#1
What is an example of a positive externality?
Education benefits from an educated population
ExplanationSociety gains from educated populace without direct cost.
#2
Which of the following is an example of a private good?
A hamburger from a fast-food restaurant
ExplanationFast-food hamburgers exemplify private goods.
#3
Which of the following is an example of a common resource?
Fish in the open ocean
ExplanationOpen ocean fish exemplify common resources.
#4
Which of the following is an example of a non-excludable good?
A public library
ExplanationPublic libraries exemplify non-excludable goods.
#5
What is a public good?
A good that is non-rivalrous and non-excludable
ExplanationNon-rivalrous and non-excludable nature distinguishes public goods.
#6
Which type of market failure occurs when there is an overproduction of negative externalities?
Tragedy of the Commons
ExplanationOverproduction of negative externalities leads to resource depletion.
#7
What is the tragedy of the commons?
A situation where a common resource is overused and depleted
ExplanationOveruse and depletion of common resources constitute the tragedy of the commons.
#8
What is the difference between a normal good and an inferior good?
Normal goods have a positive income elasticity of demand, while inferior goods have a negative elasticity
ExplanationPositive income elasticity defines normal goods, while negative elasticity defines inferior goods.
#9
What is the free rider problem in the context of public goods?
A situation where individuals consume a good without paying for it, leading to underproduction
ExplanationUnderproduction due to non-payment in public goods leads to the free rider problem.
#10
What is the main characteristic of a merit good?
It is underproduced by the market
ExplanationMarket underproduction characterizes merit goods.
#11
In the context of types of goods, what is a common resource?
A good that is rivalrous but not excludable
ExplanationRivalrous but non-excludable goods are common resources.
#12
What is a private good?
A good that is rivalrous and excludable
ExplanationExcludable and rivalrous goods are classified as private goods.
#13
In the context of market failures, what is moral hazard?
The risk that individuals or firms may engage in risky behavior because they do not bear the full costs of that behavior
ExplanationRisk-taking behavior due to limited cost exposure defines moral hazard.
#14
What is a market externality?
A side effect of an economic activity that affects other parties not directly involved in the activity
ExplanationExternal effects impacting parties not engaged in an economic activity are market externalities.