iVAT Chapter 8

A  Equals the marginal social cost of producing the vaccine in a competitive equilibrium.

B  Equals the marginal benefit received by consumers of the vaccine in a competitive equilibrium.

C  Is less than the marginal benefit received by consumers of the vaccine.

D  Exceeds the marginal benefit received by consumers of the vaccine.

A  Producers’ marginal costs should be increased by an amount equal to the marginal benefit to third parties that results from production of the good.

B  Consumer of the good should pay a tax equal to the marginal benefit to third parties that results from production (or consumption) of the good.

C  Producers’ marginal costs should be decreased by an amount equal to the marginal cost imposed on third parties that results from production of the good.

D  Consumer of the good should receive a subsidy equal to the marginal cost imposed on third parties that results from production (or consumption) of the good.

A  None of the available answers.

B  Instituting a tax on the good creating the externality.

C  Reducing the cost of the good creating the externality.

D  Instituting tax reform.

E  Increasing the cost of a substitute of the good creating.

A  Normative externality.

B  Pareto externality.

C  Positive externality.

D  Negative externality.

A  Education.

B  Roller coaster rides.

C  Alcoholic beverages.

D  Pollution.

A  A negative externality.

B  A positive externality.

C  The tragedy of the commons.

D  Adverse selection.

A  Free markets yield results that economists do not consider socially optimal.

B  Markets have surpluses or shortages so that government rationing is necessary.

C  Free markets have led to excessive profits.

D  Business has introduced a product that consumers did not want.

A  Moral hazard.

B  A positive externality.

C  A free rider problem.

D  A negative externality.

E  An adverse selection problem.