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Question-1
All of the following statements are correct except:
(A)
When marginal social costs are greater than marginal private costs, there is a negative externality
(B)
When marginal social benefits are higher than marginal private benefits, governments should subsidize production
(C)
When marginal social costs are higher than marginal private costs, governments should tax production
(D)
When marginal private costs are equal to marginal private benefits, the level of output is socially optimal
Question-2
The social demand minus the externalities represents:
(A)
The difference in price
(B)
The level of public goods
(C)
The optimal mix of output
(D)
The market demand
Question-3
All of the following statements are wrong except:
(A)
A monopoly will always be Pareto efficient
(B)
A perfectly competitive market is not always Pareto efficient
(C)
Redistribution of income from producers to consumers can restore Pareto efficiency
(D)
The presence of externalities will preclude Pareto efficiency
Question-4
If a large number of individuals are affected by an external benefit, private bargaining will not work because of:
(A)
The Coase theorem
(B)
The fallacy of composition
(C)
The free-rider problem
(D)
Non-rivalry
Question-5
If some gain and some lose as the result of a proposed change and it can be demonstrated that the value of the gains would exceed the value of the losses, then the change is said to be:
(A)
Unequivocally Pareto optimal
(B)
Potentially efficient
(C)
Inefficient
(D)
Technically efficient
Question-6
Externalities are defined as
(A)
The "spillover" effect from production or consumption of goods and services
(B)
Government regulations, which limit the number of people a firm can hire
(C)
Competitors actions, which cause a firm to have to respond
(D)
Lawn maintenance at the factory
Question-7
When markets are imperfect and exhibit externalities:
(A)
Government intervention will not improve market performance
(B)
There is an inefficient allocation and use of society's scarce resources
(C)
Society's well-being is not affected
(D)
Government intervention will always improve market performance
Question-8
The total cost to society of producing an additional unit of a good or service is the:
(A)
Marginal damage cost
(B)
Marginal social cost
(C)
Marginal external cost
(D)
Marginal private cost
Question-9
Externalities are a problem only if:
(A)
The externalities are negative
(B)
Decision makers do not take them into account
(C)
All firms are perfectly competitive
(D)
All firms are monopolistic
Question-10
All of the following statements are correct about the Kuznets curve except:
(A)
China and India have reached the peak of the curve
(B)
The United States are not at the peak of the curve yet
(C)
It suggests that additional greenhouse gases from developing economies can be balanced by a reduction in pollution from highly developed economies
(D)
It describes an ‘n’ shaped relationship between income inequality and GDP per capita
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Cambridge Secondary Grade 9
IGCSE
Practice in Related Chapters
Competitive Markets Demand and Supply
The Foundations of Economics
Elasticities
Fundamental Concepts in Economics
The Theory of the Firms Production, Costs, Revenue and Profits
The Theory of the Firm II Market Structures
The Level of Over All Econonic Activity
Aggregate Demand and Aggregate Supply
Macroeconomic Objectives I : Low Unemployment,Low and Stable Rate of Inflation
Demand-Side and Supply-Side Policies
Government Intervention
Macro Economic Objectives II : Economic Growth and Equity in the Distribution of Income
Market Failure
International Trade
Exchange Rates and the Balance of Payments
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