean, polluted air, and the near-
extinction of the wild rhinoceros. What do these problems have in common?
a.
Private markets could easily solve them if governments left the markets alone.
b.
They would all go away if the government sponsored an intensive public-information campaign.
c.
They are all the result of a failure to establish clear property rights over something of value.
d.
They are all the result of a failure of corrective taxes.
4. Markets fail to allocate resources efficiently when
a.
demanders and suppliers cannot agree on a price.
b.
goods are rival in consumption and excludable.
c.
property rights are not well established.
d.
too many buyers and sellers exist in the same market.
5. When the absence of property rights causes a market failure, the government can potentially solve the problem
a.
by clearly defining property rights.
b.
through regulation.
c.
by supplying the good itself.
d.
All of the above are correct.
6. A common theme among examples of market failure is
a.
the good being provided harms society in some systematic way.
b.
some item of value does not have an owner with the legal authority to control it.
c.
cost-benefit analysis will show that private markets should provide the goods and services.
d.
government intervention decreases the social benefits.
7. When property rights are not well established,
a.
private goods become public goods.
b.
markets fail to allocate resources efficiently.
c.
the distribution of private goods is unfair.
d.
government resources are used inefficiently.
8. Which of the following represents a potential solution to the problem of environmental pollution?
a.
corrective taxes
b.
well established property rights
c.
government regulation
d.
All of the above are correct.
9. Governments can grant private property rights over resources that were previously viewed as public, such as fish or
elephants. Why would governments want to do so?
a.
to prevent overuse
b.
to decrease taxes
c.
to fight poverty
d.
to increase consumption
10. In which of the following examples are property rights not well established?
a.
Carmen smokes a cigarette outside the door to her office building.
b.
Carlita stocks shelves in a grocery store.
c.
Cameron watches a movie in his home theater room.
d.
Cathy docks her boat at her lake house.
11. Which of the following statements is correct?
a.
The establishment of property rights sometimes gives rise to market failure.
b.
The absence of property rights sometimes gives rise to market failure.
c.
In the context of public goods, the Coase theorem implies that total surplus in some markets can be improved
by the elimination of property rights.
d.
Government regulation of private behavior, in response to market failure, can never improve social well-being.
