1			Which of the following is both non-rival and non-excludable in consumption?
			A)	Food that is shared in a fraternity house.
			B)	Air pollution abatement.
			C)	Roads and highways.
			D)	Garbage collection by a local government.
2			The primary goal and purpose of U.S. Antitrust Law is to
			A)	prevent firms from increasing profits by setting collusive price and output agreements.
			B)	promote more efficient information sharing between businesses and consumers.
			C)	lessen the occurrence of activities leading to external costs.
			D)	reduce the inefficiencies resulting from natural monopolies.
3			A "purely public good" is a good or service
			A)	for which it is relatively easy to exclude nonpaying customers.
			B)	produced by private firms, but is consumed by government.
			C)	consumed simultaneously by paying and nonpaying customers.
			D)	consumed by public sector employees and financed by private contributions.
4			Suppose the firms in the chemical industry are allowed to emit harmful waste products into the air, free of charge. If this is the case in a competitive market, how will the price and output of the chemical products compare to their values under conditions of ideal economic efficiency?
			A)	The price would be too low, and the output would be too large.
			B)	The price would be too high, and the output would be too large.
			C)	The price would be too low, and the output would be too small.
			D)	The price would be too high, and the output would be too small.
5			Which of the following factors increases the role for government involvement in the market place?
			A)	The presence of negative externalities.
			B)	The need for public goods.
			C)	Asymmetric information.
			D)	All of the above.
6			Compared to an efficient, purely competitive industry result, the monopolist will
			A)	produce less output and charge a higher price.
			B)	produce more output and charge a higher price.
			C)	produce less output and charge a lower price.
			D)	produce more output and charge a lower price.

Answer questions 7, 8, and 9 using the following information: The external marginal cost of producing coal is MC_external = 4Q while the internal marginal cost is MC_internal = 2Q. The inverse demand for coal is given by P = 240 - 4Q.

7			What is the socially efficient level of output?
			A)	18.
			B)	24.
			C)	30.
			D)	40.
8			How much output would a competitive industry produce?
			A)	18.
			B)	24.
			C)	30.
			D)	40.
9			If the government taxed output at $2 per unit, what would a competitive industry produce?
			A)	18.
			B)	24.
			C)	30.
			D)	40.
10			If government requires automobile manufactures to produce cars with decreased levels of emissions (air pollutants), the most likely direct impact of this regulation would be to
			A)	increase the supply of automobiles and lead to lower car prices.
			B)	increase the supply of automobiles and lead to higher car prices.
			C)	decrease the supply of automobiles and lead to lower car prices.
			D)	decrease the supply of automobiles and lead to higher car prices.
11			The import quotas that the U.S. has placed on foreign produced sugar are likely to have had what effect?
			A)	Domestic sugar producers and domestic sugar consumers were helped.
			B)	Domestic sugar consumers and foreign sugar producers were hurt.
			C)	Foreign sugar producers and domestic sugar producers were helped.
			D)	Foreign sugar producers were helped, but domestic sugar consumers were hurt.

Answer questions 12 – 15 using the following information: The domestic demand and supply for sugar are Q^d = 30,000 - 200 P and Q^SD = 10,000 + 100 P. The foreign supply is Q^SF = 5,000 + 300 P.

12			What is the domestic market price of sugar?
			A)	$50.
			B)	$25.
			C)	$75.
			D)	$67.
13			What is the domestic quantity supplied at the domestic market price?
			A)	20,000.
			B)	25,000.
			C)	15,000.
			D)	12,500.
14			Suppose an import quota of 5,000 is imposed in the domestic market. What will be the new market price of sugar?
			A)	$50.
			B)	$25.
			C)	$75.
			D)	$67.
15			How many units of sugar will domestic producers supply after the quota is imposed?
			A)	20,000.
			B)	25,000.
			C)	15,000.
			D)	12,500.