Question

Question 26

1. 26) Free markets fail when:

   		a. there are externalities present in the market
   		b. they fail to provide public goods and services in the amounts society wants
   		c. they fail to provide private goods and services in the amounts that society wants
   		d. all of the above

3 points

Question 27

1. 27) When negative externalities are present in a market:

   		a. too much of the good or service is produced
   		b. an external cost is imposed on others (not the producer)
   		c. the government can make the market more efficient by limiting the negative externality or external cost imposed on others
   		d. all of the above

3 points

Question 28

1. 28) When a positive externality exists in a market:

   		a. too little of the good or service is produced and consumed
   		b. an external benefit is imposed on others (those who do not consume the good or service)
   		c, the government can make the market more efficient by subsidizing the production of the good or service with the positive externality or external benefit
   		d; all of the above

3 points

Question 29

1. 29) Public goods and services will not be provided in sufficient quantities because:

   		a. there is insufficient profit for private firms to provide them due to the free rider problem
   		b. government regulations make it too costly for private firms to produce them
   		c. government taxes would make it too costly for private firms to provide them
   		d. the production of private goods and services cannot be sent offshore to foreign countries

3 points

Question 30

1. 30) Public goods and services:

   		a. are always provided by the government
   		b if not provided by private firms, are funded by the government with government tax revenue (or government borrowing)
   		c. are always non-exludable
   		d. can be non-rival

Answer 1

26. The correct answer is a. There are externalities present in the market.

Externality causes market failure because the price of good at equlibrium does not accurately reflect the true cost and benefit of good.

27. The correct answer is b. An external cost imposed on others.

because negative externality means when production and consumption results to cost a third party.

28. The correct answer is b. An external benefit is impose on others.

Because it occurs when the consumption and production of a good causes a benefit to a third party.

30. The correct answer is C. are always non exludable.

Because one individual cannot be excluded from other individual to use them.