When we say that market prices allocate goods to the highest-valued users, we me

ID: 1206775 • Letter: W

Question

When we say that market prices allocate goods to the highest-valued users, we mean that

a. only consumers with higher incomes will get any of the good, while lower income consumers get none of the good.

b. only consumers who value the good more than the market price of the good will choose to buy the good.

c. government allocation of the good is warranted because government can make sure that the good gets consumed by deserving individuals.

d. there is no shortage.

48 Private provision of public goods fails to achieve economic efficiency because

a. the free rider problem causes overproduction of the good.

b. the free rider problem prevents collection of sufficient revenue.

c. the price of the privately supplied public good must exceed zero in order to be allocatively efficient.

d. both a and c

e. both b and c

49 Social economic efficiency means that the market is achieving

productive efficiency.

allocative efficiency.

maximum possible consumer surplus.

both a and b

all of the above

50 ___________ is/are example(s) of market failure that could justify government intervention in the market.

Imperfect information

Public goods

A perfectly competitive bagel market

A dominant firm that undertakes pricing strategies aimed at maintaining high entry barriers

only a, b, and d

b. only consumers who value the good more than the market price of the good will choose to buy the good.

48. c. the price of the privately supplied public good must exceed zero in order to be allocatively efficient.

49. both a and b

50. only a, b, and d

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