Question

1.) as markets become increasingly more competitive, which of the following are less likely to remain close to achieving?

a.) significant producer surplus

b.) equity

c.) efficiency

2.)when the government intervenes to address market failure in the form of external benefits (positive externalities) it generally imposes taxes in order to internalize those benefits and thus reduces the quantity of those goods produced.

a.) true

b.) false

d.) maximization of consumer surplus

3.) When external costs are present in the production of a good or service such as electric power, the market by itself without government intervention will tend to price its service too high and produce less than the optimal amount.

a.) true

b) false

Answer 1

1. Option A

Explanation: With an increase in competition, much of producer surplus gets transferred to consumer surplus.

2. False

Explanation: In the case of external benefits, the government imposes subsidies to increase production of the good.

3. False

Explanation: In the case of negative externality, the equilibrium price is lower than the socially optimal price.