Market Efficiency and Market Failures Quiz

What is the 'tragedy of the commons'?

• A situation where private goods are overused

• A situation where common resources are overused due to ill-defined property rights

• A situation where public goods are underfunded

• A situation where monopolies dominate the market

What is the free rider problem?

• When individuals pay more than their fair share for public goods

• When individuals benefit from resources without paying for them

• When companies charge too much for private goods

• When governments over-regulate markets

What is an externality?

• A cost or benefit that affects a party who did not choose to incur it

• A tax imposed by the government

• A subsidy given to producers

• A price set by the market

What is productive efficiency?

• Producing goods at the lowest possible cost

• Allocating resources to maximize consumer satisfaction

• Ensuring all firms make a profit

• Reducing government intervention in markets

What is a monopoly?

• A market structure with many competitors

• A market structure with a single seller

• A market structure with perfect competition

• A market structure with no barriers to entry

What is perfect competition?

• A market structure with a single seller

• A market structure with many sellers and no barriers to entry

• A market structure with government intervention

• A market structure with monopolistic practices

What is a demerit good?

• A good that is under-consumed and has positive externalities

• A good that is over-consumed and has negative externalities

• A good that is provided by the government for free

• A good that is only available to the wealthy

What is the impact of immobility of factors of production?

• Efficient allocation of resources

• Misallocation of resources

• Increased competition

• Reduced government intervention

What is the effect of negative externalities?

• Overproduction of goods

• Underproduction of goods

• No impact on production

• Increased government regulation

What is the role of incentives in markets?

• To discourage production

• To encourage desired behaviors and outcomes

• To eliminate competition

• To increase government intervention