Market

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Correct options are highlighted when revealed.

1.Which of the following is a classic example of a public good?

City bus servicesGovernment-funded healthcareNational securityTrain services

2.Which of the following factors can lead to market failure?

3.When a neighbor burns yard debris and smoke enters your home, what type of externality does this represent?

An externality related to production activitiesA suboptimal or second-best outcomeCosts associated with making a transactionAn externality arising from consumptionNone of the above

4.Why is a competitive equilibrium considered Pareto efficient?

Because producers accept prices without influenceSince both consumers and producers encounter identical pricesDue to the equality of marginal costs and marginal benefitsAs market prices match both marginal costs and marginal benefitsAll of the above reasons combined

5.Within the insurance sector, individuals who pose a greater risk tend to purchase insurance more frequently. What concept does this illustrate?

moral hazardaversion to riskadverse selectionan unwise bet

6.In a Nash equilibrium, how does each player select their strategy?

By presuming other players have acted before themBy choosing a strategy overshadowed by opponentsBy selecting the optimal strategy based on others' choicesBy opting for a strategy that serves as a believable threat

7.In a contestable market, how must existing companies act to prevent new competitors from entering?

operate as if in a perfectly competitive marketcollaborate with each othermake their products distinctuse price discrimination strategies

8.Which of the following is NOT classified as a form of imperfect competition?

Monopolistic competitionOligopolyMonopolyUnfair competition

9.What does tax shifting refer to?

The method used to design a tax systemThe final allocation of who bears the tax burdenThe situation where taxes lead to higher prices but lower wagesWhen households change their actions to evade paying a tax