Question 1

A positive externality occurs when

Accepted Answer

A)   Jack receives a benefit from John's consumption of a certain good.
B)   Jack receives personal benefits from his own consumption of a certain good.
C)   Jack's benefit exceeds John's benefit when they each consume the same good.
D)   Jack's receives a loss from John's consumption of a certain good.E) A) and B)
F) None of the above

Question 2

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following require firms to pay to pollute? (i) corrective taxes
(ii) tradable pollution permits
(iii) pollution regulations

Accepted Answer

A)   (i) only
B)   both (i) and (ii) 
C)   (iii) only
D)   both (ii) and (iii) E) B) and C)
F) None of the above

Question 4

When an externality is present,the market equilibrium is

Accepted Answer

A)   efficient,and the equilibrium maximizes the total benefit to society as a whole.
B)   efficient,but the equilibrium does not maximize the total benefit to society as a whole.
C)   inefficient,but the equilibrium maximizes the total benefit to society as a whole.
D)   inefficient,and the equilibrium does not maximize the total benefit to society as a whole.E) All of the above
F) None of the above

Question 5

A corrective tax

Accepted Answer

A)   allocates pollution to those factories that face the highest cost of reducing it.
B)   is a form of regulation.
C)   works well for all types of externalities.
D)   is inferior to regulatory policy according to most economists.E) All of the above
F) C) and D)

Question 6

Which of the following is not correct?

Accepted Answer

A)   Markets allocate scarce resources with the forces of supply and demand.
B)   The equilibrium of supply and demand is typically an efficient allocation of resources.
C)   Governments can sometimes improve market outcomes.
D)   Externalities cannot be positive.E) All of the above
F) B) and C)

Question 7

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that flower gardens create a positive externality equal to $1 per plant.What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

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) C) and D)
F) A) and B)

Question 9

Figure 10-9   
-Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the external benefit of smokestack scrubber installation is represented by

Accepted Answer

A)   Q3 - Q2.
B)   Q5 - Q4.
C)   P3a - P3b.
D)   P4a - P4b.E) B) and D)
F) A) and C)

Question 10

The Coase theorem states that

Accepted Answer

A)   under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present.
B)   government intervention is always required to reach an efficient outcome when an externality is present.
C)   government intervention cannot lead to an efficient outcome when an externality is present.
D)   only negative externalities can be resolved using government intervention.E) C) and D)
F) A) and D)

Question 11

Figure 10-11 th unit of output is $16. B)  The social value of the 160th unit of output is $28. C)  The external benefit of the 160th unit of output is $6. D)  All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-11.Which of the following statements is correct?

Accepted Answer

A)   The private value of the 160th unit of output is $16.
B)   The social value of the 160th unit of output is $28.
C)   The external benefit of the 160th unit of output is $6.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 12

Which of the following represents a way that a government can help the private market to internalize an externality?

Accepted Answer

A)   taxing goods that have negative externalities
B)   subsidizing goods that have positive externalities
C)   The government cannot improve upon the outcomes of private markets.
D)   Both a and b are correct.E) All of the above
F) B) and D)

Question 13

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) A) and C)
F) None of the above

Question 14

Figure 10-19 
-Refer to Figure 10-19.Note that the lines labeled "Demand" and "Social Value"are parallel.Also,the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of the good that is consumed,and (2) private cost increases by $1.40 with each additional unit of the good that is produced.Thus,when the 59th unit of the good is produced and consumed,social well-being increases by

Accepted Answer

A)   $28.00.
B)   $31.40.
C)   $33.60.
D)   $36.00.E) B) and D)
F) All of the above

Question 15

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill,the policy would be considered

Accepted Answer

A)   a subsidy.
B)   a regulation.
C)   a corrective tax.
D)   an application of the Coase theorem.E) B) and C)
F) A) and B)

Question 16

Corrective taxes

Accepted Answer

A)   encourage consumers to avoid sales taxes by shopping online.
B)   are frequently used to discourage imports.
C)   are less efficient than direct regulation.
D)   give factory owners an economic incentive to reduce pollution.E) All of the above
F) B) and D)

Question 17

Table 10-6
The following table shows the total costs for each of four firms (A,B,C,and D) to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $46,and for Firm A to eliminate two units of pollution,it would cost a total of $103.
 
-Refer to Table 10-6.If the government charged a fee of $93 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   5
B)   8
C)   11
D)   13E) B) and D)
F) A) and B)

Question 18

Figure 10-9   
-Refer to Figure 10-9,Panel (b) and Panel (c) .The overuse of antibiotics leads to the development of antibiotic-resistant diseases.Therefore,the socially optimal quantity of antibiotics is represented by point

Accepted Answer

A)   Q2.
B)   Q3.
C)   Q4.
D)   Q5.E) A) and B)
F) A) and C)

Question 19

Figure 10-11 
-Refer to Figure 10-11.A benevolent social planner would prefer

Accepted Answer

A)   a $28 price to any other price.
B)   280 units to any other quantity of output.
C)   a subsidy of $18 per unit to a subsidy of $12 per unit.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 20

Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. 
-Refer to Figure 10-13.If 250 units of plastics are produced and consumed,then the

Accepted Answer

A)   social optimum has been reached.
B)   market equilibrium has been reached.
C)   negative externality associated with plastics has been eliminated.
D)   positive externality associated with plastics has been eliminated.E) B) and D)
F) None of the above

Exam 10: Externalities

Which of the following is not correct?

Correct Answer
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Corrective taxes

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A corrective tax

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When an externality is present,the market equilibrium is

Correct Answer
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Figure 10-11 -Refer to Figure 10-11.Which of the following statements is correct?

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Suppose that flower gardens create a positive externality equal to $1 per plant.What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

Correct Answer
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Correct Answer
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Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13.If 250 units of plastics are produced and consumed,then the

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

Correct Answer
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Which of the following represents a way that a government can help the private market to internalize an externality?

Correct Answer
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Firms that can reduce pollution easily would be willing to sell their pollution permits.

Correct Answer
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The Coase theorem states that

Correct Answer
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A positive externality occurs when

Correct Answer
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Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The overuse of antibiotics leads to the development of antibiotic-resistant diseases.Therefore,the socially optimal quantity of antibiotics is represented by point

Correct Answer
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Figure 10-11 -Refer to Figure 10-11.A benevolent social planner would prefer

Correct Answer
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Which of the following require firms to pay to pollute? (i) corrective taxes (ii) tradable pollution permits (iii) pollution regulations

Correct Answer
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Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the external benefit of smokestack scrubber installation is represented by

Correct Answer
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In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Correct Answer
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If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill,the policy would be considered

Correct Answer
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Exam 10: Externalities

Which of the following is not correct?

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Corrective taxes

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A corrective tax

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When an externality is present,the market equilibrium is

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose that flower gardens create a positive externality equal to $1 per plant.What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13.If 250 units of plastics are produced and consumed,then the

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 represents a way that a government can help the private market to internalize an externality?

Correct AnswerverifiedShow Answer

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Correct AnswerverifiedShow Answer

The Coase theorem states that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A positive externality occurs when

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The overuse of antibiotics leads to the development of antibiotic-resistant diseases.Therefore,the socially optimal quantity of antibiotics is represented by point

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11.A benevolent social planner would prefer

Correct AnswerverifiedShow Answer

Which of the following require firms to pay to pollute? (i) corrective taxes (ii) tradable pollution permits (iii) pollution regulations

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the external benefit of smokestack scrubber installation is represented by

Correct AnswerverifiedShow Answer

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Correct AnswerverifiedShow Answer

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill,the policy would be considered

Correct AnswerverifiedShow Answer

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