1) The Coase theorem argues that the assignment of property rights will generate

Question

1)

The Coase theorem argues that the assignment of
property rights will generate an efficient solution to
the problem of
a. any type of market failure that involves high
transaction costs
b. negative externalities as long as bargaining
costs are great
c. positive externalities as long as bargaining
costs are small
d. any type of market failure
e. negative externalities as long as bargaining
costs are small

2)

In the village of Axiok, the grassland is an
open-access resource. To avoid the common-pool
problem, the government can do all of the
following except:
a. Do nothing because this is a privately-owned
resource
b. Charge all the cattle owners a fee for use of the
grassland
c. Restrict the number of cattle each farmer is
allowed to have
d. Impose a tax on the cattle owners
e. Restrict the number of cattle allowed to graze

3)

The Central Park in Manhattan is an example of:
a. A public good
b. A private good
c. A natural monopoly
d. An external good
e. An open-access-good

4)

During a visit in Central Park, Alan values his first
hour of walking at $10 and the second one at $7,
Cooper values his first hour of walking at $6 and
the second one at $1, and Emma values her first
hour of walking at $20 and the second one at $15.
Assuming that Alan, Cooper, and Emma are the
only visitors in Central Park, what is true regarding
the market demand for walks in Central Park?
a. The market demand is horizontal
b. There is not enough information to determine
the market demand
c. Can be determined by horizontally adding up
the individual demands
d. Can be determined by vertically adding up the
individual demand
e. There isn't a demand for walks in Central Park

5)

6)

In Exhibit 12-2, which of the following is true at a wage rate of $20? The supply curve is horizontal. No labor is supplied. The income effect dominates the substitution effect. The income effect equals the substitution effect. The substitution effect dominates the income effect. In Exhibit 11-1, economic rent at equilibrium is represented by area a a + b c b + c b

Explanation / Answer

1. e. negative externalities as long as bargaining
costs are small

2. a. Do nothing because this is a privately-owned
resource

3. a. A public good

4. d. Can be determined by vertically adding up the
individual demand

5. c. Income effect dominates the substitution effect.

6. e. b

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