An Ultimate Microeconomics Knowledge Test!

142 Questions | Total Attempts: 18

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Microeconomics Quizzes & Trivia

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Questions and Answers
  • 1. 
    Because Buyers and Sellers neglect the external effects of their actions when deciding how much to demand or supply, the market equilibrium is not efficient. 
    • A. 

      True

    • B. 

      False

  • 2. 
    In the presence of a negative externality, the market equilibrium quantity of a commodity is less than the socially optimal quantity
    • A. 

      True

    • B. 

      False

  • 3. 
    "Do unto others as you would have them do unto you" tells people to internalize externalities 
    • A. 

      True

    • B. 

      False

  • 4. 
    Corrective Tax reduces economic efficiency by distorting taxpayer behaviour
    • A. 

      True

    • B. 

      False

  • 5. 
    By offering special tax breaks for spending on research and development, Canadian tax laws internalize the technology spillover externality 
    • A. 

      True

    • B. 

      False

  • 6. 
    If studded snow tires cause an estimated $10 damage to the highways per vehicle each year, then the most efficient outcome for society would be to ban the use of studded snow tires
    • A. 

      True

    • B. 

      False

  • 7. 
    Coarse Theorm states negative externalities require government action because the market fails to take into account external social costs
    • A. 

      True

    • B. 

      False

  • 8. 
    Patent protect internalize technology spillovers by giving the inventors property rights over their inventions
    • A. 

      True

    • B. 

      False

  • 9. 
    When correcting for a negative externality, command-and-control policies are preferable because they are more efficient
    • A. 

      True

    • B. 

      False

  • 10. 
    An externality is
    • A. 

      The cost the producer incurs

    • B. 

      The benefit the consumer recieves

    • C. 

      The tariff levied against the external producers

    • D. 

      The uncompensated impact of one persons actions on the well-being of a bystander

  • 11. 
    Pulp & Paper mills produce not only paper but also dioxin, a by-product of the manufacturing process. Therefore, which one of the following can be said accurately about this market?
    • A. 

      Equilibrium price and output are too high to be socially desirable

    • B. 

      Equilibrium price and output are too low to be socially desirable

    • C. 

      Equilibrium price is too low, and output it too high to be socially desirable

    • D. 

      Equilibrium price is too high and output is too low to be socially desirable

  • 12. 
    When a positive externality is present, 
    • A. 

      The private value curve (demand) is below social value curve for a product

    • B. 

      The social cost curve is above the private cost curve (supply) of a product

    • C. 

      The private value curve (demand) is above the social value curve of a product

    • D. 

      The social cost curve is below the supply curve of a product

  • 13. 
    Which of the following is supported by the coase theorm? 
    • A. 

      The market can internalize external costs and benefits, and it can achieve efficiency if private parties can negotiate solutions to the externalities

    • B. 

      Government can improve upon the operation of the market by using environmental controls

    • C. 

      Correcting externalities through the market can work, only if the innocent third parties have established and enforced property rights

  • 14. 
    The purchase of a new car by a resident of downtown Toronto generates
    • A. 

      A tech spillover

    • B. 

      A negative externality

    • C. 

      A positive externality

    • D. 

      An efficient market outcome

  • 15. 
    What externality is a target for correction by a pigovian tax -- ie. gasoline tax
    • A. 

      Construction

    • B. 

      Accidents

    • C. 

      Pollution

    • D. 

      Pedestrian safety

  • 16. 
    Relative to market based pollution control policies, which statement can be made about direct regulation?
    • A. 

      It requires less detailed info to set pollution limits

    • B. 

      It provides more of an incentive to develop better tech to clean up the beyond minimum

    • C. 

      It allows polluters to pollute at no charge up to the limits set by the government

    • D. 

      It makes it easier to fine-tune regulations for different situations

  • 17. 
    Which of the following would be achieved by the most efficient pollution control system?
    • A. 

      Each polluter will clean up to the point where total social benefits are maximized

    • B. 

      Polluters will clean up just to point where that polluters last unit of cleanup has a social value exactly equal to its social costs

    • C. 

      Each polluter will meet exactly the same pollution standards as all other polluters

    • D. 

      Each polluter will clean up to the maximum level that is technically feasible.

  • 18. 
    Heavy trucks on the trans Canada highway cause noise pollution in nearby towns. Which one of the following is an efficient policy to deal with? 
    • A. 

      Rely on the "invisible hand" to take care of the problem

    • B. 

      Provide subsidy to each trucking company, depending on the total amount of noise its trucks can create in the affected neighbourhoods

    • C. 

      Impose a tax on each trucking company, depending on the total amount of noise its trucks create in the affected neighbourhoods

    • D. 

      Subsidize trucking companies that install noise abatement devices

  • 19. 
    What is an important question to address the following question in defining an antipollution policy?
    • A. 

      How do we reduce pollution to the appropriate level?

    • B. 

      How do we eliminate pollution?

    • C. 

      How do we learn to live with pollution, rather than worry about its growth?

    • D. 

      How do we design a policy, not to be used today but instead when it is needed later in the decade?

  • 20. 
    The whaling industry has hunter some species of whales nearly to extinction. Cattle, however, continue to thrive on farms throughout the world. Which one of the following is the major reason for this difference between cattle and whales? 
    • A. 

      Whales are a common resource and cattle are private property

    • B. 

      Whales are more valuable than cattle, and whalers are simply responding to economic incentives

    • C. 

      The technology for harvesting whales has improves more quickly than the cattle

    • D. 

      Whaling is an international industry, but cattle are raised locally

  • 21. 
    The free-rider program problem arises when a person who recieves the benefit of a good can avoid paying for it
    • A. 

      True

    • B. 

      False

  • 22. 
    Downloading music from the internet is not a free-rider program
    • A. 

      True

    • B. 

      False

  • 23. 
    Club Goods are free to their consumers
    • A. 

      True

    • B. 

      False

  • 24. 
    A good or service that is excludable and rival in consumption is known as a private good and is most efficiently provided by the market
    • A. 

      True

    • B. 

      False

  • 25. 
    The main weakness of a national defence as an example of a public good is that defence is actually provided privately in a market economy, through aerospace companies and other defence contractors. 
    • A. 

      True

    • B. 

      False