This quiz works best with JavaScript enabled. Home > Economics > Market Dynamics > Market Failures > Market Failures – Quiz 7 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Market Failures Quiz 7 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which of the following is a consequence of free riders? A) The good or service is never produced or underproduced because not enough people paid to use it. B) The good or service is produced regardless. C) The government always steps in to produce the good or service. D) Consumers are better off by not having the good or service be produced. Show Answer Correct Answer: A) The good or service is never produced or underproduced because not enough people paid to use it. 2. When social costs are greater than private costs, there is a; A) Positive externality. B) Negative externality. C) Less than socially optimal output. D) Socially optimal output. Show Answer Correct Answer: B) Negative externality. 3. A tax imposed on the sellers of a good will A) Raise both the price buyers pay and the effective price sellers receive. B) Raise the price buyers pay and lower the effective price sellers receive. C) Lower the price buyers pay and raise the effective price sellers receive. D) Lower both the price buyers pay and the effective price sellers receive. Show Answer Correct Answer: B) Raise the price buyers pay and lower the effective price sellers receive. 4. As profit maximizers, firms try to minimize their production cost.This market failure happens when no supplier is willing to provide the service/good because of high transactions cost. This is one of the reasons for government intervention in a market. A) Information asymmetry. B) Missing markets. C) Externalities. D) Imperfect competition. Show Answer Correct Answer: B) Missing markets. 5. What is one reason that local law enforcement is considered a public good? A) Everyone in the community benefits from it. B) Nobody in the community has to pay for it. C) Private firms make a profit from producing it. D) Individual citizens pay directly for it. Show Answer Correct Answer: A) Everyone in the community benefits from it. 6. This is the minimum price buyers are required to pay for a good. It's a lower limit for the price. A) Equilibrium. B) Shortage. C) Price floor. D) Price ceiling. Show Answer Correct Answer: C) Price floor. 7. Perfect Competition has ..... A) Identical products. B) Similar, but not identical products. Show Answer Correct Answer: A) Identical products. 8. Laws that encourage competition in the market A) Antitrust Laws. B) Monopoly. C) Price Discrimination. D) Patent. Show Answer Correct Answer: A) Antitrust Laws. 9. Which of the following market structures is considered a price maker(the business sets the price and has control over the price)? A) Perfect competition. B) Monopolistic competition. C) Oligopoly. D) Monopoly. Show Answer Correct Answer: D) Monopoly. 10. AT&T, Verizon, and T-Mobile are an example of a(n) A) Monopoly. B) Oligopoly. Show Answer Correct Answer: B) Oligopoly. 11. The following statements are true of government regulations except A) They limit economic freedom. B) They seek to limit negative externalities. C) They exist to protect consumers. D) They are always popular with private businesses. Show Answer Correct Answer: D) They are always popular with private businesses. 12. Patents are an example of a A) Natural monopoly. B) Government monopoly. C) Geographic monopoly. D) Technological monopoly. Show Answer Correct Answer: D) Technological monopoly. 13. Under what condition is allocative efficiency achieved? A) Marginal private benefits > marginal social costs. B) Marginal private benefits < marginal social costs. C) Marginal social benefits = marginal social costs. D) Marginal social benefits > marginal social costs. Show Answer Correct Answer: C) Marginal social benefits = marginal social costs. 14. Which of the following relationships involves asymmetric information? A) An employee knows more than his employer knows about his work effort. B) A borrower knows more than the lender about his ability to repay the loan. C) The seller of a 30-year-old house knows more than the buyer about the condition of the house. D) All of the above are correct. Show Answer Correct Answer: D) All of the above are correct. 15. A farmers market is the best example of which market structure? A) Perfect Competition. B) Monopoly. C) Oligopoly. D) Monopolistic Competition. Show Answer Correct Answer: A) Perfect Competition. 16. When there is a perfect competition, one seller emerges as the primary controller of price as it squeezes out its competitors. A) True. B) False. Show Answer Correct Answer: B) False. 17. The folliowing conditions are required for achieving competitive equilibrium, hence pareto optimality, except: A) Infinitely small buyers and sellers. B) Price-taking buyers and sellers. C) Property rights. D) Information asymmetry. Show Answer Correct Answer: D) Information asymmetry. 18. Utility companies such as electricity would be an example of which type of monopoly? A) Natural monopoly. B) Geographic monopoly. C) Pure monopoly. D) Technological monopoly. Show Answer Correct Answer: A) Natural monopoly. 19. An Economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume. A) Public good. B) Free rider. C) Externalities. D) Private sector. Show Answer Correct Answer: C) Externalities. 20. Negative externalities exist when A) Too little is produced. B) A third-party benefits without paying. C) The optimal amount is produced. D) Too much is produced. Show Answer Correct Answer: D) Too much is produced. ← PreviousNext →Related QuizzesMarket Dynamics QuizzesEconomics QuizzesMarket Failures Quiz 1Market Failures Quiz 2Market Failures Quiz 3Market Failures Quiz 4Market Failures Quiz 5Market Failures Quiz 6Market Failures Quiz 8Market Failures Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books