Lesson 4 Quiz over Chapter 13

Question 1

An example of a public good is:

Answer 1

fire and police protection.

Question 2

Inefficient outcomes may occur when demand curves do not reflect the total social benefit of producing a good or service.
True or False?

Answer 2

True

Question 3

Which of the following could be considered a shortcoming of the market system?

Answer 3

The market demand curve does not always reflect the positive externalities of the good or service.

Question 4

An external cost or external benefit is also known as a(n):

Answer 4

externality.

Question 5

Intellectual property:

Answer 5

the body of law including patents, trademarks and copyrights that protect the right of inventors.

Question 6

When externalities cause substantial positive benefits for third parties, a competitive market:

Answer 6

underallocates resources to the production of the good.

Question 7

Positive externalities refer to:

Answer 7

benefits that spillover to a third party or parties.

Question 8

One approach to positive externalities is for the government to levy taxes on the related good or service.
True or False?

Answer 8

False

they should decrease the tax on the good or service not increase it.

Question 9

The optimal output of product with a positive externality occurs when marginal society’s benefit and marginal society’s cost of producing that externality are equal (MSC=MSB).
True or False?

Answer 9

True

Question 10

Rivalry and excludability are the main characteristics of:

Answer 10

private goods.