Economics Study Set 17

Business

Quiz 15 :

The Shortcomings of Free Markets

Quiz 15 :

The Shortcomings of Free Markets

Question Type
search
arrow
Think about the goods and services that your local government provides. Which are "public goods" as economists use the term
Free
Essay
Answer:

Answer:

The important role of a government is to provide public goods and services. The example of public goods and services provided by a government are public transport, road maintenance, security to the people.
Economists consider public transport as a public good because it is difficult to exclude the people from the use of it.
Security provided by a local government is also considered as public good because it benefits to all the people. People cannot be excluded from using the road, thus, it is considered as a public good.

Tags
Choose question tag
close menu
arrow
Suppose that because of a new disease that attacks coffee plants, far more labor and other inputs are required to harvest a pound of coffee than before. How may that change affect the efficient allocation of resources between tea and coffee How would the prices of coffee and tea react in a free market
Free
Essay
Answer:

Answer:

If relatively more inputs are required to produce a pound of coffee, then it would reduce the allocated resources to harvest tea. A change in the production technique of coffee affects the production of tea.
Relatively more resources have to be used for harvesting a pound of coffee. This will hamper the overall production of coffee and tea altogether.
The price of coffee is likely to increase in the market due to a new disease that requires to relatively more resources. The price of tae is likely to remain same considering no changes in the cost of production.

Tags
Choose question tag
close menu
arrow
What is the opportunity cost to society of a 100-mile truck trip Why may the price of the gasoline used by the truck not adequately represent that opportunity cost
Free
Essay
Answer:

Answer:

The opportunity cost to the society of a 100-mile truck trip is equals to value of the availability of goods and services that are transported by 100-miles trip.
The price of gasoline is not sufficient to represent the opportunity cost because the clean environment relinquishes due to 100-miles truck trip.
Truck trips lead to pollute the environment. So, the forgone cost of clean environment is required to consider while measuring the opportunity cost to the society of a 100-mile truck trip.

Tags
Choose question tag
close menu
arrow
Explain why the services of a lighthouse are sometimes used as an example of a public good.
Essay
Answer:
Tags
Choose question tag
close menu
arrow
(More difficult) A firm holds a patent that is estimated to be worth $20 million. The patent is repeatedly challenged in the courts by a large number of (moneyseeking) firms, each hoping to grab away the patent. If anyone is free to challenge the patent so that there is free entry into the litigation process, how much will end up being spent in the legal battles ( Hint: Under perfect competition, should firms expect to earn any economic profit )
Essay
Answer:
Tags
Choose question tag
close menu
arrow
Compare cleaning a dormitory room with cleaning the atmosphere of a city. Which is a public good and which is a private good Why
Essay
Answer:
Tags
Choose question tag
close menu
arrow
Give some other examples of public goods. In each case, explain why additional users do not deplete the good and why it is difficult to exclude people from using it.
Essay
Answer:
Tags
Choose question tag
close menu
arrow
Give some examples of goods whose production causes detrimental externalities and some examples of goods whose production creates beneficial externalities.
Essay
Answer:
Tags
Choose question tag
close menu
arrow
Explain why education is not a very satisfactory example of a public good.
Essay
Answer:
Tags
Choose question tag
close menu
arrow
In recent decades, college tuition costs have risen more rapidly than the general price level, even though the wages of college professors have failed to keep pace with the price level. Can you explain why
Essay
Answer:
Tags
Choose question tag
close menu