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# Macroeconomics Study Set 43

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## Quiz 4 : B: Market Failures: Public Goods and Externalities

A demand-side market failure occurs when demand curves do not reflect consumers' full willingness to pay for a good or service.
Free
True False

True

Market for asparagus.At the market price of $2, area A represents: Free Multiple Choice Answer: Answer: C Consumer surplus and the market price are positively related. Free True False Answer: Answer: False A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service. True False Answer: Productive efficiency means that the society is producing the combination of the output most desirable by consumers. True False Answer: Market failures Multiple Choice Answer: Supply-side market failure Multiple Choice Answer: A supply-side market failure occurs when supply curves do not reflect the full cost of producing a good or service. True False Answer: Market for asparagus.At the market price of$2, area A + B represents:
Multiple Choice
Refer to the diagram.The area of consumer surplus would be represented by triangular area:
Multiple Choice
There is a positive relationship between equilibrium price and the amount of producer surplus.
True False
If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.
True False
Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.
True False
Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.
True False
Society's marginal cost of pollution moderation curve slopes upward because of the law of diminishing marginal utility.
True False
Market failure
Multiple Choice