When a good causes positive external benefits to accrue to third parties, an unfettered market will
A) under-allocate resources to the good causing the benefit.
B) over-allocate resources to the good causing the benefit.
C) cause the equilibrium quantity, established before the benefit is taken into account, to be produced more efficiently.
D) eliminate such goods.
Answer: A
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Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct?
A) Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. B) Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets. C) Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. D) Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets.
The "before and after" specification, binary variable specification, and "entity-demeaned" specification produce identical OLS estimates
A) as long as there are observations for more than two time periods. B) if you use the heteroskedasticity-robust option in your regression program. C) for the case of more than 100 observations. D) as long as T = 2 and the intercept is excluded from the "before and after" specification.
If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are less than the external costs,
a. Taxing it could bring us closer to the efficient solution b. Subsidizing it could bring us closer to the efficient solution c. Neither a tax or a subsidy could bring us closer to the efficient solution d. None of the above is true.
Which of the following is not an example of a Pareto improvement?
a. You buy a dozen oranges at a produce stand. b. Two children trade baseball cards. c. Your sister buys a new car. d. Two adults trade cars. e. A man is robbed at gunpoint.