PRINCIPLES OF MICROECONOMICS
EXAM 2 QUESTIONS AND ANSWERS
(GRADED A)
/. Which of the following is an example of a nonexcludable product?
a. a public library
b.college education
c.public transportation
d.internet service for your home computer - Answer-✅a. a public library
/.All of the following are examples of public goods except...
a.clean water systems
b.crime prevention
c.stock of knowledge in the public domain
d.broadcast television with commercials - Answer-✅a. clean water systems
/.The basic cause of deadweight losses from the existence of common resources and
externalities is...
a.the use of a market system to deal with scarcity
b.the absence of government intervention
c.the self interested rationality of human beings
d.a lack of clearly defined and enforceable property rights - Answer-✅d. a lack of clearly
defined and enforceable property rights
/.Which of the following is an example of a common resource?
a. the stock of knowledge in the public domain
b. the Sumatran tiger population in the world
c.taxicab services
d.rabbit fur - Answer-✅b. the Sumatran tiger population in the world
/.Which is the following is an example of a quasi-public good?
a. crime prevention
b.stock of knowledge in the public domain
c.organic apples
d.cable television - Answer-✅d.cable television
/.If policymakers use a pollution tax to control pollution, the tax per unit of pollution
should be set...
a.equal to the marginal external cost at the economically efficient level of pollution
, b.at a level low enough so that producers can pass along a portion of the additional cost
onto consumers without significantly reducing demand for the product
c.equal to the amount of the deadweight loss created in the absence of a pollution tax
d.equal to the marginal private cost of production at the economically efficient level of
pollution - Answer-✅a. equal to the marginal external cost at the economically efficient
level of pollution
/.Steven Cheung examined the relationship between beekeepers and apple growers.
Cheung noted that: "Pollination contracts usually include stipulations regarding the
number and strength of...[bee] colonies, the rental fee per hive, the time of delivery...the
protection of bees from pesticides, and the strategic placing of hives." Cheung's
suggests that the relationship between beekeepers and apple growers is an example
of...
a.the Coase Theorem
b.how excessive legal costs can prevent economic efficiency from being achieved
c.government intervention improving economic efficiency
d.negative externalities - Answer-✅a.the Coase Theorem
/.Consider the following characteristics:
a.low transaction costs
b.small levels of pollution
c.high levels of pollution
d.clear assignment of property rights
Which of the above are assumptions behind the Coase Theorem?
a. a only
b.a,b, and d
c.a,c, and d
d.a and d - Answer-✅d. a and d
/.Assume that emissions from electric utilities contribute to pollution in the form of acid
rain. Which of the following describes how this affects the market for electricity?
a.the equilibrium in the market is not efficient;the marginal benefit from electricity is
greater than the marginal social cost
b.a deadweight loss occurs;at equilibrium the additional social cost of production is
greater than the additional benefit to consumers
c. the equilibrium in the market is not efficient ; because of the cost of the acid rain,
economic efficiency would be greater if more electricity were produced
d.the equilibrium in the market is not efficient; consumer surplus is equal to producer
surplus - Answer-✅b. a deadweight loss occurs; at equilibrium the additional social cost
of production is greater than the additional benefit to consumers
/.Which of the following would result in a positive externality?
a.medical research results in a cure for malaria
b.a local government establishes a price ceiling on rental apartments
c.McDonald's adds new fat-free items to its menu
EXAM 2 QUESTIONS AND ANSWERS
(GRADED A)
/. Which of the following is an example of a nonexcludable product?
a. a public library
b.college education
c.public transportation
d.internet service for your home computer - Answer-✅a. a public library
/.All of the following are examples of public goods except...
a.clean water systems
b.crime prevention
c.stock of knowledge in the public domain
d.broadcast television with commercials - Answer-✅a. clean water systems
/.The basic cause of deadweight losses from the existence of common resources and
externalities is...
a.the use of a market system to deal with scarcity
b.the absence of government intervention
c.the self interested rationality of human beings
d.a lack of clearly defined and enforceable property rights - Answer-✅d. a lack of clearly
defined and enforceable property rights
/.Which of the following is an example of a common resource?
a. the stock of knowledge in the public domain
b. the Sumatran tiger population in the world
c.taxicab services
d.rabbit fur - Answer-✅b. the Sumatran tiger population in the world
/.Which is the following is an example of a quasi-public good?
a. crime prevention
b.stock of knowledge in the public domain
c.organic apples
d.cable television - Answer-✅d.cable television
/.If policymakers use a pollution tax to control pollution, the tax per unit of pollution
should be set...
a.equal to the marginal external cost at the economically efficient level of pollution
, b.at a level low enough so that producers can pass along a portion of the additional cost
onto consumers without significantly reducing demand for the product
c.equal to the amount of the deadweight loss created in the absence of a pollution tax
d.equal to the marginal private cost of production at the economically efficient level of
pollution - Answer-✅a. equal to the marginal external cost at the economically efficient
level of pollution
/.Steven Cheung examined the relationship between beekeepers and apple growers.
Cheung noted that: "Pollination contracts usually include stipulations regarding the
number and strength of...[bee] colonies, the rental fee per hive, the time of delivery...the
protection of bees from pesticides, and the strategic placing of hives." Cheung's
suggests that the relationship between beekeepers and apple growers is an example
of...
a.the Coase Theorem
b.how excessive legal costs can prevent economic efficiency from being achieved
c.government intervention improving economic efficiency
d.negative externalities - Answer-✅a.the Coase Theorem
/.Consider the following characteristics:
a.low transaction costs
b.small levels of pollution
c.high levels of pollution
d.clear assignment of property rights
Which of the above are assumptions behind the Coase Theorem?
a. a only
b.a,b, and d
c.a,c, and d
d.a and d - Answer-✅d. a and d
/.Assume that emissions from electric utilities contribute to pollution in the form of acid
rain. Which of the following describes how this affects the market for electricity?
a.the equilibrium in the market is not efficient;the marginal benefit from electricity is
greater than the marginal social cost
b.a deadweight loss occurs;at equilibrium the additional social cost of production is
greater than the additional benefit to consumers
c. the equilibrium in the market is not efficient ; because of the cost of the acid rain,
economic efficiency would be greater if more electricity were produced
d.the equilibrium in the market is not efficient; consumer surplus is equal to producer
surplus - Answer-✅b. a deadweight loss occurs; at equilibrium the additional social cost
of production is greater than the additional benefit to consumers
/.Which of the following would result in a positive externality?
a.medical research results in a cure for malaria
b.a local government establishes a price ceiling on rental apartments
c.McDonald's adds new fat-free items to its menu
