Question

If one person consumes a public good:

Question 2 options:

a)	others cannot be excluded from enjoying it.

b)	he or she must pay for it.

c)	others are excluded from enjoying it.

d)	the amount of the good available to others is diminished.

If demand for a product rises, what happens to consumer surplus, assuming supply holds steady and the market sells at equilibrium prices?

Question 3 options:

a)	Consumer surplus will be smaller after the increase in demand.

b)	Consumer surplus will remain unchanged after the increase in demand.

c)	There is no way to predict whether consumer surplus will change.

d)	Consumer surplus will be larger after the increase in demand.

An effective price ceiling is imposed in a market. This leads to the development of an illegal black market for the product. How would the price in the black market compare to the price of the product in the legal market, which has an effective price ceiling?

Question 5 options:

a)	The black market price will be the same but the quantity sold will be higher.

b)	The black market price will be lower.

c)	The black market price will be the same but the quantity sold will be lower.

d)	The black market price will be higher.

When a consumer joins a network, the external cost generated shifts demand leftward.

Question 6 options:

a)

True

b)

False

Answer 1

2> others cannot be excluded from enjoying it.

Reason

Public goods are non-excludable.

3> There is no way to predict whether consumer surplus will change.

Reason

As there will be a rise in price and quantity, we can not surely tell what is going to happen.

5> The black market price is lower

Reason

In the black market, producers will sell to gain more profit from low-end customers.

6> False

If a consumer joins, the demand will always increase even in the presence of externality.