WorksheetsCreative Destruction 14
Total questions: 15
Worksheet time: 8mins
Name
Class
Date
1.
1. How do entrepreneurs earn economic profits?
a)
a. They discover market failures.
b)
b. They enter competitive markets.
c)
c. They flood the market with supply.
d)
d. They create barriers to entry.
e)
e. They apply for government subsidies.
2.
2. Entrepreneurs do NOT
a)
a. identify untapped markets
b)
b. create new products
c)
c. exacerbate existing market imperfections
d)
d. develop innovative methods of production
e)
e. differentiate their services
3.
3. Who coined the term “creative destruction”?
a)
a. Joseph Schumpeter
b)
b. John Keynes
c)
c. Milton Friedman
d)
d. Arthur Okun
e)
e. Adam Smith
4.
4. What catalyzes “creative destruction”?
a)
a. government regulation
b)
b. social welfare
c)
c. market failure
d)
d. positive externalities
e)
e. economic profits
5.
5. Which of the following examples would NOT arise from entrepreneurs investing around exist ing barriers to entry?
a)
a. watch manufacturers copying a Rolex design
b)
b. Uber and Lyft developing alternative forms of transportation to compete with traditional taxis
c)
c. satellite televisions competing with cable television
d)
d. mobile phone manufacturers de veloping alternative smartphones to compete with Apple’s iPhone
e)
e. new soda flavors targeting different demographics
6.
6. Positive externalities are an example of
a)
a. price discrimination
b)
b. entrepreneurship
c)
c. Pareto efficiency
d)
d. market failure
e)
e. social welfare
7.
7. Which of the following examples would be considered a positive externality?
a)
a. A colony of bees pollinates a nearby farmer’s apple trees.
b)
b. All of the neighbors share ownership of the community pool.
c)
c. The construction of a new football stadium incentivizes a nearby city to build a baseball stadium.
d)
d. A factory dumps pollution into a nearby river.
e)
e. The government provides a rent subsidy to low - income families.
8.
8. If two companies produce goods that are complements, it is MOST likely t hat they
a)
a. exacerbate a market failure
b)
b. divide additional revenue between each other
c)
c. bundle their products
d)
d. impose externalities on each other
e)
e. directly compete with each other
9.
9. The firm’s marginal cost plus the cost of treating the pollution i t produces is called the
a)
a. fixed cost curve
b)
b. true social cost of production
c)
c. externality - adjusted cost of production
d)
d. public supply curve
e)
e. socially optimal supply curve
10.
10. Compared to the private market equilibrium, the equilibrium that accounts for a negative externality is
a)
a. to the right and up
b)
b. straight to the right
c)
c. to the left and down
d)
d. to the right and down
e)
e. to the left and up
11.
11. How would a graph of a positive externality represent social benefits?
a)
a. steeper demand curve
b)
b. increased demand curve
c)
c. price ceiling
d)
d. lower equilibrium price
e)
e. increased supply curve
12.
12. The Coase Theorem requires
a)
a. government imposition of transaction costs
b)
b. clearly defined property rights
c)
c. the ability to internalize externalitie s
d)
d. an initial distribution of rights
e)
e. the existence of positive externalities
13.
13. Why PRIMARILY is it unlikely for an oil refinery and a downstream population to reach a negotiated solution?
a)
a. The costs of negotiation are too high.
b)
b. Property rights are not defined.
c)
c. The benefit to the firm exceeds the cost endured by the citizens.
d)
d. The initial distribution of rights lies with the oil refinery.
e)
e. The damages are not reciprocal.
14.
14. It is MOST effective to use taxes to remedy the effects of extern alities when
a)
a. the value of the externality is measurable
b)
b. the Coase Theorem applies
c)
c. the costs of negotiation are high
d)
d. the government can solve the issue
e)
e. property rights are clearly defined
15.
15. How does the United States Environmental Protectio n Agency deal with sulfur dioxide emissions?
a)
a. negotiating directly with sulfur dioxide emitters
b)
b. giving a quota to each firm that wants to emit sulfur dioxide
c)
c. taxing sulfur dioxide emitters
d)
d. allowing the states to decide the optimal amount of sulfur dioxide emissions
e)
e. auctioning off rights to emit sulfur dioxide
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