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9 - Market failure exists when)A stores fail to open late...

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Market failure exists when: ( ) A) stores fail to open late enough to permit us to shop on our way home. (X) B) there is an imperfection in the market mechanism that prevents markets from getting society to the optimal mix on the production possibilities curve. ( ) C) energy prices rise dramatically in response to extremely cold weather resulting in a failure of families to budget adequately for their utility bill. ( ) D) restaurants fail to give struggling students a student discount on meals. Feedback: Market failure is an imperfection in the market mechanism that prevents optimal outcomes; the market "fails" to do something. A public good is any good: (X) A) that is paid for by tax dollars. ( ) B) for which it is difficult to exclude use, and for which consumption by one person does not subtract from what is available for others. ( ) C) that is consumed by every member of the general public, but use by one person subtracts from what is available for others. ( ) D) that is typically consumed in public places. Feedback: A public good is a good or service whose consumption by one person does not exclude consumption by others; it is available to everyone . The free-rider phenomenon: ( ) A) causes the underproduction of private goods.
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( ) B) causes the underproduction of public goods. (X) C) causes the overproduction of public goods because everyone enjoys a free-ride. ( ) D) explains the problem of how insects travel from one country to another by hitching a ride on cars, boats, and airplanes. Feedback: A free rider is an individual who reaps direct benefits from someone else?s purchase (consumption) of a public good; it causes the underproduction of public goods. It is clear from both economic theory and practical experience that: ( ) A) national defense is a private good because it often influences our private affairs. ( ) B) national defense is a public good. ( ) C) reducing air pollution is a public good since the entire public benefits, but the regulation of commerce is a private good since only those engaged in commerce benefit.
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