ECN 104 Lecture Notes - Lecture 14: Product Differentiation, Diminishing Returns, Overgrazing
6 Jun 2018
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Chapter15PublicGoods,Externalities,InformationAsymmetries,
andMarketFailure
Copyright(c)2010McGraw-HillRyersonLimited Page1
CHAPTER 15
Public Goods, Externalities, Information
Asymmetries, and Market Failure
Topic Question numbers
___________________________________________________________________________________________________
15.1 Public goods 1-45
Private goods characteristics 1-3
Public goods characteristics 4-13
Optimal quantity of a public good 14-15
Demand for public goods 16-23
Comparing MB and MC 24-27
Cost-benefit analysis 28-45
15.2 Externalities 46-104
Negative externalities 46-51
Positive externalities 52-59
Individual bargaining: Coase Theorem 60-64
Liability rules and lawsuits 65-67
Government intervention 68-77
A market-based approach to negative externalities 78-92
Society's optimal amount of externality reduction 93-102
Climate change 103-104
15.3 Information failures 105-123
Inadequate information about sellers 105-107
Inadequate information about buyers 108-109
Inadequate seller information about buyers 110-121
Qualification 122-123
15.4 The Economics of health care 124-133
Peculiarities of the health care market 124-129
Third party payments: Insurance 130
Possible solutionsto excess demand 131-133
The last word 134-139
True-false 139-150
___________________________________________________________________________________________________
hzzled
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Chapter15PublicGoods,Externalities,InformationAsymmetries,
andMarketFailure
Copyright(C)2010McGraw-HillRyersonLimited
Page2
1. Which of the following is a characteristic of a private good:
A) free-rider problem
B) external benefits
C) external costs
D) excludability
Ans: D Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Private goods characteristics Type: Application
2. Which of the following is correct?
A) Private goods are subject to rivalry and excludability
B) Private goods are indivisible.
C) Private goods are subject to the free-rider problem.
D) Private goods are produced in efficient or optimal amounts despite substantial
externalities.
Ans: A Level: Moderate Main Topic: 15.1 Public goods Page: 349
Subtopic: Private goods characteristics Type: Application
3. Which of the following is a private good?
A) a ballpoint pen
B) national defence
C) a highway
D) a lighthouse
Ans: C Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Private goods characteristics Type: Application
4. Which is a characteristic of a public good?
A) rivalry among firms
B) excludability
C) external benefits
D) no free-rider problem
Ans: C Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Public goods characteristics Type: Application
hzzled
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Chapter15PublicGoods,Externalities,InformationAsymmetries,
andMarketFailure
Copyright(C)2010McGraw-HillRyersonLimited
Page3
5. Which is a characteristic of a public good:
A) the possibility of excluding payers from non-payers
B) non-rivalry and non-excludability
C) it is possible to withhold it from those who would not pay for it
D) it is provided by the private sector
Ans: B Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Public goods characteristics Type: Definition
6. A public good can be best defined as one which:
A) has no externals associated with its production or consumption.
B) entails rising costs of production.
C) yields widespread benefits which cannot readily be denied the public at large.
D) yields benefits only to the individual who decides to buy it.
Ans: C Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Public goodscharacteristics Type: Definition
7. A public good:
A) is not subject to rivalry and excludability.
B) entails no externalities.
C) is subject to rivalry and excludability.
D) can not be produced by private firms.
Ans: A Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Public goods characteristics Type: Application
8. A public good:
A) generally results in substantial negative externalities.
B) can never be provided by a nongovernmental organization.
C) can't be provided to one person without making it available to others as well.
D) costs essentially nothing to produce and thus is provided by the government at a
zero price.
Ans: C Level: Easy Main Topic: 15.1 Public goods Page: 349
Subtopic: Public goods characteristics Type: Application
hzzled
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Document Summary
15. 3 information failures z l e h z d. Copyright ( c ) 2010 mcgraw-hill ryerson limited. Chapter 15 public goods, externalities, information asymmetries, and market failure: which of the following is a characteristic of a private good: free-rider problem external benefits external costs excludability. Ans: d level: easy main topic: 15. 1 public goods page: 349. Private goods are subject to rivalry and excludability. Private goods are subject to the free-rider problem. Private goods are produced in efficient or optimal amounts despite substantial externalities. h. Ans: a level: moderate main topic: 15. 1 public goods page: 349. Subtopic: private goods characteristics type: application z: which of the following is a private good? a ballpoint pen national defence a highway a lighthouse z l. Subtopic: private goods characteristics type: application e: which is a characteristic of a public good? d rivalry among firms excludability external benefits no free-rider problem. Ans: b level: easy main topic: 15. 1 public goods page: 349.
