Economics Final Review - Ms. Brown

What is one reason that firefighter services are considered a public good?

• Everyone in the community benefits from it.

• Nobody in the community has to pay for it.

• Private firms make a profit from producing it

• Individual citizens pay directly for it.

Public goods are examples of market failure, because producing these goods in the free market

• shows that the free enterprise system cannot distribute resources.

• helps entrepreneurs learn how to distribute public resources.

• does not allow for the efficient distribution of resources.

• encourages private businesses to distribute resources efficiently.

Which of the following is an example of a negative externality resulting from an outdoor concert in the park?

• College students near by get to enjoy free entertainment

• An elderly woman in her apartment hears a song that she liked as a child.

• A pizza parlor stays open later and makes a bigger profit than most nights

• A traffic jam occurs as drivers hunt for parking spots near the concert.

Which of the following explains why a city fireworks display on the Fourth of July is provided as a public good?

• Fireworks displays usually take place in a public area.

• Fireworks are a scarce resource.

• Nonpayers cannot be prevented from seeing the fireworks.

• Each consumer pays a fee to see the fireworks.

What might be the economic benefit of the government providing a public good rather than the private sector?

• decreased prices for the good

• decreased cost for the good

• increased taxes needed to provide the good

• greater efficiency in providing the good

What is critical in determining whether something is produced as a public good?

• whether the market has the resources to provide it

• whether the benefits to society are greater than the total cost

• whether the government needs to use tax money to provide it

• whether the benefits are limited to the poor

Market failure occurs whenever

• free markets fail to distribute resources efficiently.

• goods fail to arrive at a market in a timely fashion.

• government builds infrastructure.

• voluntary exchange in a market fails to result in a sale.

If a student volunteers at a food pantry on Fridays after school, which of the following might be a negative externality?

• The student might learn a new skill.

• The student might make some new friends.

• The student's parents have to drive him or her to the food pantry.

• The student might decide to volunteer two days a week.

Use the image to answer the questions:

Which of the following best describes the use of the private bridge by the public?

• the efficient allocation of resources

• the free-rider problem

• positive externalities

• negative externalities

Do externalities play a role in the environmental impact of products and services?

• Yes

• No

Answer explanation

Yes. Externalities are costs or benefits that are not reflected in the market price of a product or service but affect the environment.