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Chapter 05 - Market Failures: Public Goods and Externalities
74. The marginal benefit to society of reducing pollution declines with increases in pollution
abatement because of the law of:
75. The marginal cost to society of reducing pollution rises with increases in pollution
abatement because of the law of:
Chapter 05 - Market Failures: Public Goods and Externalities
76. Refer to the above diagram. From society's perspective, if MB1 and MC2 are relevant:
77. Refer to the above diagram. From society's perspective, if MB2 and MC1 are relevant:
78. Refer to the above diagram. With MB1 and MC1, society's optimal amount of pollution
abatement is:
Chapter 05 - Market Failures: Public Goods and Externalities
79. Refer to the above diagram. Which one of the following might shift the marginal cost
curve from MC1 to MC2?
80. Refer to the above diagram. Which one of the following might shift the marginal benefit
curve from MB1 to MB2?
81. The MC curves in the above diagram slope upward because of the law of:
Chapter 05 - Market Failures: Public Goods and Externalities
82. The MB curves in the above diagram slope downward because of the law of:
83. (Consider This) Suppose that Susie creates a work of art and displays it in a public place.
Economists would expect:
84. (Consider This) Brinley puts on an art show in a public space, asking for donations based
on how much people enjoy his work. Economists would expect that:
Chapter 05 - Market Failures: Public Goods and Externalities
85. (Consider This) According to the Coase theorem:
86. (Consider This) Darcy and Rachel live down the hall from each other in the same dorm.
Darcy likes to play her music loudly down the hall, and Rachel finds the music annoying. A
Coase theorem solution for this problem would be for:
Chapter 05 - Market Failures: Public Goods and Externalities
87. (Consider This) Suppose that a large tree on Betty's property is blocking Chuck's view of
the lake below. Betty accepts Chuck's offer to pay Betty $100 for the right to cut down the
tree. This situation describes:
88. (Last Word) In a cap-and-trade program:
Chapter 05 - Market Failures: Public Goods and Externalities
89. (Last Word) A cap-and-trade program:
90. (Last Word) Because there are so many sources of carbon dioxide, making monitoring
difficult and costly, many economists:
91. Supply-side market failures occur because it is impossible in certain cases for sellers to
charge consumers what they are willing to pay for a product.
Chapter 05 - Market Failures: Public Goods and Externalities
92. When a supply-side market failure occurs, the costs are greater than the benefits for the
last unit(s) of output produced.
93. Along a demand curve, product price and consumer surplus are inversely related.
94. Along a supply curve, product price and producer surplus are inversely related.
95. Allocative efficiency occurs where (for the last unit) maximum willingness to pay exceeds
minimum acceptable price by the greatest amount.
Chapter 05 - Market Failures: Public Goods and Externalities
96. Allocative efficiency occurs where the collective sum of consumer and producer surplus is
at a maximum.
97. That government that has the smallest budget is the most efficient in the economic sense.
98. A demand curve for a public good is determined by summing horizontally the individual
demand curves for the public good.
99. The optimal quantity of a public good occurs where the marginal benefit of the citizen
who has the highest preference for the good just equals the good's marginal cost.
Chapter 05 - Market Failures: Public Goods and Externalities
100. Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the
full benefits of a public good or service.
101. Society's optimal amount of pollution abatement is where society's marginal benefit of
abatement is zero.
102. An improvement in the technology of pollution control is likely to increase society's
optimal amount of pollution abatement.
103. Society's marginal cost of pollution abatement curve slopes upward because of the law of
diminishing marginal utility.
Chapter 05 - Market Failures: Public Goods and Externalities
104. (Consider This) The principle that private negotiation can resolve potential externalities
without resort to government intervention is known as the Coase theorem.
