b. To promote equality
c. To enforce property rights
d. To protect an industry from foreign competition
ANSWER: d
84. Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
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c. a market failure caused by equality.
d. There is no market failure in this case.
ANSWER: a
85. If an externality is present in a market, economic efficiency may be enhanced by
a. government intervention.
b. a decrease in foreign competition.
c. fewer market participants.
d. weaker property rights.
ANSWER: a
86. Which of the following is an example of an externality?
a. Zima purchases a new pants suit.
b. Malik's bird chirps loudly during the night, waking his neighbors.
c. Roberto sells a book to Kevin, who uses the book and then gives it to Lee as a gift.
d. Kalene watches a scary movie.
ANSWER: b
87. The willingness of citizens to pay for vaccinations does not include the benefit society receives from having
vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is
known as
a. productivity.
b. an externality.
c. market power.
d. property rights.
ANSWER: b
88. Laws that enforce chemical hazard control are examples of government intervention that is intended to reduce
a. efficiency.
b. equality.
c. externalities.
d. productivity.
ANSWER: c
89. Which of these activities will most likely impose an external cost?
a. An athlete works out at a gym.
b. A postal worker smokes a cigarette in a crowded break room.
c. A young father pushes his baby in a stroller.
d. A construction worker eats a hotdog during her lunch break.
ANSWER: b
90. Which of these activities will most likely result in an external benefit?
a. A college student buys a deck of cards to play solitaire in her dorm room.
b. An elderly woman plants a flower garden on the vacant lot next to her house.
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c. An executive purchases a book to read on a business trip.
d. A ten-year-old uses his allowance to buy new Nike shoes.
ANSWER: b
91. Market power refers to the
a. power of a single person or small group to influence market prices.
b. ability of a person or small group to successfully market new products.
c. power of the government to regulate a market.
d. importance of a certain market in relation to the overall economy.
ANSWER: a
92. Which of the following firms is likely to have the greatest market power?
a. A utility company
b. A farmer
c. A grocery store
d. A local electronics retailer
ANSWER: a
93. Productivity is defined as the
a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.
ANSWER: a
94. The primary determinant of a country's standard of living is
a. the country's ability to prevail over foreign competition.
b. the country's ability to produce goods and services.
c. the total supply of money in the economy.
d. the average age of the country's labor force.
ANSWER: b
95. The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by
a. unstable economic conditions in Eastern Europe.
b. increased competition from abroad.
c. a decline in the rate of increase in U.S. productivity.
d. a strong U.S. dollar abroad, hurting U.S. exports.
ANSWER: c
96. Suppose that in Peru total annual output is worth $750 million and people work 40 million hours. In Oman, total
annual output is worth 650 million and people work 20 million hours. Productivity is higher
a. in Oman. Most variation in the standard of living across countries is due to differences in productivity.
b. in Oman. Differences in productivity explain very little of the variation in the standard of living across
countries.
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