Question 1

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Accepted Answer

Pigovian taxes allow markets to coordina...

Question 2

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Accepted Answer

A) True 
 B)False

Question 3

A command-and-control policy is another term for a

Accepted Answer

A)  pollution permit.
B)  government regulation.
C)  corrective tax.
D)  Both a and b are correct.

Question 4

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Accepted Answer

A)  corrective tax.
B)  subsidy.
C)  command-and-control policy.
D)  market-based policy.

Question 5

A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Accepted Answer

A)  social value = private value = private cost 
B)  private cost 
C)  social cost = private cost = private value 
D)  social cost = private cost = private value = social value.

Question 6

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Accepted Answer

A)  taxing production, which would decrease supply.
B)  taxing production, which would increase supply.
C)  subsidizing production, which would decrease supply.
D)  subsidizing production, which would increase supply.

Question 7

Which of the following is not an effective method of reducing negative externalities?

Accepted Answer

A)  relying on voluntary compliance
B)  taxing the output of industries that pollute
C)  creating legal environmental standards
D)  increasing public spending on cleanup and reduction of pollution

Question 8

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Accepted Answer

A)  They are equal.
B)  The equilibrium quantity is greater than the socially optimal quantity.
C)  The equilibrium quantity is less than the socially optimal quantity.
D)  There is not enough information to answer the question.

Question 9

Once tradable pollution permits have been allocated to firms,

Accepted Answer

A)  the government controls the price of permits.
B)  firms that can reduce pollution only at high cost will be willing to pay the most for the pollution permits.
C)  the value of pollution-saving technology will be lower than the market value of a pollution permit.
D)  the Coase theorem is no longer applicable as a solution to reducing pollution.

Question 10

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should

Accepted Answer

A)  impose a corrective tax on any firm producing a technology spillover.
B)  offer tax credits to consumers who are adversely affected by the new technology.
C)  subsidize producers by an amount equal to the value of the technology spillover.
D)  provide research grants to those firms not currently engaging in research to increase competition in the industry.

Question 11

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Accepted Answer

Economists generally...

Question 12

Table 10-3 
-Refer to Table 10-3. The socially optimal quantity of output is

Accepted Answer

A)  3 units.
B)  4 units.
C)  5 units.
D)  6 units.

Question 13

Patents do not

Accepted Answer

A)  provide firms an incentive to research.
B)  assign property rights to inventors.
C)  protect the rights of inventors for their lifetimes.
D)  internalize externalities.

Question 14

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels?

Accepted Answer

A)  ​impose a tax on rain barrels that is equal to the per-unit externality
B)  ​offer a subsidy on rain barrels that is equal to the per-unit externality
C)  ​encourage homeowners to bargain with rain barrel producers
D)  nothing​

Question 15

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following:
• a private cost of $3.10;
• a social cost of $3.55;
• a value to consumers of $3.70.
-Refer to Scenario 10-1. The production of the 1,000th gallon of gasoline entails an

Accepted Answer

A)  external cost of $0.15.
B)  external cost of $0.45.
C)  external benefit of $0.15.
D)  external benefit of $0.45.

Question 16

Beverly owns a rabbit and receives a $600 benefit from owning it. Sometimes Beverly's rabbit makes its way onto the lawn of her neighbor, Charles, and eats the vegetables in Charles' garden. This intrusion by the rabbit costs Charles $400. Can both individuals become better off if Charles pays Beverly some amount of money to get rid of the rabbit? Explain.

Accepted Answer

No, since Beverly would requir...

Question 17

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Accepted Answer

A) True 
 B)False

Question 18

When correcting for an externality, command-and-control policies are always preferable to market-based policies.

Accepted Answer

A) True 
 B)False

Question 19

Corrective taxes are more efficient than regulations for keeping the environment clean.

Accepted Answer

A) True 
 B)False

Question 20

When externalities exist, buyers and sellers

Accepted Answer

A)  neglect the external effects of their actions, but the market equilibrium is still efficient.
B)  do not neglect the external effects of their actions, and the market equilibrium is efficient.
C)  neglect the external effects of their actions, and the market equilibrium is not efficient.
D)  do not neglect the external effects of their actions, and the market equilibrium is not efficient.

Exam 10: Externalities

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Correct Answer
verified

Correct Answer
verified

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct Answer
verified

Patents do not

Correct Answer
verified

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Correct Answer
verified

Correct Answer
verified
No, since Beverly would requir...
View Answer

When externalities exist, buyers and sellers

Correct Answer
verified

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Correct Answer
verified
Pigovian taxes allow markets to coordina...
View Answer

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should

Correct Answer
verified

A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Correct Answer
verified

Table 10-3 -Refer to Table 10-3. The socially optimal quantity of output is

Correct Answer
verified

Correct Answer
verified

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Correct Answer
verified

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Correct Answer
verified
Economists generally...
View Answer

A command-and-control policy is another term for a

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct Answer
verified

When correcting for an externality, command-and-control policies are always preferable to market-based policies.

Correct Answer
verified

Which of the following is not an effective method of reducing negative externalities?

Correct Answer
verified

Once tradable pollution permits have been allocated to firms,

Correct Answer
verified

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Correct Answer
verified

Exam 10: Externalities

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct AnswerverifiedShow Answer

Patents do not

Correct AnswerverifiedShow Answer

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNo, since Beverly would requir...View AnswerShow Answer

When externalities exist, buyers and sellers

Correct AnswerverifiedShow Answer

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Correct AnswerverifiedPigovian taxes allow markets to coordina...View AnswerShow Answer

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should

Correct AnswerverifiedShow Answer

A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Correct AnswerverifiedShow Answer

Table 10-3 -Refer to Table 10-3. The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Correct AnswerverifiedShow Answer

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Correct AnswerverifiedEconomists generally...View AnswerShow Answer

A command-and-control policy is another term for a

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct AnswerverifiedShow Answer

When correcting for an externality, command-and-control policies are always preferable to market-based policies.

Correct AnswerverifiedShow Answer

Which of the following is not an effective method of reducing negative externalities?

Correct AnswerverifiedShow Answer

Once tradable pollution permits have been allocated to firms,

Correct AnswerverifiedShow Answer

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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No, since Beverly would requir...
View Answer

Correct Answer
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Correct Answer
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Pigovian taxes allow markets to coordina...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Economists generally...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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