Ch4 Noncompetitive Market Models and Market Test Bank Docx

Dewar ASQZ

Chapter 4

Multiple Choice

1. Which of the following is defined as a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off?

[1] Utility maximization

[2] Profit maximization

[3] Economic equilibrium

[4] Pareto efficiency

<Answer: 4>

<Complexity: Moderate>

<A-head: Introduction>

<Subject: Chapter 4, Page 23>

Multiple Choice

2. Which of the following is used to cover all circumstances in which Pareto efficiency is not achieved by the market?

[1] Market equilibrium

[2] Market failure

[3] Market surplus

[4] Market barriers

<Answer: 2>

<Complexity: Moderate>

<A-head: Introduction>

<Subject: Chapter 4, Page 23>

True/False

3. Healthcare markets will not lead to Pareto efficiency in the absence of externalities.

<Answer: False>

<Complexity: Easy>

<A-head: Externalities>

<Subject: Chapter 4, Page 23>

Matching

4. Match the externality to the appropriate description.

[1] This might arise if a firm producing pharmaceuticals dumps its waste in a river or pollutes the air.

<Answer: External cost of production>

[2] If a promising compound is discovered, this will lead to the publication of scientific papers on the compound; therefore, the research undertaken on the compound will lead to the identification of other useful avenues for research.

<Answer: External benefits of production>

[3] In addition to their effects on individual health, cigarette smoking and alcohol consumption may also have negative effects on the rest of society in terms of passive smoking and antisocial behavior, which are not compensated for in the private market.

<Answer: External costs of consumption>

[4] Vaccines have a direct health benefit on others by reducing their chances of ill health, and they are not being compensated in the private market; therefore, these activities should be subsidized.

<Answer: External benefits of consumption>

<Complexity: Difficult>

<A-head: Externalities>

<Subject: Chapter 4, Page 24>

Multiple Response

5. Which of the following are characteristics of public goods?

[1] Nonrivalry

[2] Nonexclusivity

[3] Nonexcludability

[4] Noncompetitive

<Answer: 1, 3>

<Complexity: Moderate>

<A-head: Public Goods>

<Subject: Chapter 4, Page 24>

Multiple Choice

6. In general, which of the following provides public goods?

[1] Hospitals

[2] Government

[3] Schools

[4] Private businesses

<Answer: 2>

<Complexity: Moderate>

<A-head: Public Goods>

<Subject: Chapter 4, Page 23>

True/False

7. Most healthcare products and services are not public goods because they are both rival and excludable.

<Answer: True>

<Complexity: Easy>

<A-head: Public Goods>

<Subject: Chapter 4, Page 25>

True/False

8. The market for health care is characterized by perfect knowledge by both the consumers and providers of care.

<Answer: False>

<Complexity: Easy>

<A-head: Information Imperfections>

<Subject: Chapter 4, Page 25>

Multiple Response

9. Which of the following would be considered legal restrictions that prevent other firms from entering the market and providing goods and services similar to existing firms?

[1] Scale of production

[2] Patents

[3] Occupational licensing

[4] Price regulations

<Answer: 2, 3>

<Complexity: Difficult>

<A-head: The Monopoly Model>

<Subject: Chapter 4, Page 27>

Multiple Choice

10. Which piece of legislation prohibits overt collusion?

[1] Health Insurance Portability and Accountability Act

[2] Affordable Care Act

[3] Sherman Antitrust Act

[4] Social Security Act

<Answer: 3>

<Complexity: Moderate>

<A-head: Oligopoly>

<Subject: Chapter 4, Page 29>