If the government is successful in internalizing the external costs of production in a market, then:
a. social costs will equal private costs.
b. an inefficient level of output will be produced.
c. social costs will exceed private costs.
d. social costs will be less than private costs.
e. social costs will fall to zero.
QUESTION 2Which of the following statements is not true about a market system?
a. The market system provides an incentive to consumers to acquire purchasing ability.
b. The market system magnifies the problem of scarcity of goods and services.
c. The market system provides an incentive for allocating resources.
d. The market system provides an incentive to improve the quality of goods produced.
e. The market system provides everything everyone wants to consume.
QUESTION 3The commons problem refers to:
a. a problem that arises when everything is privately owned.
b. a situation when the resources are owned by the government and the common people have limited access to them.
c. a problem that arises when government takes incorrect measures which adversely affect common people.
d. a problem that arises when everyone has access to a particular resource.
e. the adverse situation that arises when the government fails to take adequate measures to solve common problems.
QUESTION 4Given that resources can be allocated by the government, the market, a random process, or on a first-come first-serve basis, which of the following statements is true?
a. The market system is not entirely fair but it creates incentives to increase supplies and improve standards of living.
b. The random process of allocation allows individuals to acquire purchasing power and enhances the value of the resources that they own.
c. Since the government system does not distinguish between those who have income and those that do not, government allocation of resources is the most efficient.
d. There will be no shortages under the first-come first-serve basis of allocation.
e. A random process of allocation is fair in the sense that everyone gains and there are no losers.
QUESTION 5One of the reasons that communism failed in the Soviet Union is that, under communism:
a. no one had property rights, so there was little incentive to use resources efficiently.
b. there were high rates of unemployment and homelessness accompanied by a high rate of inflation.
c. planners did not have all the information necessary to make efficient decisions.
d. there was a high degree of political freedom.
e. there was a high degree of economic freedom.
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