Market Failures and Government Involvement
Quiz objective:
Learn about the issue of market failures and their relationship to public policy.
1.
An economic justification for government involvement in a problem is called a(n)
A) externality
B) market failure
C) information failure
D) spillover effect
2.
An example of a pure public good would be
A) national defense
B) public schools
C) federally owned grazing lands
D) all of the above
E) a and b only
3.
The policy of having govenment regulation on industry to install pollution control equipment is a way of dealing with an externality. As a result of this policy
A) the company reduces the price of its product
B) the general public buys less of the product
C) the company recognizes the full cost of producing the product (now it also is paying to reduce the pollution)
D) the government has no legal authority to implement such a policy
E) none of the above
4.
Information failures are more problematic for
A) small, inexpensive goods
B) goods and services purchased that are health related
C) fundamental freedom goods such as newspapers
D) all of the above
E) b and c only
5.
Which of the following explain why govenments get involved in solving certain problems?
A) economic reasons such as market failures
B) political reasons (responding to constituent concerns)
C) moral or ethical reasons
D) all of the above
E) a and b only
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