Question

Which of the following statements is true?

a	A market failure occurs when the market produces the “wrong” amount of a good or service, or fails to provide any at all.
b	When there is market failure, resources are either over-allocated or under-allocated to the production of the good.
c	Supply-side market failures occur when it is impossible to charge all consumers, or even any consumer of the good, the price for the good. As a result, firms are not willing to produce the good since they cannot cover the cost of production.
d	All of the above.
e	Only a) and b)

Question 2 (1 point)

Which of the following statements is true?

a	A demand-side market failure occurs when a firm does not pay the full cost of producing its output (which includes “extra” costs). That is, the external (“extra”) costs of producing the good are not reflected in the supply of the good.
b	When there aren’t any market failures (that is, when demand fully reflects consumers’ willingness to pay and supply reflects all costs of production), the market equilibrium is efficient.
c	An efficient market produces the amount of output that society desires, and maximizes the benefits to both consumers and producers.
d	All of the above.
e	Only b) and c)

Question 3 (1 point)

Which of the following statements is true?

a	Producer surplus is the difference between what a consumer is willing to pay for a good and what the consumer actually pays. It is the “extra” benefit from paying less than the maximum price one is willing to pay for the good.
b	Consumer surplus is the difference between the actual price a producer receives for a good and the minimum price they would accept for the good. It is the “extra” benefit from receiving a higher price.
c	Private goods are produced in the market by firms, and have two key characteristics: rivalry and excludability.
d	All of the above.
e	Only a) and b)

Answer 1

1) Supply side market failure occurs when the supply curves does not incorporate the full cost of producing the good.

The correct option is, E) Only a) and b)

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2) A demand side market failure occurs when the demand curve does not take into account the full willingness to pay of the consumers.

The correct option is, e) Only b) and c)

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3) The correct option is, c) Private goods are produced in the market by firms, and have two key characteristics: rivalry and excludability.