Question

***I'm in a time crunch, thanks!

1. Negative externalities lead markets to produce

a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.

b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels.

c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels.

d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.

2. Two types of private solutions to the problem of externalities are

a. charities and the Golden Rule.

b. charities and subsidies.

c. the Golden Rule and taxes.

d. taxes and subsidies

3. Markets fail to allocate resources efficiently when

a. prices fluctuate.

b. people who have property rights abuse their privileges.

c. property rights are not well established.

d. the government refuses to intervene in private markets.

4. Which of the following is an example of general knowledge, as opposed to specific knowledge that can be patented?

a. the invention of a longer-lasting battery

b. a mathematical theorem

c. a method for constucting a high-performance microchip

d. the chemical formula for an adhesive

Answer 1

1a. Negative externalities lead markets to produce greater than efficient output levels and positive externalites lead markets to produce less than efficient output levels

Negative externalities means the social costs are higher than the private costs. The efficient levels will be at the intersection of Marginal benefits and marginal social costs. However, Marginal private costs will still be lower and the producers would continue producing (And similarly positive externalities lead to higher marginal benefits but are not accounted for thus leading to production lesser than the efficient levels

2a. Charities and Golden rule are two private solutions to the problem of externalities (Taxes and subsidies are state/government solutions)

3d The government refuses to intervene in the markets (Can also be c. property rights are not well established with that topic in mind)

Markets only consider private costs and benefits and it government can intervene appropriately to account for the externalities

4b A mathematical theorem

A mathematical theorem cannot be patented as per the patent law(it is an abstract idea) unlike all the other inventions mentioned