Price Theory and Resource Allocation Flashcards
An example of common resource is
a. fish in the ocean
b. the Ambassador Bridge
c. air traffic control
d. national defence
e. the internet
a fish in the ocean
Minimum differentiation among the political parties suggest that
a. platforms of parties tend to have few new ideas
b. parties offer few ideas on minimizing size and scope of government
c.
the platforms of the parties will tend to become similar as they try to appeal to a majority of voters
When the production of a good has an external cost, the equilibrium quantity
in an unregulated, competitive market has a marginal social cost greater than the marginal social benefit
When a good is rival and excludable, it is a
private good
All of the following statements regarding rational ignorance are true except
It leads to an efficient outcome
Governments provide public goods such as national defence because
of the** free-rider problem** which results in underproduction by private firms
The figure shows the private marginal cost curve, the social marginal cost curve, and the market demand curve. If the market is unregulated, then the** quantity produced** is
Q3
The figure shows the private marginal cost curve, the social marginal cost curve, and the market demand curve. If the market is unregulated, then at the equilibrium output the marginal social cost of production is
greater than the marginal benefit to consumers
One way to solve negative externality problems is
issue marketable permits to polluting firms
Which of the following is NOT a statutory intellectual property right?
trade secrets
Common resources are overused because
the marginal social benefit is not taken into consideration by producers
Which of the following achieves the efficient use of a common resource?
property rights, quotas, and individual transferable quotas
Which one of the following goods is nonexcludable?
the atmosphere
Effective strategies for addressing the problem of negative externalities include
imposing taxes on the activity that generates the pollution
An example of an activity that creates a positive consumption externality is
flu vaccination
Refer to figure. The unregulated outcome in the paper market is
a quantity of 50 tonnes and a price of $12 a tonne
Figure 4 shows the demand curve, the marginal private cost curve, and the marginal social cost curve of good. A. production of the 6th unit of output generates a marginal external
cost of $3
One way to alleviate the tragedy of the commons is to
make the resource private property
When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then
a competitive, unregulated market produces more than the efficient quantity of Good A
The tragedy of the commons refers to
the absence of incentives to prevent the oversue and depletion of a commonly used resource
A public good is
nonrival and nonexcludable
An economy’s marginal social benefit curve for a private good is obtained by summing the individual marginal
benefit curves horizontally
Suppose Brian Adams wants to perform a concert in the City Park in Corner Brook Newfoundland. The city officials argue that the only way the concert can be given permission to be performed in the City Park is if it is free of charge. If Brian Adams agrees to performing free of charge, then the concert is
Nonexcludable
A well-maintained water-fromt property that is enjoyed by other property owners is an example of
a positive consumption externality
In the equilibrium for a common resource with no government regulation
marginal private benefit equals marginal cost
For a private good, the economy’s marginal social benefit curve is the ___ sum of the individual marginal benefit curves and for a public good, the economy’s marginal social benefit curve is the ___sum of the individual marginal benefit curves
horizontal; vertical
An externality is defined as
a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer
The average total cost curve for a knowledge-based firm is
U shaped
According to public choice theory, a voter will favour a candidate whose political program is
perceived by the voter to be in his self-interest
Public choice theory predicts that
voters are rationally ignorant
