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AP Micro: Market Failures and Externalities

Authored by Jason Lee

11th - 12th Grade

Used 29+ times

AP Micro: Market Failures and Externalities
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36 questions

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1.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

A market failure is best described as

The idea that market forces of supply and demand always provide the maximum benefit for society
The idea that market forces of supply and demand do not always provide the maximum benefit for society
The concept that a decision made by one party can have negative effects on another party
The concept that a decision made by one party can have positive effects on another party

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A beekeeper who produces honey helps the apple orchard next door because the extra bees help pollinate the apple trees. This an example of

a. Positive Externalities

b. Negative Externalities

c. Vertical merging

d. Collusion

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

An economic side effect of a good/service that generates benefits or costs to someone other than the person deciding how much to produce or consume.

a. Side effects

b. Public Goods

c. Externalities

d. Monopolies

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Goods that are provided by the government (and paid for through taxation) are known as: 

Private goods
Public Goods
Cartels
Commodities 

5.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

An essential characteristic of a public good is that it is non-excludable. This means that

public goods are of equal benefit to all consumers.

there is no opportunity cost in the provision of public goods.

people could consume the good without paying for it.

the government should not levy a tax for providing public goods.

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Negative externalities can be best described as

When the consumption/production of a good or service has a negative impact on a third party

When the consumption/production of a good or service has any impact on a third party

When the consumption/production of a good or service has a positive impact on a third party

When the consumption/production of a good or service depletes the access for a third party

7.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

A government might tax a good that creates negative externalities in order to try to:

Increase price and consumption of the good to provide firms with extra revenue
 Make the information avaliable more asymmetric
Decrease demand for the good and thus increase the consumer surplus
Decrease consumption of the good and thus reduce the triangle of welfare loss

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