#1
Which of the following is an example of a market failure?
Externalities
ExplanationMarket inefficiencies caused by external costs or benefits not reflected in prices.
#2
Which of the following is an example of a negative externality?
Pollution from a factory affecting nearby residents
ExplanationCosts imposed on third parties not involved in the transaction.
#3
Which economic concept supports the idea that government intervention should be minimal, and markets should operate freely?
Laissez-faire
ExplanationEconomic theory advocating for minimal government interference in markets.
#4
Which economic concept supports the idea that market participants act in their self-interest and unintentionally contribute to the overall economic well-being?
Invisible hand
ExplanationConcept introduced by Adam Smith referring to the self-regulating nature of markets.
#5
Which economic concept supports the idea that market participants make decisions based on rational self-interest and complete information?
Rational choice theory
ExplanationTheory positing that individuals make choices that maximize their utility given available information and preferences.
#6
In the context of government intervention, what does 'Pigovian tax' refer to?
Tax to correct negative externalities
ExplanationTax aimed at correcting market inefficiencies by internalizing external costs.
#7
Which of the following is an example of a public good?
Street lighting
ExplanationNon-excludable and non-rivalrous goods provided by the government.
#8
What is the Tragedy of the Commons?
Overuse and depletion of shared resources
ExplanationPhenomenon where individuals exploit common resources to the point of depletion.
#9
Which market failure occurs when a single seller or producer dominates the market?
Monopoly
ExplanationSituation where one entity controls the entire market, leading to decreased competition.
#10
In the context of market failures, what is the 'free rider' problem?
A person who enjoys a good or service without paying for it
ExplanationOccurs when individuals benefit from a public good without contributing.
#11
What is the main purpose of antitrust laws?
To prevent unfair business practices and promote competition
ExplanationLaws aimed at ensuring fair competition and preventing monopolistic behaviors.
#12
Which economic concept supports the idea that the government should provide public goods?
Free rider problem
ExplanationDilemma where individuals benefit from public goods without contributing.
#13
What is the purpose of a price floor in government intervention?
To prevent the price from falling below a certain level
ExplanationRegulation setting a minimum price to protect producers.
#14
What is the role of a subsidy in correcting market failures?
To provide financial assistance and encourage production of certain goods
ExplanationGovernment payment to encourage production or consumption of a good.
#15
What does the term 'information asymmetry' refer to in the context of market failures?
Unequal distribution of information between buyers and sellers
ExplanationSituation where one party has more or better information than the other party.