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