Question

2. The free-rider problem is that

a. everyone has the incentive to let others pay the costs of providing public goods.

b. criminals commit crimes in order to get free room and board in jail.

c. if you don't pay for something, you don't value it.

d. elected officials attach all kinds of special-interest provisions to spending bills.

4. Which of the following would be the best example of a monopolistically competitive firm?

a. sugar farmer.

b. railway transportation.

c. italian restaurants.

d. drug company

e. food service at a national park.

5. The rule followed by all profit-maximizing firms, including monopolistically competitive firms, is to produce

a. at minimum average cost.

b. where marginal cost equals marginal revenue.

c. at minimum average cost, unless the firm is a monopoly.

d. where marginal cost equals marginal revenue, unless the firm is a monopoly.

7. A private good

a. can easily be packaged and sold by the unit in a market.

b. is one for which the benefit of a given quantity can be enjoyed by additional consumers at zero additional cost.

c. has the same characteristics as a public good.

d. is nonrival in consumption.

8. Market failure

a. occurs, for example, when companies fail to provide enough beef to the market, so prices rise.

b. occurs, for example, when government fails to regulate the market sufficiently such that not enough output is forthcoming.

c. occurs only in capitalist economies.

d. can be caused by externalities associated with the production or consumption of some particular good.

Answer 1

Ans:

2) Option A

everyone has the incentive to let others pay the costs of providing public goods.

Explanation

The free rider problem occurs when people consume goods or services without paying towards it.

4) Option C

italian restaurants

Explanation

Monopolistic competition is a market structure characteristed by large numbers of buyers and sellers, low entry and exit barriers and similar but differentiated goods. examples of monopolistic competition are restaurants, consumer electronics.

5) Option B

where marginal cost equals marginal revenue

Explanation

Monopolistic competition is a market structure characteristed by large numbers of buyers and sellers, low entry and exit barriers and similar but differentiated goods. The profit maximizing level of output is where marginal cost is equal to marginal revenue.

7) Option A

can easily be packaged and sold by the unit in a market

Explanation

A private good is a good whose consumption by one individual prevents another individual from consuming it. A private good can easily be packaged and sold by the unit in a market.

8) Option C

occurs only in capitalist economies.

Explanation

Market failure occurs when there is an inefficient allocation of resources. Market failure is an inherent feature of any capitalist economy.