Question : 31) Refer to Figure 4-17. The deadweight loss due to : 1245100

31) Refer to Figure 4-17. The deadweight loss due to the externality is represented by the area

A) mso.

B) msn.

C) nso.

D) mtn.

32) Refer to Figure 4-17. At the competitive market equilibrium, for the last unit produced,

A) the size of the external cost is Pm – Po.

B) the size of the external benefit is Pm – Po.

C) the size of the external cost is Pn – Po.

D) the size of the external benefit is Pn – Po.

33) Pollution is an example of a

A) public good.

B) positive externality.

C) private cost.

D) negative externality.

34) Which of the following would result in a positive externality?

A) A local government establishes a price ceiling on rental apartments.

B) An electric utility burns coal that causes acid rain.

C) Medical research results in a cure for malaria.

D) McDonald’s adds new fat-free items to its menu.

35) A positive externality results when

A) economists are sure that a good or service provides benefits to consumers.

B) someone pays for a good or service even though she is not directly affected by the production or consumption of it.

C) when people who live in one country benefit from the production of a good or service that occurs in another country.

D) people who are not directly involved in producing or paying for a good or service benefit from it.

36) Which of the following describes how a negative externality affects a competitive market?

A) The externality causes a difference between the private cost of production and the social cost.

B) The externality causes a difference between the private cost of production and the private benefit from consumption.

C) The externality causes consumer surplus to exceed producer surplus.

D) The externality causes a difference between the private cost of production and the equilibrium price.

37) A free market fails when

A) there is government intervention.

B) there is an external effect in either production, consumption, or both.

C) firms that produce goods which create positive externalities go bankrupt.

D) firms that produce goods which create negative externalities earn high profits.

38) Which of the following could be evidence of a market failure?

A) Resources in an economy are not fully utilized.

B) The market price of a product is above the average cost of production.

C) There are only a handful of firms competing against each other in an industry.

D) Market prices do not reflect true production costs.

39) Which of the following describes how a positive externality affects a competitive market?

A) The externality causes a difference between the private benefit from consumption and the social benefit.

B) The externality causes a difference between the private benefit from production and the social cost of production.

C) The externality causes quantity demanded to exceed quantity supplied.

D) The externality causes a difference between the social cost of production and the social cost of consumption.

40) “A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus.” This statement

A) is true only if there are positive externalities in production in the market.

B) is true only if there are no negative externalities in the market.

C) is true only if there are no positive or negative externalities in the market.

D) is true in theory, but economic efficiency cannot be achieved in a real market.