22) The free market would end up producing too much of a good in which of the fo
ID: 2440175 • Letter: 2
Question
22)
The free market would end up producing too much of a good in which of the following cases?
(2pts)
The good is produced by a monopoly.
None of the above.
All the above.
The good is a public good.
The production of the good involves a positive externality.
23)
When the production of a good involves a negative externality, which of the following will be true?
(2pts)
marginal private benefit exceeds marginal social benefit
marginal private cost exceeds marginal social cost
marginal social cost exceeds marginal private cost
marginal social benefit exceeds marginal private benefit
24)
If a person who generates a negative externality incorporates into his or her private cost-benefit calculations the effect that this externality will have on third parties, the externality is said to have been
(2pts)
mitigated
internalized
accomodated
substituted
compounded.
25)
The Coase Theorem is significant because it
(2pts)
shows that under certain conditions externalities can be corrected in the market without the need for government action.
demonstrates that asymmetric information leads to serious market failures.
demonstrates that there are no transactions costs involved with correcting externalities.
shows that it is crucially important how property rights are assigned.
clearly defines the dividing line between public and private goods.
Explanation / Answer
22)
Output is maximized in perfectly competitive market. Monopoly market does not maximize output.
Hence. Right answer is : None of above.
23)
In case of negative externalities, Marginal social cost exceeds the marginal private cost.
Right answer is : marginal social cost exceeds marginal private cost
24)
Right answer is : Internalized
When external effect are taken in production decisions, it is called internalization.
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