Question 1

Which of the following is an advantage of tradable pollution permits?

Accepted Answer

A)   Each firm is allowed to pollute exactly the same amount.
B)   Revenue from the sale of permits is greater than revenue from a corrective tax.
C)   The initial allocation of permits to firms does not affect the efficiency of the market.
D)   Firms will engage in joint research efforts to reduce pollution.E) A) and C)
F) All of the above

Question 2

Markets are often inefficient when negative externalities are present because

Accepted Answer

A)   private costs exceed social costs at the private market solution.
B)   externalities cannot be corrected without government regulation.
C)   social costs exceed private costs at the private market solution.
D)   production externalities lead to consumption externalities.E) None of the above
F) C) and D)

Question 3

Externalities can be corrected by each of the following except

Accepted Answer

A)   self-interest.
B)   moral codes and social sanctions.
C)   charity.
D)   normal market adjustments.E) A) and B)
F) A) and C)

Question 4

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.E) B) and C)
F) A) and B)

Question 5

Which of the following illustrates the concept of a negative externality?

Accepted Answer

A)   A college professor plays a vigorous game of racquet ball with the racquet he recently purchased.
B)   A flood wipes out a farmer's corn crop.
C)   A college student plays loud music on his new stereo system at 2:00 a.m.
D)   A janitor eats a hamburger during his lunch break.E) B) and C)
F) A) and D)

Question 6

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.E) All of the above
F) C) and D)

Question 7

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.E) All of the above
F) A) and B)

Question 8

Which of the following statements is not correct?

Accepted Answer

A)   Private markets tend to over-produce products with negative externalities.
B)   Private markets tend to under-produce products with positive externalities.
C)   Private parties can bargain to efficient outcomes even in the presence of externalities.
D)   Private parties are usually more successful in achieving efficient outcomes than government policies.E) B) and D)
F) All of the above

Question 9

Which of the following is not an effective method to reduce 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 pollutionE) A) and C)
F) A) and D)

Question 10

Reaching an efficient bargain is difficult when the

Accepted Answer

A)   externality is large.
B)   number of interested parties is large.
C)   externality is negative.
D)   government becomes involved.E) B) and C)
F) A) and D)

Question 11

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

Accepted Answer

A)   social cost
B)   social value
C)   private cost
D)   private valueE) None of the above
F) B) and D)

Question 12

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $5 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.E) All of the above
F) A) and B)

Question 13

Which of the following is NOT a way of internalizing technology spillovers?

Accepted Answer

A)   subsidies
B)   patent protection
C)   industrial policy
D)   taxesE) B) and C)
F) None of the above

Question 14

Technology spillover occurs when

Accepted Answer

A)   a firm passes the high costs of technical research on to society through higher prices.
B)   a firm's research yields technical knowledge that is used by society as a whole.
C)   the government subsidizes firms engaged in high-tech research.
D)   copyright laws prohibit firms from profiting from the research of others.E) A) and C)
F) All of the above

Question 15

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward.The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2.Is there an external cost associated with the restoration of the 50th historic building,or is there an external benefit? What is the amount of that external cost or external benefit?

Accepted Answer

There is an external benefit o...

Question 16

Figure 10-9   
-Refer to Figure 10-9.Which graph represents a market with a negative externality?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   Both (b) and (c) are correct.E) A) and B)
F) B) and C)

Question 17

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

Accepted Answer

Pigovian taxes allow markets to coordina...

Question 18

Figure 10-19 
-Refer to Figure 10-19.The socially optimal quantity of output is

Accepted Answer

A)   58 units.
B)   73 units.
C)   between 73 and 94 units.
D)   94 units.E) C) and D)
F) None of the above

Question 19

Figure 10-11 
-Refer to Figure 10-11."The social value of the last unit produced exceeds the private cost of the last unit produced by $9." This statement is correct at which quantity of output?

Accepted Answer

A)   140 units
B)   180 units
C)   220 units
D)   260 unitsE) B) and D)
F) C) and D)

Question 20

Although regulation and corrective taxes are both capable of reducing pollution,regulation accomplishes this goal more efficiently.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with a negative externality?

Correct Answer
verified

Figure 10-11 -Refer to Figure 10-11."The social value of the last unit produced exceeds the private cost of the last unit produced by $9." This statement is correct at which quantity of output?

Correct Answer
verified

Reaching an efficient bargain is difficult when the

Correct Answer
verified

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

Correct Answer
verified

Technology spillover occurs when

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

Which of the following statements is not correct?

Correct Answer
verified

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

Correct Answer
verified

Markets are often inefficient when negative externalities are present because

Correct Answer
verified

Which of the following illustrates the concept of a negative externality?

Correct Answer
verified

Correct Answer
verified
There is an external benefit o...
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

Which of the following is an advantage of tradable pollution permits?

Correct Answer
verified

Although regulation and corrective taxes are both capable of reducing pollution,regulation accomplishes this goal more efficiently.

Correct Answer
verified

Externalities can be corrected by each of the following except

Correct Answer
verified

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

Correct Answer
verified

Figure 10-19 -Refer to Figure 10-19.The socially optimal quantity of output is

Correct Answer
verified

Which of the following is NOT a way of internalizing technology spillovers?

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $5 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

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

Correct Answer
verified

Exam 10: Externalities

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with a negative externality?

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11."The social value of the last unit produced exceeds the private cost of the last unit produced by $9." This statement is correct at which quantity of output?

Correct AnswerverifiedShow Answer

Reaching an efficient bargain is difficult when the

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

Technology spillover occurs when

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

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Markets are often inefficient when negative externalities are present because

Correct AnswerverifiedShow Answer

Which of the following illustrates the concept of a negative externality?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThere is an external benefit o...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

Which of the following is an advantage of tradable pollution permits?

Correct AnswerverifiedShow Answer

Although regulation and corrective taxes are both capable of reducing pollution,regulation accomplishes this goal more efficiently.

Correct AnswerverifiedShow Answer

Externalities can be corrected by each of the following except

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

Figure 10-19 -Refer to Figure 10-19.The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

Which of the following is NOT a way of internalizing technology spillovers?

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $5 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

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
There is an external benefit o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified