Question

1. An example of a public good is

   		a public utility.
   		a book.
   		an apple.
   		a joke.

2. Refer to Figure 12.4. Assume consumer preference changes toward  X and away from  Y.  Ceteris paribus, the likely change in capital flow in sector Y will cause the industry's short-run ________ curve to shift to the ________.

   		demand; left
   		supply; right
   		supply; left
   		demand; right

3. Air pollution generated by a steel mill is an example of

   		the free-rider problem.
   		a positive production externality.
   		a public good.
   		a negative production externality.

4. If firms in a monopolistically competitive industry are ________, then in the long run new firms producing close substitutes will enter the industry.

   		suffering economic losses
   		producing where MR = MC
   		earning economic profits
   		breaking even

Answer 1

Public goods are those goods which are non rival (a persons consumption reduces the amount available to others) and non exculdable (a person cannot be stopped from using the good)

So a public utility is an example of public good as it is non exculdable and non rival in nature.

A few person can be excluded from a joke even tough it is non rival in nature.

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Figure not provided

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Air pollution caused by an steel mill has a bad effect on the heath of the bystanders so it is a case of negative externality

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If firms in a monopolistically competitive industry are earning economic profit, then in the long run new firms producing close substitutes will enter the industry.

As profits will attract new firms and entry of new firms is free in monopolistic competitive market