What does the text suggest is necessary for preventing future scandals like Enron's?

Identifying and dealing with market failures

What is the primary lesson of the Enron scandal as mentioned in the text?

Regulations prevent market failures

Companies are always transparent

What does the text say happens when markets fail?

Markets do not function properly

Resources are always used efficiently

What causes a market failure according to the text?

A condition necessary for competitive markets does not exist

The government sets prices incorrectly

Prices always balance naturally

What happens when mergers and acquisitions reduce competition?

Fewer firms dominate industries

Prices are controlled by the government

How does inadequate competition affect the use of scarce resources?

It reduces efficient use of resources

It encourages wasteful spending

It increases the availability of resources

It encourages overuse of resources

Why does a firm with few or no competitors lack an incentive to use resources carefully?

They have no competition to drive efficiency

They want to maximize their profits

They face government regulations

They have an overabundance of resources

They need to cut costs to survive

Where can inadequate competition occur in the market?

Only when there is perfect competition

What happens when a monopolist dominates the supply side of the market?

The market becomes more efficient

What is an example of a market with little or no competition on the demand side?

Government buying space shuttles

A highly competitive tech industry

What could a firm with no competition easily do with its profits?

Spend on luxury items like executive jets

Why are public utilities like electricity regulated by the government?

To prevent firms from wasting resources

To allow companies to set their own prices

What might inadequate competition enable a business to do?

Influence politicians for special treatment

Provide better customer service

What were some individuals involved in the Enron scandal accused of doing?

Lobbying for favorable policy treatment

Paying large bonuses to workers

Reducing government regulations

Increasing competition in the energy market

Improving transparency in financial reporting

What is necessary for resources to be allocated efficiently in a market?

Adequate information about market conditions

Who needs adequate information about market conditions?

Consumers, businesspeople, and government officials

How might wages for the same skills differ between industries?

Wages might be higher in one industry compared to another

Wages are the same across all industries

Wages depend only on the company

Wages are set by the government

Where can some information about market conditions be easily found?

Classified ads in the newspaper or on the Internet

What happens if information is difficult to obtain but is important for buyers and sellers?

It is an example of a market failure

It causes government intervention

How might inadequate information affect the economy in the long run?

It will lower the rate of growth and the standard of living

It increases government spending

It boosts competition among firms

It reduces the number of unemployed people

What does resource immobility refer to?

Resources like land, capital, labor, and entrepreneurs not moving to high-return markets

Resources being used inefficiently

Resources being controlled by the government

Resources being wasted in the wrong sectors

What happens when a large plant, steel mill, or mine closes and leaves workers without employment?

Some workers can find jobs in other industries, but not all can

All workers immediately find new jobs

Workers are guaranteed unemployment benefits

Workers get relocated by the government

Workers are retrained by the company

Why might newly unemployed workers not be able to sell their homes?

They may not have the financial means or market demand

They are required to stay in their jobs

Housing markets are over saturated

The government prevents property sales

Workers prefer to stay in their current homes

Why might some unemployed workers not want to move to another city for new jobs?

They may not want to leave friends and family

They prefer staying in a familiar location

They are not willing to work in other cities

They lack the skills needed for new jobs

What are public goods?

Products that are collectively consumed by everyone

Products that are produced by private companies

Products that can only be consumed by the rich

Products that are only consumed by the government

Products that are only consumed by individuals

How does the use of a public good by one individual affect others?

It does not diminish the satisfaction or value available to others

It reduces the satisfaction of others

It increases the cost for others

It prevents others from using it

What typically happens when the market is left to supply public goods?

It either does not supply them or supplies them inadequately

It supplies them with excessive quantity

It reduces the cost of these goods

It always leads to fair distribution

Why does the market fail to supply public goods effectively?

It produces only items that can be withheld if people refuse to pay

It produces too many public goods

It always meets the demand for public goods

It creates private incentives for public goods

It efficiently distributes resources

Why is it difficult to deny someone the benefits of national defense?

It benefits everyone, regardless of individual payment

National defense is a private service

People can opt out of receiving national defense

National defense is only available to the wealthy

Only those who pay for it receive it

Why do private markets produce too few public goods?

It is difficult for everyone to pay their fair share

They are easy to provide at low cost

They are popular among consumers

Private companies can profit from them

What was the issue with the floodwalls in New Orleans after Hurricane Katrina?

They could not sustain the onslaught of the hurricane

They were fully funded by private companies

They were built by local businesses

Why are floodwalls considered public goods?

They are funded by government expenditures and have little profit for private firms

They are only used by businesses

They are built by private companies

Why does government sometimes delay spending on public goods like floodwalls?

It may result in higher taxes or reduce funding for other public goods

There is always enough funding for public goods

Public goods are not needed in all areas

The private sector can handle the funding

Government prefers to allocate funds to private companies

What is an externality?

An unintended side effect that benefits or harms a third party

A direct result of a market transaction

A price increase caused by scarcity

What is a negative externality?

Harm, cost, or inconvenience suffered by a third party

A positive side effect for all involved

A market-driven advantage for consumers

A product with unexpected benefits

A cost that only affects the producer

What is a classic example of a negative externality?

Noise and inconvenience from an airport expansion

A decrease in air quality from factories

What is a positive externality?

A benefit someone receives without being involved in the activity

A cost that a third party pays for

A government subsidy for a company

An economic disadvantage for workers

A product purchased by consumers

7.2 Market Failures-pd 6

Authored by Justin Beyersdorfer

Social Studies

12th Grade

Used 1+ times

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82 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What serious economic fact does the Enron story highlight?

Markets sometimes fail

Government regulations are always effective

Markets are always efficient

Companies always follow the law

The economy never faces failures

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which other company faced an accounting scandal around the same time as Enron?

WorldCom

Microsoft

Apple

IBM

Facebook

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What did WorldCom have to declare in 2002 due to legal issues?

Bankruptcy

Profit

Loss

Stock buybacks

Acquisition

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What did the Enron and WorldCom scandals demonstrate about a competitive free enterprise economy?

It works best when several conditions are met

It always works without regulation

It only works with perfect competition

It fails when information is inadequate

It functions best without government intervention

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What condition is mentioned as essential for a competitive economy to function effectively?

Adequate information

Unlimited resources

Government control

High taxes

Strong market monopolies

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What should we be able to identify and deal with to prevent future economic problems?

Different types of market failures

Weak regulatory policies

Global competition

Economic inequality

Government bailouts

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What happened to WorldCom in 2002?

It declared bankruptcy

It launched a major product

It merged with a competitor

It became the market leader

It was fully acquitted

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7.2 Market Failures-pd 6

What serious economic fact does the Enron story highlight?

Which other company faced an accounting scandal around the same time as Enron?

What did WorldCom have to declare in 2002 due to legal issues?

What did the Enron and WorldCom scandals demonstrate about a competitive free enterprise economy?

What condition is mentioned as essential for a competitive economy to function effectively?

What should we be able to identify and deal with to prevent future economic problems?

What happened to WorldCom in 2002?

What was the main reason for the downfall of WorldCom in 2002?

What does the text suggest is necessary for preventing future scandals like Enron's?

What is the primary lesson of the Enron scandal as mentioned in the text?

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