MARKET FAILURE EXTERNALITIES

1.

Multiple Choice

30 sec

1 pt

Consumer surplus is the difference between the highest price a consumer will pay and

the market or actual price.

the lowest price the consumer will pay.

the cost of production.

2.

Multiple Choice

30 sec

1 pt

Producer surplus is the difference between the lowest price a firm will accept and

the cost of production.

the market or actual price.

What the consumer will pay.

3.

Multiple Choice

30 sec

1 pt

Theresa paid $10 for a pizza when she was prepared to pay $15. Theresa's consumer surplus is

$10.

$15.

impossible to calculate.

$5.

4.

Multiple Choice

30 sec

1 pt

Market equilbrium is usually efficient because

Total surplus is maximised at equilbrium

consumer surplus is maximised at equilbrium

producer surplus is maximised at equilbrium

there is no tendency to change at equilbrium.

5.

Multiple Choice

30 sec

1 pt

Market failure occurs when

total surplus is not maximised at equilibrium.

the market is in disequibrium.

prices are too high for everyone to afford.

not everyone can get what they want.

6.

Multiple Choice

30 sec

1 pt

A deadweight loss is created when the quantity produced and sold at equilibrium is

not the social optimum.

either above or below the social optimum.

7.

Multiple Choice

30 sec

1 pt

Which of the following would create a DWL from overproduction?

Negative externalities.

Positive externalities.

A sales tax

8.

Multiple Choice

30 sec

1 pt

Which of the following would create a DWL of underproduction?

Positive externalities

Negative externalities.

9.

Multiple Choice

30 sec

1 pt

The presence of externalities in production creates DWL because the supply curve

reflects production costs

fails to reflect the marginal social cost of production

is too far to the right

10.

Multiple Choice

30 sec

1 pt

Pollution taxes aim to

make the polluter pay for the external costs of producing the good.

ensure the polluter pays the private costs of producing the good.

eliminate pollution.

11.

Multiple Choice

30 sec

1 pt

A subsidy paid to a producer is aimed at correcting the market failure of

negative externalities.

overproduction.

positive externalities.

pollution.

12.

Multiple Choice

30 sec

1 pt

Which of the following statements is true about externalities?

When externalities exist, resources are allocated efficiently

When positive externalities exist, efficiency is improved by taxing the product

From society's point of view, the output of goods for which a positive externality exists is too low

The price system overproduces goods with positive externalities

13.

Multiple Choice

30 sec

1 pt

A situation of market failure is said to exist if;

buyers and sellers pay for the true opportunity costs of their actions

there are no externalities

the government provides merit goods free

third parties in society are affected and not compensated

14.

Multiple Choice

30 sec

1 pt

When social costs are greater than private costs, there is a;

positive externality

negative externality

less than socially optimal output

socially optimal output

15.

Multiple Choice

30 sec

1 pt

The existence of externalities

is something we just have to live with in a market economy.

is a justification or rationale for government intervention in the market economy.

proves that markets are efficient.

contradicts the laws of demand and supply

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