Market Failures and Externalities Quiz & Flashcards

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Questions and Answers

When a good belongs to ___, it tends to _. That is the problem ___ exist to solve.

no one in particular, deliver less value, property rights

What is the definition of an externality?

a cost or benefit of market activity to an outside party

What is a main problem with determining the social benefits of a public good like a community fireworks show?

There is no definite way to find out how much people value fireworks

The market for public goods such as ___ are often subject to _. Private markets tend to _ these goods and services because of the ___ problem.

city parks, market failure, undersupply, free-rider Signup and view all the answers

In which of the following scenarios would property rights lead individuals to fix the problem themselves?

Sports fans celebrate a victory by spraying foam on cars in the parking lot Signup and view all the answers

All externalities are market failures, but not all market failures are externalities.

True Signup and view all the answers

Should the politician support or reject the following proposals based on cost-benefit analysis?

Installing streetlights in a community where there has been a lot of crime - Support Signup and view all the answers

Which of the following would need to be true for Internet access to qualify as a club good?

Connection speed does not depend on the number of current users Signup and view all the answers

Cap and trade policy makes the right to pollute a tradable good.

True Signup and view all the answers

What are the characteristics of overuse or neglect in activities involving common property?

Hundreds of people set off fireworks on the beach, leaving trash - Both overuse and neglect Signup and view all the answers

What factors contribute to the situation of enforcing property rights encouraging maintenance of a car?

Incentive to trade with others - Contributing Factor Signup and view all the answers

Fill in the blanks to complete the statement about how people treat property. When a good belongs to ___, it tends to _ . That is the problem ___ exist to solve.

Signup and view all the answers

Fill in the blanks to complete the statement about how people treat property. When a good belongs to ___, it tends to _. That is the problem ___ exist to solve.

no one in particular, deliver less value, property rights Signup and view all the answers

What is the definition of an externality?

a cost or benefit of market activity to an outside party Signup and view all the answers

What is a main problem with determining the social benefits of a public good like a community fireworks show?

There is no definite way to find out how much people value fireworks Signup and view all the answers

Fill in the blanks to complete the description of public goods. The market for public goods such as ___ are often subject to _. Private markets tend to _ these goods and services because of the ___ problem.

city parks, market failure, undersupply, free-rider Signup and view all the answers

In which of the following scenarios would property rights lead individuals to fix the problem themselves and for which scenarios would they likely neglect the problem?

Sports fans celebrate a victory by spraying foam on cars in the parking lot Signup and view all the answers

All externalities are market failures, but not all market failures are externalities.

True Signup and view all the answers

Should the politician support or reject the following public good proposals?

Repairing a broken dam that is a major source of hydroelectric power for a large city Signup and view all the answers

Match each type of good to the corresponding definition.

Private = Paid for and used by owners only Excludable = More for one consumer means less for others Rival = Consumers must pay for Public = Many can use even if few or none pay for it Signup and view all the answers

Why does a campground at a national park not necessarily count as a public good?

The park may charge a fee for overnight camping Signup and view all the answers

A negative externality is the same thing as an external cost.

True Signup and view all the answers

Under a system of common property, the _ leads to _ and overuse.

the incentive structure, neglect Signup and view all the answers

Identify the beneficial effects of copyright law in terms of addressing the free-rider problem.

It allows artists to legally prevent others from using their work without permission Signup and view all the answers

Fill in the blanks to complete the passage about common-resource goods. Common-resource goods are _ and also non-_

rival, excludable Signup and view all the answers

What are ways the government can prompt a producer to internalize pollution costs that were previously external?

pollution taxes, mandated coverage of cleanup costs, pollution abatement regulations Signup and view all the answers

Which of the following is an example of the tragedy of the commons?

The state of a public restroom on campus at the end of the day Signup and view all the answers

Study Notes

Market Inefficiencies: Externalities & Public Goods

When a good belongs to no one in particular, it tends to deliver less value; property rights solve this problem, allowing goods assigned to a specific person to be handled more efficiently.
Externality defined as a cost or benefit of a market activity affecting outside parties.
Determining social benefits of public goods, like community fireworks shows, is challenging due to the absence of a method to gauge public valuation.
Public goods like city parks face market failure due to undersupply; private markets struggle to provide these services because of the free-rider problem, leading to government intervention funded by tax dollars.
Well-defined property rights increase maintenance; individuals are motivated to solve problems tied to their property but often neglect public spaces, such as littering.
All externalities are considered market failures; however, not all market failures stem from externalities.
Cost-benefit analysis informs politicians on whether to support public good proposals based on needs, such as community safety or infrastructure, while avoiding unnecessary expenses.
Distinction between goods:
- Private Goods: excludable and rival.
- Club Goods: excludable but non-rival.
- Common-resource Goods: rival but not excludable.
- Public Goods: non-rival and non-excludable.
Strategies to minimize the free-rider problem in group projects include requiring individual contributions rather than equal grading for all.
Internet access qualifies as a club good if connection speed remains unaffected by user volume.
Cap and trade policy transforms pollution rights into tradable assets, promoting reductions in environmental impact.
Activities involving common property can lead to neglect or overuse; e.g., overuse evident in damaged public parks or neglected flowers.
Enforceable property rights motivate individuals to maintain and trade assets while reducing neglect.
Economic classifications:
- Excludable: competitive allocation.
- Private: ownership restricted.
- Rival: consumption prevents others from benefiting.
- Public: available for all regardless of payment.
Public goods may be underfunded as community members express thanks but often fall short on financial support.
The tragedy of the commons refers to collective neglect leading to resource depletion.
Copyright law mitigates free-rider problems by allowing artists to control use of their work, transforming public into excludable goods.
Government interventions such as subsidies can enhance vaccination rates by lowering costs for consumers.
Externalities can influence regulations, prompting adjustments in industries, illustrating the sequence: externality effects lead to regulations, which cause adaptations by producers and ultimately benefit the environment.
Strategic assessment of businesses like the chocolate factory indicates positive externalities that benefit local economies without overproduction concerns.
Major problems with cap and trade include high-cost producers circumventing reform.
National defense exemplifies a pure public good: it's impractical to defend only those who pay for it.
Reducing common resource overuse can occur through regulatory measures or transitioning to club goods, potentially alleviating the tragedy of the commons.
Private property rights foster incentives for maintenance, conservation, protection, and trading, shaping owner behavior and resource management.
Free-rider problems primarily arise with public goods, exemplified by the poor condition of communal facilities like restrooms.

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Test your knowledge on market inefficiencies, focusing on externalities and public goods. Use these flashcards to reinforce your understanding and improve your grasp of how property rights affect efficiency and the definition of externalities.

Inquizitive 7: Market Inefficiencies

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Questions and Answers

When a good belongs to ___, it tends to _. That is the problem ___ exist to solve.

What is the definition of an externality?

What is a main problem with determining the social benefits of a public good like a community fireworks show?

The market for public goods such as ___ are often subject to _. Private markets tend to _ these goods and services because of the ___ problem.

In which of the following scenarios would property rights lead individuals to fix the problem themselves?

All externalities are market failures, but not all market failures are externalities.

Should the politician support or reject the following proposals based on cost-benefit analysis?

Which of the following would need to be true for Internet access to qualify as a club good?

Cap and trade policy makes the right to pollute a tradable good.

What are the characteristics of overuse or neglect in activities involving common property?

What factors contribute to the situation of enforcing property rights encouraging maintenance of a car?

Fill in the blanks to complete the statement about how people treat property. When a good belongs to ___, it tends to _ . That is the problem ___ exist to solve.

Fill in the blanks to complete the statement about how people treat property. When a good belongs to ___, it tends to _. That is the problem ___ exist to solve.

What is the definition of an externality?

What is a main problem with determining the social benefits of a public good like a community fireworks show?

Fill in the blanks to complete the description of public goods. The market for public goods such as ___ are often subject to _. Private markets tend to _ these goods and services because of the ___ problem.

In which of the following scenarios would property rights lead individuals to fix the problem themselves and for which scenarios would they likely neglect the problem?

All externalities are market failures, but not all market failures are externalities.

Should the politician support or reject the following public good proposals?

Match each type of good to the corresponding definition.

Why does a campground at a national park not necessarily count as a public good?

A negative externality is the same thing as an external cost.

Under a system of common property, the _ leads to _ and overuse.

Identify the beneficial effects of copyright law in terms of addressing the free-rider problem.

Fill in the blanks to complete the passage about common-resource goods. Common-resource goods are _ and also non-_

What are ways the government can prompt a producer to internalize pollution costs that were previously external?

Which of the following is an example of the tragedy of the commons?

Study Notes

Market Inefficiencies: Externalities & Public Goods

Studying That Suits You

Description

More Like This

Microeconomics Chapters 10 and 11: Externalities

Market Failures Overview

Fallas de Mercado y Bienes Públicos

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Inquizitive 7: Market Inefficiencies

Choose a study mode

Podcast

Questions and Answers

When a good belongs to _____, it tends to _____. That is the problem _____ exist to solve.

What is the definition of an externality?

What is a main problem with determining the social benefits of a public good like a community fireworks show?

The market for public goods such as _____ are often subject to _____. Private markets tend to _____ these goods and services because of the _____ problem.

In which of the following scenarios would property rights lead individuals to fix the problem themselves?

All externalities are market failures, but not all market failures are externalities.

Should the politician support or reject the following proposals based on cost-benefit analysis?

Which of the following would need to be true for Internet access to qualify as a club good?

Cap and trade policy makes the right to pollute a tradable good.

What are the characteristics of overuse or neglect in activities involving common property?

What factors contribute to the situation of enforcing property rights encouraging maintenance of a car?

Fill in the blanks to complete the statement about how people treat property. When a good belongs to _____, it tends to _____ . That is the problem _____ exist to solve.

Fill in the blanks to complete the statement about how people treat property. When a good belongs to _____, it tends to _____. That is the problem _____ exist to solve.

What is the definition of an externality?

What is a main problem with determining the social benefits of a public good like a community fireworks show?

Fill in the blanks to complete the description of public goods. The market for public goods such as _____ are often subject to _____. Private markets tend to _____ these goods and services because of the _____ problem.

In which of the following scenarios would property rights lead individuals to fix the problem themselves and for which scenarios would they likely neglect the problem?

All externalities are market failures, but not all market failures are externalities.

Should the politician support or reject the following public good proposals?

Match each type of good to the corresponding definition.

Why does a campground at a national park not necessarily count as a public good?

A negative externality is the same thing as an external cost.

Under a system of common property, the _____ leads to _____ and overuse.

Identify the beneficial effects of copyright law in terms of addressing the free-rider problem.

Fill in the blanks to complete the passage about common-resource goods. Common-resource goods are _____ and also non-_____

What are ways the government can prompt a producer to internalize pollution costs that were previously external?

Which of the following is an example of the tragedy of the commons?

Study Notes

Market Inefficiencies: Externalities & Public Goods

Studying That Suits You

Description

More Like This

Microeconomics Chapters 10 and 11: Externalities

Market Failures Overview

Fallas de Mercado y Bienes Públicos

When a good belongs to ___, it tends to _. That is the problem ___ exist to solve.

The market for public goods such as ___ are often subject to _. Private markets tend to _ these goods and services because of the ___ problem.

Fill in the blanks to complete the statement about how people treat property. When a good belongs to ___, it tends to _ . That is the problem ___ exist to solve.

Fill in the blanks to complete the statement about how people treat property. When a good belongs to ___, it tends to _. That is the problem ___ exist to solve.

Fill in the blanks to complete the description of public goods. The market for public goods such as ___ are often subject to _. Private markets tend to _ these goods and services because of the ___ problem.

Under a system of common property, the _ leads to _ and overuse.

Fill in the blanks to complete the passage about common-resource goods. Common-resource goods are _ and also non-_