This quiz works best with JavaScript enabled. Home > Finance > Economics > Market Dynamics > Market Failures > Market Failures – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Market Failures Quiz 5 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. 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) Imperfect competition. D) Externalities. Show Answer Correct Answer: B) Missing markets. 2. What is one reason that local law enforcement is considered a public good? A) Individual citizens pay directly for it. B) Private firms make a profit from producing it. C) Everyone in the community benefits from it. D) Nobody in the community has to pay for it. Show Answer Correct Answer: C) Everyone in the community benefits from it. 3. This is the minimum price buyers are required to pay for a good. It's a lower limit for the price. A) Shortage. B) Equilibrium. C) Price floor. D) Price ceiling. Show Answer Correct Answer: C) Price floor. 4. Perfect Competition has ..... A) Identical products. B) Similar, but not identical products. Show Answer Correct Answer: A) Identical products. 5. Laws that encourage competition in the market A) Price Discrimination. B) Patent. C) Antitrust Laws. D) Monopoly. Show Answer Correct Answer: C) Antitrust Laws. 6. Which of the following market structures is considered a price maker(the business sets the price and has control over the price)? A) Monopolistic competition. B) Monopoly. C) Perfect competition. D) Oligopoly. Show Answer Correct Answer: B) Monopoly. 7. AT&T, Verizon, and T-Mobile are an example of a(n) A) Oligopoly. B) Monopoly. Show Answer Correct Answer: A) Oligopoly. 8. The following statements are true of government regulations except A) They seek to limit negative externalities. B) They exist to protect consumers. C) They are always popular with private businesses. D) They limit economic freedom. Show Answer Correct Answer: C) They are always popular with private businesses. 9. Patents are an example of a A) Geographic monopoly. B) Natural monopoly. C) Technological monopoly. D) Government monopoly. Show Answer Correct Answer: C) Technological monopoly. 10. 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. 11. A farmers market is the best example of which market structure? A) Oligopoly. B) Monopoly. C) Monopolistic Competition. D) Perfect Competition. Show Answer Correct Answer: D) Perfect Competition. 12. 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. 13. 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. 14. 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. 15. 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) Private sector. D) Externalities. Show Answer Correct Answer: D) Externalities. 16. Negative externalities exist when A) Too much is produced. B) The optimal amount is produced. C) Too little is produced. D) A third-party benefits without paying. Show Answer Correct Answer: A) Too much is produced. 17. A negative externality results due to firms A) Being very, very, bad. B) Firms not realizing they are polluting. C) Firms internalizing production costs. D) Not paying the full cost of production. Show Answer Correct Answer: D) Not paying the full cost of production. 18. Education is a negative externality. A) False. B) True. Show Answer Correct Answer: A) False. 19. Factors that make it difficult for new firms to enter a market are called A) Factors of production. B) Monopolistic Outlook. C) Limited supply. D) Barriers to entry. Show Answer Correct Answer: D) Barriers to entry. 20. Market failure in which there is unintended harm or inconvenience to a third party. A) Negative externality. B) Public goods. C) Economies of scale. D) Positive externality. Show Answer Correct Answer: A) Negative externality. 21. What is rent control? A) A price ceiling that imits the amount a property owner can charge for renting out a home, apartment or other real estate. B) A price floor that imits the amount a property owner can charge for renting out a home, apartment or other real estate. C) An order that sets a cap on how much rent can be raised over time. D) None of above. Show Answer Correct Answer: A) A price ceiling that imits the amount a property owner can charge for renting out a home, apartment or other real estate. 22. The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called A) The externality theorem. B) A corrective tax. C) The Pigovian theorem. D) The Coase theorem. Show Answer Correct Answer: D) The Coase theorem. 23. An economic side effect of a good/service that generates benefits or costs to someone other than the person deciding how much to produce or consume. A) Side effects. B) Monopolies. C) Externalities. D) Public Goods. Show Answer Correct Answer: C) Externalities. 24. Again consider the market for plastic. If you would like to solve the negative externalities problem, how much tax would you charge for the plastic production? A) Equal to the private cost at $ 3.5 per ton. B) Equal to the value of negative externalities at $ 1.5 per ton. C) Equal to the value of positive externalities at $ 1.5 per ton. D) Equal to the social cost at $ 5 per ton. Show Answer Correct Answer: B) Equal to the value of negative externalities at $ 1.5 per ton. 25. Which of the following industries is most likely to exist in a purely competitive market? A) Personal computers. B) Shoes. C) Bottled water. D) Wheat. Show Answer Correct Answer: D) Wheat. 26. In which market structure is there NO competition? A) Perfect Competition. B) Oligopoly. C) Monopolistic Competition. D) Monopoly. Show Answer Correct Answer: D) Monopoly. 27. Public goods are A) Rival and excludable. B) Non-rival and non-excludable. C) Rival and non-excludable. D) Non-rival and excludable. Show Answer Correct Answer: B) Non-rival and non-excludable. 28. The ups and downs of the economy, which the government must sometimes step in to stabilize due is known as the A) Regulatory cycle. B) Fiscal Policy. C) Business cycle. D) Monetary Policy. Show Answer Correct Answer: C) Business cycle. 29. Market structure in which a few very large sellers dominate the industry. A) Perfect competition. B) Oligopoly. C) Monopoly. D) Monopolistic competition. Show Answer Correct Answer: B) Oligopoly. 30. The US Postal Service is an example of which type of monopoly? A) Geographic Monopoly. B) Natural Monopoly. C) Government Monopoly. D) Technological Monopoly. Show Answer Correct Answer: C) Government Monopoly. ← PreviousNext →Related QuizzesMarket Dynamics QuizzesEconomics QuizzesMarket Failures Quiz 1Market Failures Quiz 2Market Failures Quiz 3Market Failures Quiz 4Market Failures Quiz 6Market Failures Quiz 7 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books