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Question-1
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-2
Market failure occurs when
(A)
Society chooses the optimal mix of output
(B)
When market prices signal what to produce
(C)
When a society does not vote on what should be produced
(D)
The market mechanism does not produce the optimal outcome
Question-3
When markets are imperfect and exhibit externalities:
(A)
There is an inefficient allocation and use of society's scarce resources
(B)
Government intervention will not improve market performance
(C)
Society's well-being is not affected
(D)
Government intervention will always improve market performance
Question-4
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-5
All of the following statements are incorrect except:
(A)
When marginal social benefits are lower than marginal private benefits, output is at its optimal level
(B)
Loud music is an example of negative benefit externality
(C)
Marginal social benefits can never be larger than private social benefits
(D)
When marginal social benefits are greater than marginal private benefits, there is a negative externality
Question-6
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-7
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-8
Externalities, both negative and positive, are a cause for..
(A)
Concern
(B)
Market Failure
(C)
Full Employment
(D)
Monopolistic Competition
Question-9
An externality is an example of a market failure because:
(A)
A good can be consumed by many people without having to pay for it
(B)
The market is under-producing a good
(C)
The price of the product does not reflect all costs
(D)
The price does not fluctuate with supply and demand
Question-10
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.
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Cambridge Secondary Grade 10
IGCSE
Practice in Related Chapters
Demand-Side and Supply-Side Policies
Elasticities
Competitive Markets Demand and Supply
The Foundation of Economics
The Theory of the Firms Production, Costs, Revenue and Profits
The Theory of the Firm II Market Structures
The Level of Over All Economic Activity
Aggregate Demand and Aggregate Supply
Government Intervention
Macroeconomic Objectives I : Low Unemployment,Low and Stable Rate of Inflation
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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