Question 1

Which of the following is a drawback of cost-beneﬁt analysis?

Accepted Answer

A)   Costs and beneﬁts that accrue over time cannot be assessed.
B)   It may be diﬃcult to measure costs and beneﬁts in monetary terms.
C)   The costs of an activity are usually greater than the beneﬁts.
D)   Cost-beneﬁt analysis can only be used to assess government interventions.E) C) and D)
F) B) and D)

Question 2

Which of the following is true of a monopoly?

Accepted Answer

A)   A monopoly market is Pareto e?cient.
B)   The level of consumer surplus is greater in monopoly compared to perfect competition.
C)   The level of producer surplus is higher in monopoly compared to perfect competition.
D)   There is no dead-weight loss in a monopoly.E) A) and D)
F) None of the above

Question 3

The equilibrium in a monopoly market is Pareto eﬃcient.

Accepted Answer

A) True 
 B)False

Question 4

Through the fair fuel stabilizer, the UK government manages volatility in the prices of petrol and diesel.

Accepted Answer

A) True 
 B)False

Question 5

The costs of _____ are termed agency costs.

Accepted Answer

A)   research and development
B)   advertising
C)   monitoring performance
D)   producing a goodE) B) and D)
F) A) and B)

Question 6

The Coase conjecture argues that a monopoly provider of a durable good will retain monopoly power and sell the good at the monopoly price.

Accepted Answer

A) True 
 B)False

Question 7

Pareto e?ciency holds in a(n)  _____.

Accepted Answer

A)   monopoly
B)   oligopoly
C)   perfectly competitive market
D)   monopolistically competitive marketE) A) and B)
F) B) and C)

Question 8

Government agencies can be ineffective as they can be subject to regulatory capture.

Accepted Answer

A) True 
 B)False

Question 9

The separation of ownership from control explains why ﬁrms aim to maximize proﬁts.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of a public good?

Accepted Answer

A)   A street light.
B)   An apple.
C)   A house.
D)   A car.E) C) and D)
F) B) and D)

Question 11

Satis?cing behaviour would NOT involve:

Accepted Answer

A)   separation of ownership and control.
B)   attaining average levels of performance.
C)   setting and achieving the highest target possible.
D)   trade-offs between managers and owners.E) A) and B)
F) B) and C)

Question 12

In the following graph, MR and AR represent the marginal revenue and average revenue curves of a monopoly ﬁrm respectively. MC represents the marginal cost curve of the ﬁrm. Refer to the ﬁgure to answer the question.  The proﬁt-maximizing monopoly ﬁrm will produce output at the point where:

Accepted Answer

A)   marginal cost is decreasing.
B)   the marginal cost curve intersects the marginal revenue curve.
C)   the average revenue curve intersects the marginal cost curve.
D)   marginal cost is zero.E) C) and D)
F) A) and D)

Question 13

In the following graph, MR and AR represent the marginal revenue and average revenue curves of a monopoly ﬁrm respectively. MC represents the marginal cost curve of the ﬁrm. Refer to the graph to answer the question.  When price is P2, the dead-weight loss in the market is equal to the area _____.

Accepted Answer

A)   A + B
B)   C + D + E
C)   E + F
D)   FE) A) and C)
F) A) and D)

Question 14

Carbon dioxide emissions are an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 15

Rent-seeking behaviour refers to the resources spent by companies in trying to achieve monopoly status.

Accepted Answer

A) True 
 B)False

Question 16

A stock option that is offered to a manager gives him the right to buy a share in the company at the future share price.

Accepted Answer

A) True 
 B)False

Question 17

Subsidies are provided to goods for which the private level of output is more than the socially optimal level of output.

Accepted Answer

A) True 
 B)False

Question 18

Pro?ts may decline when sales increase if:

Accepted Answer

A)   there are diseconomies of scale.
B)   costs remain constant.
C)   there are increasing returns to scale.
D)   the variable cost of production falls.E) A) and D)
F) A) and B)

Question 19

Explain how merit and demerit goods highlight a problem of imperfect information in a market.

Accepted Answer

Merit goods are seen by governments as p...

Question 20

Market failure is likely in markets that:

Accepted Answer

A)   are perfectly competitive.
B)   have complete information.
C)   are e?cient in production
D)   have negative externalities.E) A) and B)
F) All of the above

Exam 8: Governing Business

The separation of ownership from control explains why ﬁrms aim to maximize proﬁts.

Correct Answer
verified

Market failure is likely in markets that:

Correct Answer
verified

Which of the following is true of a monopoly?

Correct Answer
verified

Rent-seeking behaviour refers to the resources spent by companies in trying to achieve monopoly status.

Correct Answer
verified

The equilibrium in a monopoly market is Pareto eﬃcient.

Correct Answer
verified

Pareto e?ciency holds in a(n) _____.

Correct Answer
verified

Pro?ts may decline when sales increase if:

Correct Answer
verified

Satis?cing behaviour would NOT involve:

Correct Answer
verified

The costs of _____ are termed agency costs.

Correct Answer
verified

Which of the following is a drawback of cost-beneﬁt analysis?

Correct Answer
verified

The Coase conjecture argues that a monopoly provider of a durable good will retain monopoly power and sell the good at the monopoly price.

Correct Answer
verified

Government agencies can be ineffective as they can be subject to regulatory capture.

Correct Answer
verified

Through the fair fuel stabilizer, the UK government manages volatility in the prices of petrol and diesel.

Correct Answer
verified

Subsidies are provided to goods for which the private level of output is more than the socially optimal level of output.

Correct Answer
verified

In the following graph, MR and AR represent the marginal revenue and average revenue curves of a monopoly ﬁrm respectively. MC represents the marginal cost curve of the ﬁrm. Refer to the ﬁgure to answer the question. The proﬁt-maximizing monopoly ﬁrm will produce output at the point where:

Correct Answer
verified

Carbon dioxide emissions are an example of a negative externality.

Correct Answer
verified

Correct Answer
verified

Which of the following is an example of a public good?

Correct Answer
verified

Explain how merit and demerit goods highlight a problem of imperfect information in a market.

Correct Answer
verified
Merit goods are seen by governments as p...
View Answer

A stock option that is offered to a manager gives him the right to buy a share in the company at the future share price.

Correct Answer
verified

Exam 8: Governing Business

The separation of ownership from control explains why ﬁrms aim to maximize proﬁts.

Correct AnswerverifiedShow Answer

Market failure is likely in markets that:

Correct AnswerverifiedShow Answer

Which of the following is true of a monopoly?

Correct AnswerverifiedShow Answer

Rent-seeking behaviour refers to the resources spent by companies in trying to achieve monopoly status.

Correct AnswerverifiedShow Answer

The equilibrium in a monopoly market is Pareto eﬃcient.

Correct AnswerverifiedShow Answer

Pareto e?ciency holds in a(n) _____.

Correct AnswerverifiedShow Answer

Pro?ts may decline when sales increase if:

Correct AnswerverifiedShow Answer

Satis?cing behaviour would NOT involve:

Correct AnswerverifiedShow Answer

The costs of _____ are termed agency costs.

Correct AnswerverifiedShow Answer

Which of the following is a drawback of cost-beneﬁt analysis?

Correct AnswerverifiedShow Answer

The Coase conjecture argues that a monopoly provider of a durable good will retain monopoly power and sell the good at the monopoly price.

Correct AnswerverifiedShow Answer

Government agencies can be ineffective as they can be subject to regulatory capture.

Correct AnswerverifiedShow Answer

Through the fair fuel stabilizer, the UK government manages volatility in the prices of petrol and diesel.

Correct AnswerverifiedShow Answer

Subsidies are provided to goods for which the private level of output is more than the socially optimal level of output.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Carbon dioxide emissions are an example of a negative externality.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of a public good?

Correct AnswerverifiedShow Answer

Explain how merit and demerit goods highlight a problem of imperfect information in a market.

Correct AnswerverifiedMerit goods are seen by governments as p...View AnswerShow Answer

A stock option that is offered to a manager gives him the right to buy a share in the company at the future share price.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Merit goods are seen by governments as p...
View Answer

Correct Answer
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