Unit 6: Market Failure and Role of Government

In the absence of government intervention, imperfect competition, externalities, public goods, and imperfect information all result in which of the following?

Which of the following are associated with public goods? I. Free riders II. Adding demand curves vertically to find the demand curve for society III. Nonrivalry in consumption IV. Nonexcludability

What could the government do to most effectively avoid a free rider problem?

A loud party in the neighborhood is disturbing people nearby who would like to sleep. Which of the following is most likely to lead to an efficient solution to the problem?

Education makes Chris a better worker, voter, parent, and citizen. Because the benefits from education go beyond those that Chris enjoys himself, education provides

When a negative externality exists as the result of the production of a good, the socially optimal quantity of output could be achieved by

If the government wants to establish a socially optimal price for a natural monopoly, it should select the price at which

Patents, control of essential resources, economies of scale, and exclusive government licenses are all

The concentration ratio for a monopoly is

When a negative externality exists, the market produces

A positive externality occurs when

The free-rider problem occurs because

A Pigouvian tax is designed to

The Coase theorem suggests that externalities can be resolved through

What is the per-unit amount of the Pigouvian tax needed to correct the externality?

When a positive externality exists, the market produces

A subsidy is an appropriate government intervention when there is a

The tragedy of the commons occurs because

The Gini coefficient measures

An effective cap-and-trade system for pollution

The deadweight loss from the negative externality equals

A progressive income tax means that

Antitrust laws are designed to

When the marginal social cost of a good exceeds its marginal private cost, the socially optimal outcome can be achieved by

A regressive tax takes a

What is the Gini coefficient for this economy?

Asymmetric information in a market means that

If a good has a marginal social benefit greater than its marginal private benefit, the government can improve efficiency by

A factory produces chemicals and dumps waste into a river, imposing costs on downstream fishers. The marginal private cost is [math]4, and the marginal benefit is $12. Currently 1,000 units are produced. What is the socially optimal outcome?

National defense is considered a public good because

A factory produces steel and emits pollution that causes $10 per unit in damages to nearby residents. In an unregulated market, the factory produces 1,000 units. Which of the following government interventions would result in the socially optimal quantity?

A lighthouse provides light that helps all ships navigate safely, regardless of whether the ship owners pay for the service. This describes which economic concept and why does it lead to market failure?