Theme 1 - Market Failure - Information Failure & Public Goods
Quiz by Mark Seccombe
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- Q1
Dentists may undertake non-essential dental work on patients. A likely explanation for this is:
Dental care is a public good
The existence of asymmetric information
External benefits result from dental care
There is a shortage of dentists
30s1.3.4a - Q2
When consumers over-estimate the private benefit of consuming a good or a service, it is likely that the product will be
Not consumed at all
Bought only by rich consumers
Over-consumed
Under-consumed
30s1.3.4c - Q3
When fakes are introduced in an antiques market is the likely that
Genuine sellers will leave the market
Genuine buyers will enter the market looking for bargains
Buyers of fakes will get increased consumer surplus
Sellers of fakes will leave the market
30s1.3.4a - Q4
Which is NOT a possible method of overcoming asymmetric information?
Taxes on illegal products
Employment records
Product warranties
Credit checks by lenders
30s1.3.4a - Q5
In an auction, the winners' curse is less likely to happen when
The true value of the item is more uncertain
The winning bid pays the 2nd highest bid made
The number of bidders in the auction is large
The auction involves closed sealed bids
30s1.3.4a - Q6
Calls are growing for high sugar drinks to be taxed to curb rising obesity. This suggests that sugary drinks are:
Public goods
Veblen goods
De-merit goods
Merit goods
30s1.3.4c - Q7
US food authorities may intervene to reduce the artificial transfats found in processed foods. The most likely intervention is:
A tax on producers of processed foods
De-regulation in the processed food industry
A subsidy to processed food suppliers
A maximum price for processed foods
30s1.4.1a - Q8
In the insurance industry, high-risk customers are more likely to take out insurance. This is an example of:
Adverse selection
Gambling
Risk aversion
Moral hazard
30s1.3.4a - Q9
In which situation might the buyer usually have better information than the seller?
Second hand cars
Life insurance
Stock trading
Estate agents
30s1.3.4a - Q10
An employers insists that all job applicants complete psychometric testing - this is an example of
Signalling
Discrimination
Screening
Diligence
30s1.3.4a - Q11
Which one of the following distinguishes merit goods from public goods?
A merit good is limited in supply, a public good has infinite supply
A merit good is provided at a cost, a public good is provided at no cost
A merit good is provided by government, a public good is provided by companies
Consumption of a merit good reduces availability, consumption of a public good does not reduce availability
30s1.3.3 - Q12
A pure public good (or service) is always
heavily subsidised by the government.
available for consumption by others when consumed by an additional person.
provided by the government for all consumers.
provided free of charge for all consumers.
30s1.3.3 - Q13
Left to the free market, Good X would not be produced at all. Yet the production and consumption of at least some of Good X increases the welfare of society. Good X is most likely to be a
demerit good.
public good.
merit good.
free good.
30s1.3.3 - Q14
Complete market failure always exists when
there is a missing market in the provision of public goods
the free market fails to provide sufficient merit goods.
there are negative externalities in production.
the free market underprices demerit goods.
30s1.3.3 - Q15
A good is excludable if
it is supplied at a zero price
it is supplied by the government rather than through the free market.
one person’s use has no effect on the quantity available for someone else
it is possible to prevent someone from enjoying its benefits
30s1.3.3