ECON 310 Chapter 2 Study Quiz
______1. Adam Smith in Wealth of Nations argues that "People acting in their own self-interest will...."
a. promote their own self interest.
b. promote the interest of others (altruism).
c. ignore the costs and benefits imposed on others by their actions.
d. promote the social interest.
______2. The addition to cost associated with the production of an additional unit of a good or service is referred to as
a. marginal user cost.
b. marginal cost.
c. marginal extraction cost.
d. all of the above.
______3. All of the following are categories of market failure except:
a. perfect competition
b. existence of a public good
c. inappropriate government intervention
d. none of the above.
______4. There is evidence of market failure due to imperfect information when:
a. wages rise with an increase in the risk associated with a job.
b. consumption of apples falls with the disclosure that they are coated with pesticide.
c. wages do not rise with an increase in risk associated with a job.
d. the forces of supply and demand equate marginal social benefits and marginal social costs.
______5. Public goods are distinguished by two primary characteristics. These are:
a. market failure; high prices.
b. government intervention; nonrivalry.
c. nonrivalry; nonexcludability.
d. rivalry; excludability.
______6. The key points to Baumol and Oates' definition of an externality are:
a. production and utility functions, real variables and intended effects.
b. production and utility functions, real variables, and unintended effects.
c. consumption, supply, variables, and unintended actions.
d. consumption, supply, real variables and intended actions.
______7. Real (Technological) externalities effect the _______, result in shift of existing production possibilities frontiers and _______ wealth.
a. ability to produce goods and services; net change in.
b. price; transfer of.
c. ability to produce goods and services; transfer of.
d. price; net change in.
______8. An open access externality is generated by
a. insufficient enforcement of property rights.
b. nonrivalry in consumption.
c. inability to enforce property rights.
d. unethical behavior.
______9. If an oil producer is deciding how much oil to sell today and in the future, he should consider:
a. marginal private benefit and marginal private cost.
b. marginal extraction cost and marginal social benefit.
c. marginal extraction cost, marginal user cost and marginal social benefit.
d. the possibility of war in the middle east.
e. both c and d.
______10. Dynamic efficiency requires:
a. a comparison of benefits and costs through time.
b. equating net benefits across all time periods.
c. equating present value of net benefits across all time periods.
d. equating marginal private benefits wit marginal private costs across all time periods.
_____11. Given, MSB = MPB = 30 - q, where q refers to the quantity of the good and MPC = q, with MSC = 2q, the optimal level of output when considering all costs and benefits is:
a. 6.67
b. 10
c. 20
d. 24.5