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Market Failure MCQ

During periods of deflation _ will be hurt and _ will be helped.

Firms; borrowers

Borrowers; lenders

Consumers; firms

Home buyers; home sellers

Answer

Correct Answer: Borrowers; lenders

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In the labor market, things like education level and grades are ______.

Warranties

Adverse selections

Moral hazards

Signals

Answer

Correct Answer: Signals

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Benefiting from asymmetric information is known as ______.

Moral hazard

Adverse selection

Rival exclusion

Technological spillover

Answer

Correct Answer: Adverse selection

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Asymmetric information is information that is ______.

So technically complicated most people are unable to interpret it

Available to one party in a transaction but not the other

Known by government officials but withheld from the public

Too late to be used by the participants in an exchange

Answer

Correct Answer: Available to one party in a transaction but not the other

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Free riders are people who ______.

Take advantage of benefits without paying for them

Provide benefits to other people free-of-charge

Regulate industry by converting private resources to public use

Create technological advances that spill over to other industries

Answer

Correct Answer: Take advantage of benefits without paying for them

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The use of public goods is ______.

Limited to one person at a time

Restricted to those who pay for them

Protected from free riders

Available to multiple people

Answer

Correct Answer: Available to multiple people

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A private good is ______.

Neither rival nor excludable

Rival, but not excludable

Rival and excludable

Not rival, but excludable

Answer

Correct Answer: Rival and excludable

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Greater numbers of transactors make negotiations______.

Harder

More likely

Faster

Cheaper

Answer

Correct Answer: Harder

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Transaction costs exclude ______.

The cost of reaching a mutually acceptable price

The cost of the goods or services bought

Costs associated with negotiating

Costs of executing a transaction

Answer

Correct Answer: The cost of the goods or services bought

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The idea that when the benefits are greater than the costs for some course of action, potential transactions can make some people better off without making anyone worse off is the ______.

Adverse selection

Free ride problem

Moral hazard

Coase theorem

Answer

Correct Answer: Coase theorem

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It is probable that pollution regulation is subject to ______.

Increasing returns

Diminishing returns

Being a moral hazard

Being a club good

Answer

Correct Answer: Diminishing returns

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If firms had to pay for the externalities they cause, production costs would ______.

Become indeterminate

Remain unaffected

Increase

Decrease

Answer

Correct Answer: Increase

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Because of scarcity, clean air ______.

Is free

Has a cost

Does not exist

Is a private good

Answer

Correct Answer: Has a cost

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An educated population is an example of a(n) ______.

Positive externality

Negative externality

Government subsidy

Adverse selection

Answer

Correct Answer: Positive externality

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Corrective ______ are used to internalize negative externalities.

Regulations

Spillovers

Subsidies

Taxes

Answer

Correct Answer: Taxes

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How is a firm’s production influenced by a negative externality?

It will produce less than efficient output.

It will produce more than efficient output.

It will produce optimally efficient output.

It will fluctuate between low and high output.

Answer

Correct Answer: It will produce more than efficient output.

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Rights given to a firm to discharge a specified amount of pollution is called

Pollution Control Rights

Transferable pollution Rights

Pollution Control Rights

Pollution transfer Rights

Answer

Correct Answer: Transferable pollution Rights

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A good that is nonrivalrous in consumption and nonexcludable known as

Private Good

Public Good

Consumer Good

General Good

Answer

Correct Answer: Public Good

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A good with rivalrous consumption and excludability is called

Private Good

Public Good

Consumer Good

General Good

Answer

Correct Answer: Private Good

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Positive externality is When ____ spill over to an outside party

Expenses

Costs

Benefits

Loses

Answer

Correct Answer: Benefits

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Negative externality is When ___ spill over to an outside party

Expenses

Costs

Benefits

Loses

Answer

Correct Answer: Costs

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Moral hazard is Taking additional risks because you are

Insured

Thus

Both of these

None of these

Answer

Correct Answer: Both of these

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Someone who derives benefits from something not paid for is Known as

Consumer

Free Rider

Outside party

Product Producer

Answer

Correct Answer: Free Rider

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Common resource is a good that is rival in ____ and nonexcludable

Production

Consumption

Both of These

None of These

Answer

Correct Answer: Consumption

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_____ are Goods that are nonrival in consumption and excludable

Private Good

Public Good

Consumer Good

Club Good

Answer

Correct Answer: Club Good

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According to _________ property rights are defined in a clear-cut fashion

Coase Theorem

First Welfare Theorem

Second Welfare Theorem

Nash's equilibrium existence Theorem

Answer

Correct Answer: Coase Theorem

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_________ information is When the available information is initially distributed in favor of one party relative to another

Imperfect information

Perfect information

Symmetric information

Asymmetric information

Answer

Correct Answer: Asymmetric information

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Situation where an informed party benefits in an exchange by taking advantage of knowing more than the other party is called

Anti selection

Death spiral

Adverse selection

Answer

Correct Answer: Adverse selection

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Market Failure MCQ

During periods of deflation _____ will be hurt and _____ will be helped.

In the labor market, things like education level and grades are ______.

Benefiting from asymmetric information is known as ______.

Asymmetric information is information that is ______.

Free riders are people who ______.

The use of public goods is ______.

A private good is ______.

Greater numbers of transactors make negotiations______.

Transaction costs exclude ______.

The idea that when the benefits are greater than the costs for some course of action, potential transactions can make some people better off without making anyone worse off is the ______.

It is probable that pollution regulation is subject to ______.

If firms had to pay for the externalities they cause, production costs would ______.

Because of scarcity, clean air ______.

An educated population is an example of a(n) ______.

Corrective ______ are used to internalize negative externalities.

How is a firm’s production influenced by a negative externality?

Rights given to a firm to discharge a specified amount of pollution is called

A good that is nonrivalrous in consumption and nonexcludable known as

A good with rivalrous consumption and excludability is called

Positive externality is When ____ spill over to an outside party

Negative externality is When ___ spill over to an outside party

Moral hazard is Taking additional risks because you are

Someone who derives benefits from something not paid for is Known as

Common resource is a good that is rival in ____ and nonexcludable

_____ are Goods that are nonrival in consumption and excludable

According to _________ property rights are defined in a clear-cut fashion

_________ information is When the available information is initially distributed in favor of one party relative to another

Situation where an informed party benefits in an exchange by taking advantage of knowing more than the other party is called

During periods of deflation _ will be hurt and _ will be helped.