This quiz works best with JavaScript enabled. Home > Economics > Market Dynamics > Market Failures > Market Failures – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Market Failures Quiz 5 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which is not an example of a public good? A) Lighthouse. B) Legacy High School. C) Street lighting. D) Oil. Show Answer Correct Answer: D) Oil. 2. Government regulation may negatively affect businesses in the following ways by A) Increasing input costs. B) Increasing profits. C) Lowering consumer prices. D) All of the above. Show Answer Correct Answer: A) Increasing input costs. 3. ..... goods are goods that are considered ..... for consumers but which are ..... by the market. One important reason for overprovision is that the good may have ..... consumption externalities, thus the market ..... resources in its production. A) Excise; desirable; underproduced; positive; overallocates. B) Normal; needs; undervalued, elastic; frees. C) Demerit; undesirable; overproduced; negative; overallocates. D) Demerit; desirable; underproduced; positive; underallocates. Show Answer Correct Answer: C) Demerit; undesirable; overproduced; negative; overallocates. 4. "Side effects" of producing the good or service and can have a positive or negative affect on others. A) Externalities. B) Public Goods. C) Free-rider problem. D) None of above. Show Answer Correct Answer: A) Externalities. 5. Externalities A) Occur because of government failure. B) Occur because of selfish consumers. C) Are the costs or benefits of market activities that "spill over" onto third parties. D) Occur because demand is hidden. Show Answer Correct Answer: C) Are the costs or benefits of market activities that "spill over" onto third parties. 6. This market structure can act like a monopoly when the firms all set prices the same A) Monopoly. B) Monopolistic Competition. C) Perfect Competitio. D) Oligopoly. Show Answer Correct Answer: D) Oligopoly. 7. If any change in price causes 0 change in demand (and the demand curve is vertical), then the product is A) Perfectly elastic. B) Perfectly inelastic. C) Unit elastic. D) Relatively inelastic. Show Answer Correct Answer: B) Perfectly inelastic. 8. Market failure cannot be A) When the free market provides too little. B) When the free market fails to provide at all. C) When the free market provides too much. D) When the free market clears at a high price. Show Answer Correct Answer: D) When the free market clears at a high price. 9. A price floor will result in a A) Shortage. B) Surplus. C) Equilibrium price. D) Equilibrium quantity. Show Answer Correct Answer: B) Surplus. 10. Businesses can "Collude" or work together to set prices A) Oligopoly. B) Monopoly. C) Perfect Competition. D) None of above. Show Answer Correct Answer: A) Oligopoly. 11. A tax equal to the external cost on firms that emit pollutants would A) Not reduce pollution levels at all. B) Provide firms with the incentive to increase the level of activity creating the pollution. C) Provide firms with the incentive to decrease the level of activity creating the pollution. D) Provide firms with little incentive to search for less environmentally damaging production methods. Show Answer Correct Answer: C) Provide firms with the incentive to decrease the level of activity creating the pollution. 12. A market structure characterized by a single seller dominating all production of a given good A) Oligopoly. B) Monopoly. C) Perfect Competition. D) Monopolistic Competition. Show Answer Correct Answer: B) Monopoly. 13. Public goods, such as defense, are not supplied by the price system because A) The capital cost is too high. B) Public goods are necessities and therefore cannot be left to the price system. C) Monopolies would make supernormal profits. D) The benefits would-ceteris paribus-not be restricted to buyers but would be available to non-buyers as well. Show Answer Correct Answer: D) The benefits would-ceteris paribus-not be restricted to buyers but would be available to non-buyers as well. 14. Under which market structure are prices lowest? A) Monopoly. B) Monopolistic Competition. C) Perfect Competition. D) Oligopoly. Show Answer Correct Answer: C) Perfect Competition. 15. An illegal agreement among firms to divide the market, set prices, or limit production A) Barrier to entry. B) Collusion. C) Price domination. D) License to sell. Show Answer Correct Answer: B) Collusion. 16. Which of the following is NOT a positive government intervention in the market? A) Providing for national defense. B) Setting price ceilings and floors. C) Breaking up a monopoly. D) Establishing courts that enforce contracts. Show Answer Correct Answer: B) Setting price ceilings and floors. 17. Incorporating the external and private benefits and costs A) Impedes the decision-making process. B) Is not necessary as long as marginal benefit is greater than marginal cost. C) Eliminates the decision-making process. D) Results in socially optimal production and consumption. Show Answer Correct Answer: D) Results in socially optimal production and consumption. 18. Allocative efficiency occurs only at that output where A) Marginal benefit exceeds marginal cost by the greatest amount. B) Consumer surplus exceeds producer surplus by the greatest amount. C) The combined amounts of consumer surplus and producer surplus are maximized. D) The areas of consumer and producer surplus are equal. Show Answer Correct Answer: C) The combined amounts of consumer surplus and producer surplus are maximized. 19. A key characteristic of this market structure is that there is interdependence among firms. A) Perfect (pure) competition. B) Monopolistic competition. C) Oligopoly. D) Monopoly. Show Answer Correct Answer: C) Oligopoly. 20. In which of the following situations is market failure least likely to occur? A situation where; A) Externalities exist. B) Many producers compete in the market. C) There is a sole producer in market. D) There is a very uneven distribution of income and wealth. Show Answer Correct Answer: B) Many producers compete in the market. ← PreviousNext →Related QuizzesMarket Dynamics QuizzesEconomics QuizzesMarket Failures Quiz 1Market Failures Quiz 2Market Failures Quiz 3Market Failures Quiz 4Market Failures Quiz 6Market Failures Quiz 7Market Failures Quiz 8Market Failures Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books