Practice Test 10 - Practice Test 10 Multiple Choice...

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Practice Test 10 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Which of the following is the best statement about markets? a. Markets are usually a good way to organize economic activity. b. Markets are generally inferior to central planning as a way to organize economic activity. c. Markets fail and are therefore not an acceptable way to organize economic activity. d. Markets are a good way to organize economic activity in developed nations, but not in less-developed nations. ____ 2. Market failure can be caused by a. foreign competition. b. externalities. c. low consumer demand. d. scarcity. ____ 3. Externalities cause markets to a. fail to allocate resources efficiently. b. cause price to be different than the equilibrium price. c. benefit producers at the expense of consumers. d. cause markets to operate more equitably. ____ 4. When externalities are present in a market a. the established equilibrium maximizes the total benefit to society as a whole. b. market participants lose some market benefits to bystanders. c. both equity and efficiency are maximized. d. the market fails to allocate resources efficiently. ____ 5. A negative externality a. is an adverse impact on a bystander. b. causes the product in a market to be under-produced. c. is an adverse impact on market participants. d. is present in markets in which the good or service is undesirable for society. ____ 6. When negative externalities are present in a market a. producers will be affected, but not consumers. b. overproduction will occur. c. demand will be too high. d. the market will still maximize total benefits. ____ 7. Which of the following would NOT be considered a negative externality? a. Smelter, Inc. creates steel and pollution in Anytown, U.S.A. b. Your friend buys a new puppy that barks every night. c. You have an adverse reaction to a medication your doctor prescribed for you. d. Your neighbor buys the most powerful stereo money can buy for his patio. ____ 8. If a paper manufacturer does NOT bear the entire cost of the dioxin it emits it will a. emit lower levels of dioxin than is socially efficient. b. emit higher levels of dioxin than is socially efficient. c. emit an acceptable level of dioxin. d. not emit any dioxin in an attempt to avoid paying the entire cost. ____ 9. When the government intervenes in markets with externalities it does so to a. increase production when negative externalities are present.
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b. protect interests of bystanders. c. make certain all benefits are received by market participants. d. better coordinate the action of buyers and sellers. ____ 10. Too few resources are generally devoted to research in new technologies in developing countries because a. new technologies cannot be patented. b.
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This note was uploaded on 03/18/2012 for the course ITEC 3290 taught by Professor Dunn during the Spring '12 term at East Carolina University .

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Practice Test 10 - Practice Test 10 Multiple Choice...

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