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Question-1
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-2
A person will continue to pursue an activity up to the point where:
(A)
Marginal benefit equals marginal private cost
(B)
Marginal social cost equals marginal external cost
(C)
Marginal benefit equals marginal social cost
(D)
Marginal benefit equals marginal damage cost
Question-3
All of the following statements are correct except:
(A)
The total of consumer and producer surplus is higher under perfect competition than under monopoly
(B)
Under monopoly, the dead-weight loss is minimized
(C)
The consumer surplus under perfect competition is greater than under monopoly
(D)
The producer surplus is greater under monopoly than under perfect competition
Question-4
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-5
Externalities, both negative and positive, are a cause for
(A)
Concern
(B)
Market failure
(C)
Full employment
(D)
Monopolistic competition
Question-6
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-7
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-8
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-9
If social marginal costs are _____________ private marginal costs, the level of output will be ____________ the socially optimal level.
(A)
Equal to, equal to
(B)
Greater than, higher than
(C)
Less than, lower than
(D)
All of the above
Question-10
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
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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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