Coase made famous a court case between a doctor and a confectioner. Suppose that exact case happened again and transactions costs were absent. When would we be sure that resources were inefficiently allocated? a. If the confectioner wins the property right to make his confections. b. If the doctor wins the right to prevent the […]
The justification for government action based on the argument that everyone agrees to be coerced if everyone else is forced as well is not compatible with the criterion of Pareto superiority. a. True b. False ANSWER a
What is the transitional gains trap? In New York, in order to be legal a cab driver must have a medallion (i.e., a license) to operate. With respect to New York cab drivers who, if anyone, received transitional gains? What if the medallion program were ended tomorrow. Who would be harmed? ANSWER The transitional […]
Describe the holdout problem with emphasis on how it might lead to resource being allocated inefficiently. Give three private ways to possibly overcome the holdout problem. What will be an ideal response? ANSWER The holdout problem arises when unanimous agreement is required for a collective action. The holdout problem can prevent Pareto superior moves […]
Expenditures on education equal about _____ of state and local government financial outlays. a. one quarter b. one third c. one half d. two thirds ANSWER b
The Coase Theorem implies that _____. a. absent transactions costs, resources will be efficiently allocated b. absent transactions costs, resources will be inefficiently allocated c. with significant transactions costs, resources will be efficiently allocated d. with significant transactions costs, resources will be inefficiently allocated ANSWER a
The figure above shows a graph of the market for pizzas in a large town. What characterizes the equilibrium in this market? A) There is excess supply at the equilibrium price of $7. B) The government has selected the appropriate price for pizzas. C) The quantity supplied equals the quantity demanded. D) Supply equals demand. […]
“Captured” regulators end up doing exactly what the regulated industry wants. a. True b. False ANSWER b
The above figure shows a graph of a market for pizzas in a large town. At a price of $10, the market A) is not in equilibrium. B) has excess supply. C) does not have excess demand. D) All of the above. ANSWER D
One reason why African elephants are endangered is _____. a. the low cost of hunting exhibitions b. exploitation by zoo owners c. many natural predators d. governments often prohibit private ownership ANSWER d
