Miscellaneous Essay

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Practice Test 10 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Which of the following is the best statement about markets? a.|Markets are usually a good way to organize economic activity.| b.|Markets are generally inferior to central planning as a way to organize economic activity.| c.|Markets fail and are therefore not an acceptable way to organize economic activity.| d.|Markets are a good way to organize economic activity in developed nations, but not in less-developed nations.| ____ 2. Market failure can be caused by a.|foreign competition.| b.|externalities.| c.|low consumer demand.| d.|scarcity.| ____ 3. Externalities cause markets to a.|fail to allocate resources efficiently.| b.|cause price to be different than the equilibrium price.| c.|benefit producers at the expense of consumers.| d.|cause markets to operate more equitably.| ____ 4. When externalities are present in a market a.|the established equilibrium maximizes the total benefit to society as a whole.| b.|market participants lose some market benefits to bystanders.| c.|both equity and efficiency are maximized.| d.|the market fails to allocate resources efficiently.| ____ 5. A negative externality a.|is an adverse impact on a bystander.| b.|causes the product in a market to be under-produced.| c.|is an adverse impact on market participants.| d.|is present in markets in which the good or service is undesirable for society.| ____ 6. When negative externalities are present in a market a.|producers will be affected, but not consumers.| b.|overproduction will occur.| c.|demand will be too high.| d.|the market will still maximize total benefits.| ____ 7. Which of the following would NOT be considered a negative externality? a.|Smelter, Inc. creates steel and pollution in
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