Question 1

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.

Question 2

According to the Coase theorem,in the presence of externalities

Accepted Answer

A)   private parties can bargain to reach an efficient outcome.
B)   government assistance is necessary to reach an efficient outcome.
C)   the assignment of legal rights can prevent externalities.
D)   the initial distribution of property rights will determine the efficient outcome.

Question 3

An externality is

Accepted Answer

A)   the costs that parties incur in the process of agreeing and following through on a bargain.
B)   the uncompensated impact of one person's actions on the well-being of a bystander.
C)   the proposition that private parties can bargain without cost over the allocation of resources.
D)   a market equilibrium tax.

Question 4

An externality is the impact of

Accepted Answer

A)   society's decisions on the well-being of society.
B)   a person's actions on that person's well-being.
C)   one person's actions on the well-being of a bystander.
D)   society's decisions on the poorest person in the society.

Question 5

A cost imposed on someone who is neither the consumer nor the producer is called a

Accepted Answer

A)   corrective tax.
B)   command and control policy.
C)   positive externality.
D)   negative externality.

Question 6

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

Accepted Answer

A)   regulation.
B)   corrective tax.
C)   subsidy.
D)   market-based policy.

Question 7

Figure 10-12 
-Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

Accepted Answer

A)   social cost minus social value
B)   social value minus private cost
C)   demand
D)   private cost

Question 8

Which of the following statements is correct?

Accepted Answer

A)   Gasoline taxes are an example of an EPA regulation.
B)   Gasoline taxes are higher in many European countries than in the United States.
C)   Gasoline taxes contribute to global warming.
D)   Gasoline taxes are an example of a command-and-control policy.

Question 9

Honey producers provide a positive externality to orchards because

Accepted Answer

A)   the honey producers get more honey.
B)   the orchard owner frequently gets stung by the honey producer's bees.
C)   the orchard owner does not have to purchase bees to pollinate his flowers.
D)   the honey producers have to rent access to the orchard grounds.

Question 10

The goal of industrial policy should be that

Accepted Answer

A)   industries yielding the largest positive externalities should receive the biggest subsidies.
B)   any industry that produces negative externalities should be heavily taxed.
C)   any production process that produces negative externalities should be shut down.
D)   all industries that produce positive externalities should be equally subsidized.

Question 11

If a sawmill creates too much noise for local residents,

Accepted Answer

A)   noise restrictions will force residents to move out of the area.
B)   a sense of social responsibility will cause owners of the mill to reduce noise levels.
C)   the government can raise economic well-being through noise-control regulations.
D)   the government should avoid intervening because the market will allocate resources efficiently.

Question 12

Figure 10-5 0 and Q1. B)  P2 and Q1. C)  P1 and Q0. D)  P2 and Q0." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-5.Which price and quantity combination represents the social optimum?

Accepted Answer

A)   P0 and Q1.
B)   P2 and Q1.
C)   P1 and Q0.
D)   P2 and Q0.

Question 13

Which of the following is the most effective way to internalize a technology spillover?

Accepted Answer

A)   taxes
B)   patents
C)   government regulations
D)   free markets

Question 14

In which of the following cases is the Coase theorem most likely to solve the externality?

Accepted Answer

A)   Ed is allergic to his roommate's cat.
B)   Chemicals from manufacturing plants in the Midwest are causing acid rain in Canada.
C)   Polluted water runoff from farms is making residents of a nearby town sick.
D)   Industrialization around the world is causing global warming.

Question 15

Emma is a writer who works from her home.Emma lives next door to Clay,the drummer for a local band.Clay needs lots of practice to earn his share of the band's profit,which will amount to $250.Emma gets distracted by Clay's drumming but needs to get her writing done to earn $500 for her current article.If Emma needs to hire a lawyer to help her reach an agreement with Clay,then what price is Emma willing to pay the lawyer?

Accepted Answer

A)   less than $250
B)   less than $450
C)   less than $500
D)   less than $750

Question 16

Which of the following helped reduce sulfur dioxide emissions,a leading cause of acid rain? (i) corrective taxes
(ii) tradable pollution permits
(iii) amendments to the Clean Air Act

Accepted Answer

A)   (i) only
B)   both (i) and (ii) 
C)   (iii) only
D)   both (ii) and (iii)

Question 17

Technology spillover is one type of

Accepted Answer

A)   negative externality.
B)   positive externality.
C)   subsidy.
D)   producer surplus.

Question 18

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $12 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 19

When a transaction between a buyer and seller directly affects a third party,the effect is called an externality.

Accepted Answer

A) True 
 B)False

Question 20

Figure 10-12 
-Refer to Figure 10-12.Which of the following is an appropriate label for Line 2?

Accepted Answer

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

Exam 10: Externalities

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $12 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

An externality is the impact of

Correct Answer
verified

If a sawmill creates too much noise for local residents,

Correct Answer
verified

A cost imposed on someone who is neither the consumer nor the producer is called a

Correct Answer
verified

When a transaction between a buyer and seller directly affects a third party,the effect is called an externality.

Correct Answer
verified

Honey producers provide a positive externality to orchards because

Correct Answer
verified

According to the Coase theorem,in the presence of externalities

Correct Answer
verified

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

Correct Answer
verified

Technology spillover is one type of

Correct Answer
verified

The goal of industrial policy should be that

Correct Answer
verified

Which of the following is the most effective way to internalize a technology spillover?

Correct Answer
verified

Figure 10-5 -Refer to Figure 10-5.Which price and quantity combination represents the social optimum?

Correct Answer
verified

In which of the following cases is the Coase theorem most likely to solve the externality?

Correct Answer
verified

An externality is

Correct Answer
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Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

Correct Answer
verified

Which of the following helped reduce sulfur dioxide emissions,a leading cause of acid rain? (i) corrective taxes (ii) tradable pollution permits (iii) amendments to the Clean Air Act

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

When externalities exist,buyers and sellers

Correct Answer
verified

Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 2?

Correct Answer
verified

Exam 10: Externalities

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $12 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

An externality is the impact of

Correct AnswerverifiedShow Answer

If a sawmill creates too much noise for local residents,

Correct AnswerverifiedShow Answer

A cost imposed on someone who is neither the consumer nor the producer is called a

Correct AnswerverifiedShow Answer

When a transaction between a buyer and seller directly affects a third party,the effect is called an externality.

Correct AnswerverifiedShow Answer

Honey producers provide a positive externality to orchards because

Correct AnswerverifiedShow Answer

According to the Coase theorem,in the presence of externalities

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Technology spillover is one type of

Correct AnswerverifiedShow Answer

The goal of industrial policy should be that

Correct AnswerverifiedShow Answer

Which of the following is the most effective way to internalize a technology spillover?

Correct AnswerverifiedShow Answer

Figure 10-5 -Refer to Figure 10-5.Which price and quantity combination represents the social optimum?

Correct AnswerverifiedShow Answer

In which of the following cases is the Coase theorem most likely to solve the externality?

Correct AnswerverifiedShow Answer

An externality is

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

Correct AnswerverifiedShow Answer

Which of the following helped reduce sulfur dioxide emissions,a leading cause of acid rain? (i) corrective taxes (ii) tradable pollution permits (iii) amendments to the Clean Air Act

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

When externalities exist,buyers and sellers

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 2?

Correct AnswerverifiedShow Answer

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