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CHAPTER 5 When a nuclear-powered electrical plant is permitted to dump radioactive waste at no cost into a recreation- al waterway lowering the value boaters receive from the waterway, the Answer a. firm's cost of producing electricity will be higher than the community's true opportunity cost. b. community generally receives an external benefit from the production of electricity. c. firm will tend to produce too little electricity from the viewpoint of economic efficiency. d. firm's cost of producing electricity will be lower than the community's true opportunity cost. NOT B Does economic efficiency indicate that all pollution should be eliminated? Answer a. No, pollution does not harm most people, and therefore, we should not worry about it. b. Partially, pollution caused by business firms should be eliminated, but people should still be allowed to pollute if they want. c. Yes, pollution is bad; it harms both people and the environment, and therefore, it should be elimin- ated. d. No, at some point, the benefits of still lower levels of pollution will not be worth the additional cost. D Markets fail to allocate resources efficiently when Answer a. the government refuses to intervene in private markets. b. prices fluctuate. c. people who have property rights abuse their privileges. d. property rights are poorly enforced or not well established. D Which of the following is the most fundamental function of government? Answer a. provision of postal services and garbage collection b. regulating prices and wages c. protection of individuals and their property d. imposing progressive taxes to fund income-transfer programs NOT D A free-rider problem exists when a good that has the following characteristic? Answer a. Elastic demand. b. Inelastic demand. c. Rivalry in consumption.... View Full Document

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