EBF 200Introduction to Energy and Environmental EconomicsThe Pennsylvania State University Spring 2019Practice problems for the FinalMultiple choice questions1.Market failure is said to occur whenever:a.Private markets do not allocate resources in the most economically desirable way;b.Consumer surplus is minimized;c.Some consumers who want a good do not obtain it because the price is higher than they are willing to pay;d.Government intervenes in the functioning of private markets.2.Which of the following conditions does notneed to occur for a market to achieve allocative efficiency? 3.A positive externality occurs when: 4.A negative externality occurs when:5.Refer to the following diagramin which Sis the market supply curveand S1is a supply curve comprising all costs of production, includingexternal costs. Assume that the number of people affected by these1
external costs is large. Without government interference, this marketwill reach: a.An optimal allocation of society’s resources;b.An underallocation of resources to this product;c.An overallocation of resources to this product;d.A higher price than is consistent with an optimal allocation ofresources.
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