Question

In order to increase society's well-being, a process that produces a positive externality might be

taxed to discourage production

subsidized to encourage production

taxed to encourage production

subsidized to discourage production

provided without government intervention

When government regulations force a natural monopoly to produce where price equals average total cost, social welfare is

maximized

less than it would be without regulation

greater than it would be without regulation, but it is not maximized

exactly the same as it would be without regulation

minimized

Which of the following is a positive externality of consumption?

inoculations against a disease reduce the likelihood of transmitting it to others

phosphates from laundry detergents

litter from fast-food containers

ozone depletion from the production of fast-food containers

the greenhouse effect

If a firm can double inputs and, thereby, more than double output over the range of output the market demands, it is a

natural monopoly

Local monopoly

Price discrimination monopoly

Monopsony

Candidate for antitrust prosecution

When consumption of a good creates positive externalities,

the private demand curve shifts rightward

When consumption of a good creates positive externalities,

the private demand curve is below the marginal social benefit curve

the private demand curve is above the marginal social benefit curve

the equilibrium quantity determined by the free private market is too high

Markets for pollution rights

have never been tried in the United States

assign property rights to those who value them least

allow the government to assign property rights

enable those who value them most to pollute

are less efficient than pollution standards

The tendency for the poorest risks to buy health insurance and the tendency of the insured to take more risks with their health are known as

moral hazard and adverse selection, respectively

the winner's curse and adverse selection, respectively

adverse selection and natural selection, respectively

adverse selection and moral hazard, respectively

the winner's curse and moral hazard, respectively

Moral hazard occurs when a person's behavior changes in a way that

is immoral

is inherently dangerous

increases the chances of an unfavorable outcome

increases the likelihood of profit

raises the net welfare of society

If a seller knows more about the good than the buyer does, there exists

perfect information

an externality

a low marginal benefit of information for the buyer

asymmetric information

optimal search

The market demand curve for a public good

is the horizontal sum of all individual demand curves

is the vertical sum of all individual demand curves.

is upward sloping

is horizontal

does not exist

The rail system in Metropolis is a natural monopoly. If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?

Profit will be zero under regulation.

Only normal profit will be earned under regulation.

Accounting profit will be zero under regulation.

Economic loss will occur under regulation.