15 In the case of a beneficial externality a marginal priva

____   15.   In the case of a beneficial externality

a.

marginal private cost is below marginal social cost.

b.

marginal social cost is above marginal private cost.

c.

marginal social cost and marginal private cost are equal.

d.

the free market price is below the socially efficient price.

____   16.   A true public good is characterized by

a.

depletability but not excludability.

b.

excludability but not depletability.

c.

both depletability and excludability.

d.

neither depletability nor excludability.

____   22.   Capitalism is a market economic system with

a.

most production processes controlled by the government.

b.

most production processes controlled by private firms with minimal government control.

c.

all production processes controlled by private firms.

d.

all production processes controlled by the government.

____   23.   Firms share technology with rivals,

a.

in order to better compete with their rivals.

b.

in order to help out when their rivals are in trouble.

c.

to share the substantial risks of innovation.

d.

because they are required to by law.

e.

in order to pass false information to their rivals in order to drive them out of business.

____   25.   A successful process innovation can be expected to lead to

a.

an upward shift of the MC and AC curves which will lower output and raise the price of the product.

b.

an upward shift of the MC and AC curves which will raise output and lower the price of the product.

c.

a downward shift of the MC and AC curves which will lower output and raise the price of the product.

d.

a downward shift of the MC and AC curves which will raise output and lower the price of the product.

e.

a downward shift of the MC and AC curves which will leave unchanged the output and price of the product.

____   26.   A firm producing a smoke externality is producing

a.

more than the socially optimal quantity of output.

b.

less than the socially optimal quantity of output.

c.

exactly the socially optimal quantity of output.

d.

There is insufficient information to answer.

____   25.   A successful process innovation can be expected to lead to

a.

an upward shift of the MC and AC curves which will lower output and raise the price of the product.

b.

an upward shift of the MC and AC curves which will raise output and lower the price of the product.

c.

a downward shift of the MC and AC curves which will lower output and raise the price of the product.

d.

a downward shift of the MC and AC curves which will raise output and lower the price of the product.

e.

a downward shift of the MC and AC curves which will leave unchanged the output and price of the product.

____   26.   A firm producing a smoke externality is producing

a.

more than the socially optimal quantity of output.

b.

less than the socially optimal quantity of output.

c.

exactly the socially optimal quantity of output.

d.

There is insufficient information to answer.

a.	marginal private cost is below marginal social cost.
b.	marginal social cost is above marginal private cost.
c.	marginal social cost and marginal private cost are equal.
d.	the free market price is below the socially efficient price.

Solution

15. (D)

16.(B)

22.(C)

23.(A)

25.(D)

26.(B)