Question 1

Because there are positive externalities from higher education,

Accepted Answer

A)   private markets will under-supply college classes.
B)   private markets will over-supply college classes.
C)   the government should impose a tax on college students.
D)   government intervention cannot improve the market for college classes.

Question 2

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 3

Table 10-2
The following table shows the private value, private cost, and social value for a market with a positive externality.
 
-Refer to Table 10-2. What is the equilibrium quantity of output in this market?

Accepted Answer

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

Question 4

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 5

The term market failure refers to

Accepted Answer

A)   a market that fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand.
C)   ruthless competition among firms.
D)   a firm that is forced out of business because of losses.

Question 6

Which of the following statements is correct?

Accepted Answer

A)   Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost.
B)   Corrective taxes distort economic incentives.
C)   Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a faster rate.
D)   Both a and b are correct.

Question 7

Tradable pollution permits

Accepted Answer

A)   have prices that are set by the government.
B)   will be more valuable to firms that can reduce pollution only at high costs.
C)   are likely to create a higher level of total pollution.
D)   are less desirable than corrective taxes in reducing pollution.

Question 8

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

Accepted Answer

A)   pay your roommate at least $25 but no more than $50 to clean up after herself.
B)   pay your roommate at least $51 to clean up after herself.
C)   charge your roommate at least $25 to have you clean up after her.
D)   charge your roommate at least $50 but no more than $100 to keep you from complaining about the mess.

Question 9

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where is the quantity supplied.
 
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What particular tax or subsidy would move the market to the social optimum?

Accepted Answer

A tax of $12 per uni...

Question 10

In markets, the invisible hand allocates resources efficiently

Accepted Answer

A)   in all cases.
B)   when the buyers and sellers are the only interested parties.
C)   when there are positive externalities, but not when there are negative externalities.
D)   when there are negative externalities, but not when there are positive externalities.

Question 11

Melissa engages in an activity that influences the well-being of a bystander. In order for Melissa's activity to give rise to an externality, it must be the case that

Accepted Answer

A)   Melissa fails to recognize the impact of her activity on the bystander's well­being.
B)   the bystander fails to recognize the impact of Melissa's activity on his or her well­being.
C)   the well­being of the bystander is adversely impacted by Melissa's activity.
D)   Melissa neither pays nor receives any compensation for her activity.

Question 12

When a market experiences a positive externality,

Accepted Answer

A)   the demand curve does not reflect the value to society of the good.
B)   too much of the good is being produced.
C)   the government can internalize the externality by imposing a tax on the product.
D)   the private value is greater than the social value.

Question 13

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. Suppose the dollar amount of the externality, per gallon of gasoline, is constant, regardless of how much gasoline is produced. Then the externality could be internalized if producers of gasoline were

Accepted Answer

A)   provided a subsidy of $0.30 per gallon of gasoline sold.
B)   provided a subsidy of $0.45 per gallon of gasoline sold.
C)   required to pay a tax of $0.45 per gallon of gasoline sold.
D)   required to pay a tax of $0.30 per gallon of gasoline sold.

Question 14

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

Accepted Answer

A)   encourage the production of computer chips with subsidies.
B)   discourage the production of potato chips with taxes.
C)   encourage the production of potato chips with subsidies.
D)   discourage the production of computer chips with taxes.

Question 15

The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves, without government intervention, regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that electricity producers create a negative externality equal to $5 per unit. Further suppose that the government imposes a $5 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Accepted Answer

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

Question 17

Since almost all forms of transportation produce some type of pollution,

Accepted Answer

A)   the government should ban all transportation.
B)   the government should ban all pollution.
C)   society has to weigh the cost and benefits when deciding how much pollution to allow.
D)   refrain from intervening because the market can best solve this problem.

Question 18

The concept of external benefit is associated with a negative externality, but not with a positive externality.

Accepted Answer

A) True 
 B)False

Question 19

Research into new technologies conveys neither negative externalities nor positive externalities.

Accepted Answer

A) True 
 B)False

Question 20

Figure 10-4 
-Refer to Figure 10-4. Without government intervention, the equilibrium quantity would be

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.

Exam 10: Externalities

Correct Answer
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A tax of $12 per uni...
View Answer

The term market failure refers to

Correct Answer
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Correct Answer
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If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Because there are positive externalities from higher education,

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4. Without government intervention, the equilibrium quantity would be

Correct Answer
verified

Suppose that electricity producers create a negative externality equal to $5 per unit. Further suppose that the government imposes a $5 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Correct Answer
verified

The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves, without government intervention, regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

Correct Answer
verified

In markets, the invisible hand allocates resources efficiently

Correct Answer
verified

Melissa engages in an activity that influences the well-being of a bystander. In order for Melissa's activity to give rise to an externality, it must be the case that

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Tradable pollution permits

Correct Answer
verified

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. What is the equilibrium quantity of output in this market?

Correct Answer
verified

When a market experiences a positive externality,

Correct Answer
verified

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

Correct Answer
verified

The concept of external benefit is associated with a negative externality, but not with a positive externality.

Correct Answer
verified

Research into new technologies conveys neither negative externalities nor positive externalities.

Correct Answer
verified

Since almost all forms of transportation produce some type of pollution,

Correct Answer
verified

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Correct Answer
verified

Exam 10: Externalities

Correct AnswerverifiedA tax of $12 per uni...View AnswerShow Answer

The term market failure refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Because there are positive externalities from higher education,

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4. Without government intervention, the equilibrium quantity would be

Correct AnswerverifiedShow Answer

Suppose that electricity producers create a negative externality equal to $5 per unit. Further suppose that the government imposes a $5 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Correct AnswerverifiedShow Answer

The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves, without government intervention, regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

Correct AnswerverifiedShow Answer

In markets, the invisible hand allocates resources efficiently

Correct AnswerverifiedShow Answer

Melissa engages in an activity that influences the well-being of a bystander. In order for Melissa's activity to give rise to an externality, it must be the case that

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Tradable pollution permits

Correct AnswerverifiedShow Answer

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. What is the equilibrium quantity of output in this market?

Correct AnswerverifiedShow Answer

When a market experiences a positive externality,

Correct AnswerverifiedShow Answer

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

Correct AnswerverifiedShow Answer

The concept of external benefit is associated with a negative externality, but not with a positive externality.

Correct AnswerverifiedShow Answer

Research into new technologies conveys neither negative externalities nor positive externalities.

Correct AnswerverifiedShow Answer

Since almost all forms of transportation produce some type of pollution,

Correct AnswerverifiedShow Answer

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Correct AnswerverifiedShow Answer

Correct Answer
verified
A tax of $12 per uni...
View Answer

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verified

Correct Answer
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Correct Answer
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Correct Answer
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