This quiz works best with JavaScript enabled. Home > Finance > Economics > Market Dynamics > Market Failures > Market Failures – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Market Failures Quiz 4 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Under which market structure are prices lowest? A) Monopoly. B) Oligopoly. C) Monopolistic Competition. D) Perfect Competition. Show Answer Correct Answer: D) Perfect Competition. 2. An illegal agreement among firms to divide the market, set prices, or limit production A) Collusion. B) License to sell. C) Price domination. D) Barrier to entry. Show Answer Correct Answer: A) Collusion. 3. 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. 4. 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. 5. 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. 6. A key characteristic of this market structure is that there is interdependence among firms. A) Perfect (pure) competition. B) Oligopoly. C) Monopolistic competition. D) Monopoly. Show Answer Correct Answer: B) Oligopoly. 7. 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. 8. A tin-mining company is found guilty of polluting a river. Which one of the following government measures would an economist describe as an appropriate market-based solution? A) Imposition of regulations and direct control on the company. B) Nationalization of the tin-mining company. C) Increase tax on the tin produced. D) A reduction of private property rights over the river. Show Answer Correct Answer: C) Increase tax on the tin produced. 9. This market structure has 3-4 firms who dominate 60-80% of the industry. A) Perfect Competitio. B) Oligopoly. C) Monopoly. D) Monopolistic Competition. Show Answer Correct Answer: B) Oligopoly. 10. The role of government in a market system A) Includes improving situations that would otherwise result in a market failure. B) Does not exist. C) Includes improving on situations that would otherwise result in a government failure. D) Is restricted to establishing property rights. Show Answer Correct Answer: A) Includes improving situations that would otherwise result in a market failure. 11. It is illegal for oligopolies to exert some control over price through ..... A) Price leadership. B) Standardized products. C) Collusion. D) Conglomerates. Show Answer Correct Answer: C) Collusion. 12. Factors that make it difficult for a new firm to enter a market ..... A) Barriers to entry. B) Oligopoly. C) Collusion. D) Monopoly. Show Answer Correct Answer: A) Barriers to entry. 13. Which of the following is an example of a positive externality resulting from an outdoor band concert? A) An elderly woman in her apartment hears a song that she liked as a child. B) A pair of endangered birds leave their nest in a nearby tree when the concert starts. C) A pizza parlor closes early, because all of its customers are at the concert. D) A traffic jam occurs as drivers hunt for parking spots near the concert. Show Answer Correct Answer: A) An elderly woman in her apartment hears a song that she liked as a child. 14. In a market economy, government intervention A) Will always improve market efficiency. B) Reduces efficiency in the presence of market failures. C) May improve market efficiency in the presence of market failures. D) Is necessary as individuals and firms are self-interest. Show Answer Correct Answer: C) May improve market efficiency in the presence of market failures. 15. A formal agreement to set prices or to otherwise behave in a cooperative manner A) Non-price competition. B) Collusion. C) Deregulation. D) All the above. Show Answer Correct Answer: B) Collusion. 16. Which of the following is an example of a private goods? A) National defense. B) Fish in the ocean. C) Restaurant meals. D) Residential housing. Show Answer Correct Answer: D) Residential housing. 17. An example of a negative externality is A) Education. B) Pollution. C) Projects that beautify parks. D) Vaccines. Show Answer Correct Answer: B) Pollution. 18. The minimum wage is an example of a government price control. A) False. B) True. Show Answer Correct Answer: B) True. 19. Laws that encourage competition in the marketplace. They are needed because if they aren't in place oligopolies and monopolies can form, which decrease output and increase prices to make a larger profit. A) Anti monopoly laws. B) Anti business laws. C) Antitrust laws. D) Anti Government laws. Show Answer Correct Answer: C) Antitrust laws. 20. When a price ceiling is imposed in a market: A) A surplus results. B) Sellers of the product are made better off. C) A shortage results. D) Quantity supplied is greater than the quantity demanded. Show Answer Correct Answer: C) A shortage results. 21. Which of the following is NOT a characteristic of perfect competition? A) Many small sellers. B) Perfect resource mobility. C) Homogeneous product. D) Low barriers to entry. Show Answer Correct Answer: D) Low barriers to entry. 22. Individuals benefit from public goods that don't help pay for them through taxes. A) Externalities. B) Public Goods. C) Free-Rider Problem. D) None of above. Show Answer Correct Answer: C) Free-Rider Problem. 23. Amtrak trains has a monopoly of the service it provides because A) It is a technological monopoly; no other company has the tech necessary to provide this service. B) It is a natural monopoly; it would not be efficient for more than one company to provide this service. C) It is a patent monopoly; the government has given the company exclusive rights to provide this service. D) It is an industrial monopoly; it bought out all of its competitors that previously provided this service. Show Answer Correct Answer: B) It is a natural monopoly; it would not be efficient for more than one company to provide this service. 24. A market where brand-name loyalty is more important than product differentiation. A) Oligopoly. B) Monopolistic Competition. C) Perfect Competition. D) Monopoly. Show Answer Correct Answer: B) Monopolistic Competition. 25. Which best describes a public good? A) A good that produces no externalites. B) A good that exists only in a free market. C) A good purchased by individuals. D) A good provided by the government. Show Answer Correct Answer: D) A good provided by the government. 26. A price ceiling is set ..... equilibrium and results in a ..... A) Below, shortage. B) Below, surplus. C) Above, surplus. D) Above, shortage. Show Answer Correct Answer: A) Below, shortage. 27. Granting a pharmaceutical company a patent for a new medicine will lead to(i) a product that is priced higher than it would be without the exclusive rights.(ii) incentives for pharmaceutical companies to invest in research and development.(iii) higher quantities of output than without the patent. A) (i) and (ii) only. B) (ii) and (iii) only. C) (i) and (iii) only. D) (i), (ii), and (iii). Show Answer Correct Answer: A) (i) and (ii) only. 28. Which of the following is a consequence of free riders? A) The good or service is produced regardless. B) The good or service is never produced or underproduced because not enough people paid to use it. 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: B) The good or service is never produced or underproduced because not enough people paid to use it. 29. 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. 30. 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. ← PreviousNext →Related QuizzesMarket Dynamics QuizzesEconomics QuizzesMarket Failures Quiz 1Market Failures Quiz 2Market Failures Quiz 3Market Failures Quiz 5Market Failures Quiz 6Market Failures Quiz 7 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books