Chapter 05 – Market Failures: Public Goods and Externalities
49. Refer to the above diagrams in which figures (a) and (b) show demand curves reflecting
the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. The
collective willingness to pay for the 1st unit of this public good is:
50. Refer to the above diagrams in which figures (a) and (b) show demand curves reflecting
the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If
the marginal cost of the optimal quantity of this public good is $10, the optimal quantity must
be:
51. Cost-benefit analysis attempts to:
Chapter 05 – Market Failures: Public Goods and Externalities
The following data are for a series of increasingly extensive flood control projects:
52. Refer to the above data. For Plan D marginal costs and marginal benefits are:
53. Refer to the above data. On the basis of cost-benefit analysis government should
undertake:
Chapter 05 – Market Failures: Public Goods and Externalities
54. Refer to the above data. Plan C entails:
Answer the question on the basis of the following information for four highway programs of
increasing scope. All figures are in millions of dollars.
55. The above data indicate that:
Chapter 05 – Market Failures: Public Goods and Externalities
56. On the basis of the above data we can say that:
57. According to the marginal-cost-marginal-benefit rule:
58. Economists consider governments to be “wasteful:”
Chapter 05 – Market Failures: Public Goods and Externalities
59. A positive externality or spillover benefit occurs when:
60. A negative externality or spillover cost occurs when:
Chapter 05 – Market Failures: Public Goods and Externalities
61. Refer to the above diagram in which S is the market supply curve and S1 is a supply curve
comprising all costs of production, including external costs. Assume that the number of
people affected by these external costs is large. Without government interference, this market
will reach:
62. Refer to the above diagram in which S is the market supply curve and S1 is a supply curve
comprising all costs of production, including external costs. Assume that the number of
people affected by these external costs is large. If the government wishes to establish an
optimal allocation of resources in this market, it should:
Chapter 05 – Market Failures: Public Goods and Externalities
63. Refer to the above diagrams for two separate product markets. Assume that society’s
optimal level of output in each market is Q0 and that government purposely shifts the market
supply curve from S to S1 in diagram (a) and from S to S2 in diagram (b). We can conclude
that the government is correcting for:
64. Refer to the above diagrams for two separate product markets. Assume that society’s
optimal level of output in each market is Q0 and that government purposely shifts the market
supply curve from S to S1 in diagram (a) and from S to S2 in diagram (b). The shift of the
supply curve from S to S1 in diagram (a) might be caused by a per unit:
Chapter 05 – Market Failures: Public Goods and Externalities
65. Refer to the above diagrams for two separate product markets. Assume that society’s
optimal level of output in each market is Q0 and that government purposely shifts the market
supply curve from S to S1 in diagram (a) and from S to S2 in diagram (b). The shift of the
supply curve from S to S2 in diagram (b) might be caused by a per unit:
Chapter 05 – Market Failures: Public Goods and Externalities
66. Refer to the above competitive market diagram for product Z. Assume that the current
market demand and supply curves for Z are D1 and S1. If there are substantial external benefits
associated with the production of Z, then:
67. Refer to the above competitive market diagram for product Z. Assume that the current
market demand and supply curves for Z are D2 and S2 If there are substantial external benefits
associated with the production of Z, then:
Chapter 05 – Market Failures: Public Goods and Externalities
68. Refer to the above competitive market diagram for product Z. Assume that the current
market demand and supply curves for Z are D2 and S2. If there are substantial external costs
associated with the production of Z, then:
Chapter 05 – Market Failures: Public Goods and Externalities
69. Refer to the above diagram of the market for product X. Curve St embodies all costs
(including externalities) and Dt embodies all benefits (including externalities) associated with
the production and consumption of X. Assuming the market equilibrium output is Q1, we can
conclude that the existence of external:
70. Refer to the above diagram of the market for product X. Curve St embodies all costs
(including externalities) and Dt embodies all benefits (including externalities) associated with
the production and consumption of X. Assuming the equilibrium output is Q2, we can
conclude that the existence of external:
Chapter 05 – Market Failures: Public Goods and Externalities
71. If a good that generates positive externalities were produced and priced to take into
account these spillover benefits, then its:
72. Suppose that the Anytown city government asks private citizens to donate money to
support the town’s annual holiday lighting display. Assuming that the citizens of Anytown
enjoy the lighting display, the request for donations suggests that:
73. The socially optimal amount of pollution abatement occurs where society’s marginal: