Chapter 4 – Microeconomics

What two conditions must hold for a competitive market to produce efficient outcomes?

If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then...

Producer surplus:

Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences:

Allocative efficiency occurs only at that output where:

An efficiency loss (or deadweight loss):

Nonrivalry and nonexcludability are the main characteristics of:

Which of the following is an example of a public good?

If one person's consumption of a good does not preclude another's consumption, the good is said to be:

Refer to the 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:

A positive externality or spillover benefit occurs when:

A negative externality or spillover cost occurs when:

According to the Coase theorem:

The socially optimal amount of pollution abatement occurs where society's marginal:

The marginal benefit to society of reducing pollution declines with increases in pollution abatement because of the law of:

The marginal cost to society of reducing pollution rises with increases in pollution abatement because of the law of:

Market failure is said to occur whenever:

Which of the following is an example of market failure?

Demand-side market failures occur when:

People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a:

Supply-side market failures occur when:

When a supply-side market failure occurs, the costs are greater than the benefits for the last unit(s) of output produced.

Because of the free-rider problem:

At the optimal quantity of a public good:

Which of the following is an example of a market failure?

The value that consumers get (from consuming a product) over and above that they actually paid for the product is called:

Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is

Consumer surplus arises in a market because:

Which of the following antipollution policies is least likely to make use of cost-benefit analysis?

An emission fee levied against polluting firms will tend to shift the:

A market for pollution rights can be expected to:

Sometimes, public goods whose benefits are less than their costs still get produced because:

What are the two characteristics that differentiate private goods from public goods?

Private firms can hardly produce a public good profitably because of:

Cost-benefit analysis attempts to: