Deck 2: Consumer Welfare: Is It Necessary to Protect the Consumer

Question 1

The argument that the consumer is sovereign holds that

A) consumers must be protected by government.
B) consumers are the real source of power in the market.
C) consumers are by nature irrational.
D) None of the above.

Answer 1

B

Question 2

The view that caveat emptor must be replaced by caveat venditor is most closely associated with

A) Liberals and Radicals.
B) Conservatives.
C) Conservatives and Liberals.
D) Liberals.

Answer 2

A

Question 3

According to the concept of consumer sovereignty, consumers

A) should be protected from defective products.
B) demand for goods is manipulated by advertisers.
C) should join together into consumer protection action groups.
D) are and should be the final authority in determining output and prices.

Answer 3

D

Question 4

Caveat emptor

A) suggests that sellers really are more powerful than consumers.
B) is the slogan of the consumer protection movement.
C) means "seller beware."
D) was the title of a book written by Ralph Nader.

Question 5

Using a cost-benefit analysis, most Liberals conclude that

A) automakers have charged consumers too much for safety.
B) it is impossible to calculate the benefits from auto safety.
C) costs associated with safer cars have more than paid for themselves in reduced accident and damage claims.
D) All of the above.

Question 6

An example of the "external costs" of auto production is

A) higher pollution levels.
B) retail costs of auto safety equipment.
C) increased competition due to government interference in the market.
D) the cost of automobiles prior to the installation of safety features.

Question 7

Since the imposition of auto safety codes, the ratio of deaths to drivers has

A) increased.
B) decreased.
C) stayed about the same.
D) cannot be determined at this point in time.

Question 8

According to the Radical view

A) consumer protectionism is a highly effective restraint on the growth of corporate power.
B) consumer protection has had little negative effect on corporate profitability.
C) the Conservative and Liberal views represent a sharp choice on the role of consumer activity.
D) higher-priced autos will mostly have an adverse impact on wealthy consumers compared to less well-off consumers.

Question 9

When confronted with Liberal claims that the monetary benefits from auto safety have exceeded costs, Conservatives

A) concede that may in fact be the case.
B) believe that new cars are less safe than they need be.
C) point out that factors other than auto safety may have reduced auto injuries and deaths.
D) None of the above.

Question 10

Conservatives see as one of the effects of auto safety standards

A) reduced use of unsafe cars.
B) increased profitability for auto producers.
C) an increase in demand for automobiles.
D) excessive growth of government bureaucracy.

Question 11

Liberals maintain that auto safety standards

A) add no cost to retail auto prices.
B) add to private costs but produce greater social gains.
C) would have been voluntarily introduced by auto producers.
D) are not important to auto safety.

Question 12

Radicals maintain that

A) auto safety has been used to increase corporate profitability.
B) auto safety is unimportant.
C) safety standards are too high.
D) auto prices should be kept low so that everyone can afford them.

Question 13

Conservatives are against laws banning cell phone use while driving because

A) alleged benefits are too imprecise.
B) they distract drivers and increase car accidents.
C) auto producers would increase profits.
D) they promote driver awareness of traffic.

Question 14

Liberals tend to value cost-benefit analysis techniques than do Conservatives.

Question 15

Consumer sovereignty and caveat emptor are mutually exclusive concepts.

Question 16

Concern over third-party (e.g., auto insurance company) costs is one of the basic justifications in the Liberal argument for auto safety standards.

Question 17

If the demand for automobiles is elastic, higher prices for safety should reduce total dollar sales.

Question 18

Radicals claim automobile safety standards improve consumer sovereignty.

Question 19

The external costs of automobiles would be reduced, Liberals argue, if the price of cars were greatly increased.

Question 20

Conservatives claim that the demand for autos is inelastic.

Question 21

Radicals claim that product safety concerns divert attention from the fundamentally irrational patterns of consumption and production.

Question 22

Ford Motor Company's experience in the late 1970s indicated that consumers were willing to pay the costs for greater safety.

Question 23

Consumer sovereignty and consumer protection are roughly equivalent economic concepts.