Market Goods and Free-Rider Problem Classification Quiz

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What is the term used to represent the price-quantity pair at which both buyers and sellers are satisfied?

P*Q

P&Q

Q&P

Q*P* (correct)

In a perfectly competitive market, what happens if the price-quantity pair is not at equilibrium (QP)?

Both buyers and sellers are less satisfied (correct)

Buyers are always satisfied

Both buyers and sellers are equally satisfied

Sellers are always satisfied

What does the equilibrium of supply and demand in a market economy maximize?

Transaction costs

Government intervention

Consumer surplus (correct)

Producer surplus

Combining supply and demand curves allows us to describe what in an economy?

Equilibrium price and quantity Signup and view all the answers

In a competitive market, what happens if the price-quantity pair is not at the equilibrium point?

Producers experience losses Signup and view all the answers

What determines the elasticity of a commodity’s demand function?

Consumer tastes and substitutability of the commodity Signup and view all the answers

How is the short run defined in terms of price adjustments?

A length of adjustments to the new price situation Signup and view all the answers

When is demand considered to be elastic?

When a 1% change in price leads to more than a 1% change in demand Signup and view all the answers

What characterizes a perfectly inelastic demand curve?

A vertical demand curve Signup and view all the answers

How do long-run elasticities typically compare to short-run elasticities?

Long-run elasticities are smaller Signup and view all the answers

What defines unitary elastic demand?

When a 1% change in price leads to an equal 1% change in demand Signup and view all the answers

What is defined as economic growth?

Continuing increases in per capita national income Signup and view all the answers

Which of the following is considered a potential source of economic growth?

Accumulation of capital through net investment Signup and view all the answers

Why is growth considered important according to the text?

To reduce poverty and close the gap in per capita incomes between countries Signup and view all the answers

What does the theory of convergence suggest should happen?

Poorer countries should grow faster than rich ones Signup and view all the answers

What is the expected result of the 'trickle down' effect within countries?

'Rising tide' lifting all boats Signup and view all the answers

Why do people tend to be happier with higher levels of income according to the text?

It is a universally established fact Signup and view all the answers

What is the main characteristic of market goods?

Excludable and rival Signup and view all the answers

How can the free-rider problem be defined?

Someone who consumes a resource without paying for it Signup and view all the answers

What is an example of a negative externality mentioned in the text?

Impacts of BP spill Signup and view all the answers

How can the problem of externalities be addressed in economics?

By promoting Coasian bargaining or Pigouvian taxes Signup and view all the answers

What was the main issue with the temporary switch to the Flint River mentioned in the text?

The Flint River had a corrosive nature Signup and view all the answers

Why are market goods often best left to the market to allocate?

To allow market forces to determine distribution efficiently Signup and view all the answers

What may happen if badly-designed regulations are in place according to the text?

Government intervention may hinder technological innovation. Signup and view all the answers

How might voter concerns influence government actions based on the text?

Government intervention may or may not be influenced by voter pressures. Signup and view all the answers

Under what circumstances might certain economic agents lobby in favor of intervention?

Certain economic agents may lobby for intervention when it benefits them. Signup and view all the answers

What governmental approach relies on standards and quotas for regulation?

Command and Control approach Signup and view all the answers

What is a characteristic of a wise government intervention according to the text?

Wise intervention can be extremely beneficial when implemented correctly. Signup and view all the answers

How can a less far-sighted government still be prompted to act according to the text?

By responding to voters' pressures. Signup and view all the answers