Question 1

Figure 10-19 
-Refer to Figure 10-19. Each additional unit of the good that is produced yields an external

Accepted Answer

A)   benefit of $15.
B)   benefit of $36.
C)   cost of $15.
D)   cost of $36.E) B) and C)
F) All of the above

Question 2

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

Accepted Answer

A)   social cost minus social value
B)   social value minus private cost
C)   demand
D)   private value plus external benefitE) A) and D)
F) B) and D)

Question 3

Figure 10-19 
-Refer to Figure 10-19. Each additional unit of the good that is produced yields an external benefit of

Accepted Answer

A)   $15.
B)   $23.
C)   $36.
D)   $89.E) All of the above
F) A) and B)

Question 4

A negative externality

Accepted Answer

A)   is a cost to a bystander.
B)   is a cost to the buyer.
C)   is a cost to the seller.
D)   exists with all market transactions.E) C) and D)
F) None of the above

Question 5

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, a government policy that internalized the externality would move the quantity of antibiotics used from point

Accepted Answer

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

Question 6

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics.  Multiple Choice - Section 02: Public Policies toward Externalities
-Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Accepted Answer

A)   social optimum has been reached.
B)   market equilibrium has been reached.
C)   government must have imposed a corrective tax to guide the market to this outcome.
D)   government must have offered a corrective subsidy to guide the market to this outcome.E) A) and B)
F) None of the above

Question 7

Wally owns a dog whose barking annoys Wally's neighbor, Corrine. Suppose that the benefit of owning the dog is worth $700 to Wally and that Corrine bears a cost of $500 from the barking. Assuming Wally has the legal right to keep the dog, a possible private solution to this problem is that

Accepted Answer

A)   Wally pays Corrine $600 for her inconvenience.
B)   Corrine pays Wally $400 to give the dog to his parents who live on an isolated farm.
C)   Corrine pays Wally $550 to give the dog to his parents who live on an isolated farm.
D)   The current situation is efficient.E) C) and D)
F) None of the above

Question 8

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.E) A) and D)
F) None of the above

Question 9

Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a way to address an externality problem?

Accepted Answer

A)   command and control solution
B)   corrective tax
C)   corrective subsidy
D)   all of the above.E) B) and C)
F) A) and B)

Question 11

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 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored 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. Could the government impose a tax or provide a subsidy to move the market to the social optimum? If your answer is "Yes," should it be a tax or should it be a subsidy?

Accepted Answer

The government could...

Question 12

Figure 10-8 
-Refer to Figure 10-8. What is the equilibrium price in this market?

Accepted Answer

A)   $8
B)   More than $10
C)   Between $8 and $10
D)   $10E) None of the above
F) B) and D)

Question 13

In a certain city, the local government regulates the destruction of historic buildings and provides tax breaks to owners of historic buildings who restore them. These government policies

Accepted Answer

A)   reflect the fact that restored historic buildings convey a positive externality.
B)   reflect the fact that the destruction of historic buildings conveys a positive externality.
C)   are likely to worsen the market failure that is associated with historic buildings and the restoration of such buildings.
D)   are likely to decrease the well-being of society as a whole.E) None of the above
F) All of the above

Question 14

Which of the following statements is correct?

Accepted Answer

A)   The use of pollution permits and corrective taxes reduces the cost of environmental protection.
B)   Rich countries usually have cleaner environments than poor countries because a clean environment is like other normal goods in that it has a positive income elasticity.
C)   Clean water and clean air are goods to which the law of demand applies.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 15

Assuming transaction costs are small, the Coase theorem would predict that private parties could arrive at an efficient solution for which of the following problems?

Accepted Answer

A)   One neighbor doesn't mow his lawn.
B)   One neighbor doesn't paint her house.
C)   One neighbor comes home on his noisy motorcycle late at night.
D)   All of the above are correct.E) C) and D)
F) B) and D)

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

Question 17

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Accepted Answer

A) True 
 B)False

Question 18

At any given quantity, the willingness to pay in the market for gasoline is reflected in the

Accepted Answer

A)   height of the demand curve at that quantity.
B)   height of the supply curve at that quantity.
C)   value to the producer of the last unit of gasoline sold.
D)   total quantity of gasoline exchanged in the market.E) C) and D)
F) A) and C)

Question 19

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

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

Question 20

Which of the following suggests that private markets can be effective in dealing with externalities?

Accepted Answer

A)   the "invisible hand"
B)   the law of diminishing social returns
C)   the Coase theorem
D)   technology policyE) A) and B)
F) A) and C)

Exam 10: Externalities

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Correct Answer
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Assuming transaction costs are small, the Coase theorem would predict that private parties could arrive at an efficient solution for which of the following problems?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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Wally owns a dog whose barking annoys Wally's neighbor, Corrine. Suppose that the benefit of owning the dog is worth $700 to Wally and that Corrine bears a cost of $500 from the barking. Assuming Wally has the legal right to keep the dog, a possible private solution to this problem is that

Correct Answer
verified

In a certain city, the local government regulates the destruction of historic buildings and provides tax breaks to owners of historic buildings who restore them. These government policies

Correct Answer
verified

Patents do not

Correct Answer
verified

Which of the following is a way to address an externality problem?

Correct Answer
verified

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

Correct Answer
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Figure 10-8 -Refer to Figure 10-8. What is the equilibrium price in this market?

Correct Answer
verified

Correct Answer
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The government could...
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At any given quantity, the willingness to pay in the market for gasoline is reflected in the

Correct Answer
verified

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

Correct Answer
verified

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Correct Answer
verified

Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

Correct Answer
verified

A negative externality

Correct Answer
verified

Figure 10-19 -Refer to Figure 10-19. Each additional unit of the good that is produced yields an external benefit of

Correct Answer
verified

Which of the following suggests that private markets can be effective in dealing with externalities?

Correct Answer
verified

Figure 10-19 -Refer to Figure 10-19. Each additional unit of the good that is produced yields an external

Correct Answer
verified

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, a government policy that internalized the externality would move the quantity of antibiotics used from point

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

Exam 10: Externalities

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Correct AnswerverifiedShow Answer

Assuming transaction costs are small, the Coase theorem would predict that private parties could arrive at an efficient solution for which of the following problems?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Wally owns a dog whose barking annoys Wally's neighbor, Corrine. Suppose that the benefit of owning the dog is worth $700 to Wally and that Corrine bears a cost of $500 from the barking. Assuming Wally has the legal right to keep the dog, a possible private solution to this problem is that

Correct AnswerverifiedShow Answer

In a certain city, the local government regulates the destruction of historic buildings and provides tax breaks to owners of historic buildings who restore them. These government policies

Correct AnswerverifiedShow Answer

Patents do not

Correct AnswerverifiedShow Answer

Which of the following is a way to address an externality problem?

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

Figure 10-8 -Refer to Figure 10-8. What is the equilibrium price in this market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe government could...View AnswerShow Answer

At any given quantity, the willingness to pay in the market for gasoline is reflected in the

Correct AnswerverifiedShow Answer

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

Correct AnswerverifiedShow Answer

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Correct AnswerverifiedShow Answer

Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

Correct AnswerverifiedShow Answer

A negative externality

Correct AnswerverifiedShow Answer

Figure 10-19 -Refer to Figure 10-19. Each additional unit of the good that is produced yields an external benefit of

Correct AnswerverifiedShow Answer

Which of the following suggests that private markets can be effective in dealing with externalities?

Correct AnswerverifiedShow Answer

Figure 10-19 -Refer to Figure 10-19. Each additional unit of the good that is produced yields an external

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, a government policy that internalized the externality would move the quantity of antibiotics used from point

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

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The government could...
View Answer

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