This quiz works best with JavaScript enabled. Home > Finance > Economics > Market Dynamics > Market Failures > Market Failures – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Market Failures Quiz 3 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Regulatory policies are rules established by ..... decree. A) Private. B) Market. C) Social. D) Government. Show Answer Correct Answer: D) Government. 2. Safety nets, in the context of market failure, are A) Goods that are not safe, equitable, and profitable in the market. B) Programs that help people who are struggling. C) Designed to minimize external costs and shift the costs back to the producers. D) Payments given by the government to private companies as an incentive for them to produce a certain good. Show Answer Correct Answer: B) Programs that help people who are struggling. 3. Which categories of goods are excludable? A) Private goods and club goods. B) Private goods and common resources. C) Public goods and club goods. D) Public goods and common resources. Show Answer Correct Answer: A) Private goods and club goods. 4. Marginal Social Cost curve is A) Upward sloping. B) Downward sloping. Show Answer Correct Answer: A) Upward sloping. 5. In general, economist prefer to favor ..... based policies. A) Regulation. B) Market. Show Answer Correct Answer: B) Market. 6. At the price, neither a surplus or a shortage exists A) Consumer surplus. B) Equilibrium. C) Dead weight. D) Producer's surplus. Show Answer Correct Answer: B) Equilibrium. 7. A positive externality is something that ..... society A) Harms. B) Benefits. Show Answer Correct Answer: B) Benefits. 8. Going to the gym and seeing results, is a form of ..... externalities. A) Negative. B) Positive. Show Answer Correct Answer: B) Positive. 9. A price ceiling will result in a A) Surplus. B) Equilibrium price. C) Equilibrium quantity. D) Shortage. Show Answer Correct Answer: D) Shortage. 10. If a product has many substitutes, then the product is likely A) Inelastic. B) Elastic. C) Perfectly inelastic. D) Unit elastic. Show Answer Correct Answer: B) Elastic. 11. In this market structure, products are similar but have some differences. A) Monopolistic Competition. B) Perfect Competition. C) Oligopoly. D) Monopoly. Show Answer Correct Answer: A) Monopolistic Competition. 12. A large number of cars polluting the air could be an example of A) Negative externalities. B) Public goods. C) Asymmetric information. D) None of above. Show Answer Correct Answer: A) Negative externalities. 13. How many firms are there in a monopoly? A) 1. B) 2-5. C) Many. D) None of above. Show Answer Correct Answer: A) 1. 14. From an economic standpoint, government intervention is justified A) Because the government can increase the level of market power of private businesses. B) When the private sector is larger than public sector. C) Because the government will encourage the production of private goods. D) When the market mechanism fails to achieve the optimal mix of output. Show Answer Correct Answer: D) When the market mechanism fails to achieve the optimal mix of output. 15. Which of the following best represents a positive externality? A) Being disturbed by neighboring construction noise. B) Purchasing a pass for an amusement park. C) Dumping waste on someone else' s property. D) Enjoying watching birds at a neighbor's bird feeder. Show Answer Correct Answer: D) Enjoying watching birds at a neighbor's bird feeder. 16. The benefit to private businesses or individuals is shown in the curve ..... A) MSB. B) MSC. C) MPB. D) MPC. Show Answer Correct Answer: C) MPB. 17. Market failure results in a misallocation of resources. In some cases, this can be corrected by the government A) Subsidizing all loss-making firms. B) Restricting the manufacture of goods that generate positive externalities. C) Providing public goods. D) Placing a tax on merit goods. Show Answer Correct Answer: C) Providing public goods. 18. Which is not an example of a government safety net? A) Unemployment Insurance. B) Social Security. C) Consumer Safety. D) Medicaid. Show Answer Correct Answer: C) Consumer Safety. 19. Which is not an example of a public good? A) Legacy High School. B) Street lighting. C) Oil. D) Lighthouse. Show Answer Correct Answer: C) Oil. 20. 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. 21. ..... 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. 22. "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. 23. This market structure can act like a monopoly when the firms all set prices the same A) Oligopoly. B) Monopoly. C) Monopolistic Competition. D) Perfect Competitio. Show Answer Correct Answer: A) Oligopoly. 24. If any change in price causes 0 change in demand (and the demand curve is vertical), then the product is A) Perfectly inelastic. B) Perfectly elastic. C) Relatively inelastic. D) Unit elastic. Show Answer Correct Answer: A) Perfectly inelastic. 25. 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. 26. A price floor will result in a A) Equilibrium price. B) Shortage. C) Equilibrium quantity. D) Surplus. Show Answer Correct Answer: D) Surplus. 27. 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. 28. 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. 29. A market structure characterized by a single seller dominating all production of a given good A) Perfect Competition. B) Monopolistic Competition. C) Monopoly. D) Oligopoly. Show Answer Correct Answer: C) Monopoly. 30. 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. ← PreviousNext →Related QuizzesMarket Dynamics QuizzesEconomics QuizzesMarket Failures Quiz 1Market Failures Quiz 2Market Failures Quiz 4Market Failures Quiz 5Market Failures Quiz 6Market Failures Quiz 7 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books