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Econ 201 Assignment 5 35 terms ry101carter

C 1) A public choice is

A) a decision that affects one person.

B) a decision that affects no one.
C) a decision that affects a entire society.
D) a decision made in public

A 2) When government action leads to inefficiency it is

known as

A) government failure
B) lack of government trust
C) government as usual
D) politics

A 3) A price floor

A) results in a surplus if the floor price is higher than the

equilibrium price.
B) results in a shortage if the floor price is higher than the
equilibrium price.
C) always results in a shortage.
D) always results in a surplus.

C 4) Deadweight loss or welfare loss is

 A) made up of a loss of only producer surplus.
B) made up of a loss of only consumer surplus.
C) made up of a loss of both consumer surplus and
producer surplus.
D) not a social loss.

B 5) A price ceiling is a price

A) below which a seller cannot legally sell.

B) above which a seller cannot legally sell.
C) that creates a surplus of the good.
D) Both answers A and C are correct.

C 6) A market demand curve is constructed by

A) averaging each individual demand curve.

B) dividing one individual demand curve by the number of
consumers in the market.
C) a horizontal summation of each individual demand
curve.
D) a vertical summation of each individual demand curve.

D 7) Which of the following is a potential impact of an

effective price ceiling?

A) deterioration in the quality of the price-controlled good

B) use of non-price factors such as discrimination to
allocate the price-controlled good to consumers
C) a shortage
D) All of the above are potential impacts of an effective
price ceiling.

B 8) A good or service or a resource is excludable if

A) its use by one person decreases the quantity available

for someone else.
B) it is possible to prevent someone from enjoying its
benefits.
 C) it is not possible to prevent someone from enjoying its
benefits.
D) its use by one person does not decrease the quantity
available for someone else.

A 9) If I increase my consumption of a good and this has no

impact the quantity you can consume of the same good,
then this good is

A) nonrival.
B) both nonrival and nonexclusive.
C) nonexclusive.
D) a free good.

B 10) Food is an example of a ________ good.

A) nonrival and excludable

B) rival and excludable
C) nonrival and nonexcludable
D) rival and nonexcludable

C 11) A private good is ________ and ________.

A) nonrival; excludable
B) nonrival; nonexcludable
C) rival; excludable
D) rival; nonexcludable

C 12) Which of the following is the BEST example of a public

good?

A) a can of Mountain Dew

B) fish in the ocean
C) national defense
D) cable television

A 13) When consumption of a good is nonrival and

nonexcludable, the good is a

A) public good.
 B) mixed good.
C) private good.
D) service.

C 14) A common property resource is ________ and ________.

A) rival; excludable
B) nonrival; nonexcludable
C) rival; nonexcludable
D) nonrival; excludable

B 15) For a good to be nonrival, then

A) a person is not willing to pay for the good because

even without paying for it, the person can consume the
good anyway.

B) one person's consumption of that good does not

decrease another person's consumption of that good.

C) a person cannot be prevented from consuming that

good even if he or she did not pay for it.

D) a person is willing to pay any price to ensure that the

product is available.

B 16) An externality can be a

A) benefit but not a cost.

B) cost or a benefit.
C) cost but not a benefit.
D) marginal cost but not a total cost.

D 17) The external benefit of a good

A) equals its consumer surplus.

B) equals its total surplus.
C) equals its producer surplus.
 D) is a benefit from the good falling on people who are
not the consumers of the good.

B 18) An example of an activity that generates an external

cost is

A) eating an apple.
B) dumping soapsuds into a trout stream.
C) national defense services.
D) planting flowers along an interstate highway.

D 19) When people decorate the exteriors of their homes

with colored lights, they create ________ for the motorists
who pass by.

A) a competitive good
B) a public good
C) an excludable good
D) an external benefit

B 20) A free rider is someone who

A) creates an external benefit.

B) enjoys the benefits of a good without paying for it.
C) is irrational.
D) consumes only the goods he or she pays for.

D 21) The free-rider problem arises when consumption of a

good is

A) rival.
B) nonrival but excludable.
C) excludable.
D) nonexcludable.

B 22) The economy's demand curve (marginal social benefit

curve) for a public good is equal to the ________.

A) horizontal sum of the individual demand curves

B) vertical sum of the individual marginal benefit curves
 C) vertical sum of the individual supply curves
D) horizontal sum of the individual marginal benefit curves

C 23) The economy's marginal benefit curve for a public

good is found by ________ for all individuals.

A) horizontally summing the total benefit curves

B) horizontally summing the marginal benefit curves
C) vertically summing the marginal benefit curves
D) vertically summing the total benefit curves

A 24) An externality occurs when

A) some of the costs of producing a good are paid by

someone other than the producer.
B) the costs of producing a good are paid entirely by the
producer.
C) the marginal social cost of an activity increases as that
activity is increased.
D) Both answers A and C are correct.

A 25) Why will a private market be unable to produce the

efficient quantity of public goods?

A) because the good is nonexcludable, so there is the free

rider problem
B) because the good's marginal cost is too low
C) because the good is nonrival, so no one will want to
pay the producer for it
D) All of the above answers are correct.

False T or F

26) Demand price is the lowest price a consumer is willing

to pay for a good.

False T or F Advertisement
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27) Consumer surplus is defined as supply price minus

demand price.
True T or F

28) Producer surplus is defined as the exchange price

minus the supply price.

True T or F

29) The vast majority of economists oppose rent control.

True T or F

30) Government imposed regulations is a major sources of

monopoly power in the U.S.

False T or F

31) The gains-from-trade redistribution that occurs in a

price ceiling is from the buyers to the sellers.

False T or F

32) The total gains from trade from a market transaction

can be calculated as the supply price minus the demand
price,

True T or F

33) Government regulation of market prices usually results

in welfare losses.

True T or F

34) In economic terminology, welfare means efficiency

rather than equity (which is its common meaning to the
public).

False T or F

35) The California Energy Crisis was an example of a price

floor.