In a market economy, government intervention（）
A. will always improve market outcomes
B. reduces efficiency in the presence of externalities
C. may improve market outcomes in the presence of externalities
D. is necessary to control individual greed
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The free-rider problem（）
A. forces the supply of a public good to exceed its demand
B. results in common resources becoming club goods
C. explains why many local governments supply public goods
D. results in public goods becoming private goods
Inefficiency can be caused in a market by the presence of（）
A. market power
B. externalities
C. imperfectly competitive markets
D. All the answers are correct
Coffee and tea are substitutes. Bad weather that sharply reduces the coffee bean harvest would（）
A. increase consumer surplus in the market for coffee and decrease producer surplus in the market for tea
B. increase consumer surplus in the market for coffee and increase producer surplus in the market for tea
C. decrease consumer surplus in the market for coffee and increase producer surplus in the market for tea
D. decrease consumer surplus in the market for coffee and decrease producer surplus in the market for tea
If the current allocation of resources in the market for hammers is inefficient, then it must be the case that（）
A. producer surplus exceeds consumer surplus in the market for hammers
B. consumer surplus exceeds producer surplus in the market for hammers
C. the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources
D. the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources
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