Question 1

Which of the following is not a necessary condition for the Coase theorem?

Accepted Answer

A)  Property rights are clearly defined.
B)  The costs of bargaining are sufficiently low.
C)  The government intervenes to internalize the externality.
D)  There are only a few parties involved.E) B) and D)
F) A) and D)

Question 2

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Accepted Answer

A)  Corrective taxes apply only to goods that are bad for people's health, such as cigarettes and alcohol.
B)  Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders.
C)  Corrective taxes provide incentives for the conservation of natural resources.
D)  Corrective taxes do not affect deadweight loss.E) C) and D)
F) All of the above

Question 3

​The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

Accepted Answer

A)  ​a corrective tax.
B)  ​a corrective subsidy.
C)  ​a command-and-control policy.
D)  ​the Coase Theorem.E) None of the above
F) B) and D)

Question 4

According to the Coase theorem, private parties can solve the problem of externalities if

Accepted Answer

A)  the cost of bargaining is small.
B)  the initial distribution of legal rights favors the person being adversely affected by the externality.
C)  the number of parties involved is sufficiently large.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 5

Figure 10-10 
-Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Accepted Answer

A)  120 units
B)  140 units
C)  160 units
D)  The statement is true at all quantities of output.E) B) and C)
F) C) and D)

Question 6

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

Accepted Answer

A)  ​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel accepts, and both parties are better off.
B)  ​Sophia offers Gabriel between $0 and $10 to not recline his seat. Gabriel accepts, and Sophia is better off.
C)  ​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel declines because he has the right to recline his seat.
D)  ​Gabriel offers Sophia between $10 and $40 to recline his seat. Sophia accepts, and both parties are better off.E) A) and D)
F) C) and D)

Question 7

A corrective tax

Accepted Answer

A)  can be used to internalize a negative externality.
B)  imposed on sellers shifts the supply curve to the left.
C)  imposed on buyers shifts the demand curve to the left.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 8

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When a negative externality exists, the...

Question 9

When the social cost curve is above a product's supply curve,

Accepted Answer

A)  the government has intervened in the market.
B)  a negative externality exists in the market.
C)  a positive externality exists in the market.
D)  the distribution of resources is unfair.E) B) and C)
F) A) and D)

Question 10

Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the

Accepted Answer

A)  private benefit equals the social benefit at the private market solution.
B)  private cost exceeds the private benefit at the private market solution.
C)  social value exceeds the private value at the private market solution.
D)  private cost exceeds the social benefit at the private market solution.E) A) and B)
F) A) and C)

Question 11

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1thS1S1P0 fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
-Refer to Scenario 10-4. In order to reach the social optimum, should fire extinguishers be taxed or subsidized? What is the appropriate amount of the tax or subsidy on each fire extinguisher?

Accepted Answer

Each fire extinguish...

Question 12

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Accepted Answer

For each college degree, the s...

Question 13

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

Accepted Answer

A)  less than the social cost of producing it.
B)  less than the private cost of producing it.
C)  more than the social cost of producing it.
D)  more than the private cost of producing it.E) All of the above
F) A) and B)

Question 14

Which of the following is not a negative externality associated with driving cars?

Accepted Answer

A)  congestion
B)  pollution
C)  repairs
D)  accidentsE) C) and D)
F) A) and B)

Question 15

A technology spillover is a type of negative externality.

Accepted Answer

A) True 
 B)False

Question 16

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3 
-Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the

Accepted Answer

A)  profit margin of each concert.
B)  cost of spillover effects from the concert (e.g., noise and traffic) .
C)  value of concerts to society as a whole.
D)  amount by which the city should subsidize the concert organizers.E) None of the above
F) A) and B)

Question 17

Figure 10-11 th unit of output, private value exceeds private cost. B) 390th unit of output, private value exceeds external value. C) 450th unit of output, private value exceeds social value. D) 450th unit of output, private cost exceeds social value." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-11. On the

Accepted Answer

A)  390th unit of output, private value exceeds private cost.
B)  390th unit of output, private value exceeds external value.
C)  450th unit of output, private value exceeds social value.
D)  450th unit of output, private cost exceeds social value.E) C) and D)
F) B) and D)

Question 18

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Accepted Answer

The answer of At any given quantity, the willingness to...

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Patent protection is one way to deal with technology spillovers.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

Which of the following is not a necessary condition for the Coase theorem?

Correct Answer
verified

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Correct Answer
verified

Patent protection is one way to deal with technology spillovers.

Correct Answer
verified

According to the Coase theorem, private parties can solve the problem of externalities if

Correct Answer
verified

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Correct Answer
verified
When a negative externality exists, the...
View Answer

Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

Correct Answer
verified

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Correct Answer
verified

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the

Correct Answer
verified

Correct Answer
verified
Each fire extinguish...
View Answer

Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the

Correct Answer
verified

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500^th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500^th college degree?

Correct Answer
verified
For each college degree, the s...
View Answer

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

Correct Answer
verified

A technology spillover is a type of negative externality.

Correct Answer
verified

Figure 10-11 -Refer to Figure 10-11. On the

Correct Answer
verified

Figure 10-10 -Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Correct Answer
verified

The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

Correct Answer
verified

Which of the following is not a negative externality associated with driving cars?

Correct Answer
verified

A corrective tax

Correct Answer
verified

When the social cost curve is above a product's supply curve,

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Externalities

Which of the following is not a necessary condition for the Coase theorem?

Correct AnswerverifiedShow Answer

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Correct AnswerverifiedShow Answer

Patent protection is one way to deal with technology spillovers.

Correct AnswerverifiedShow Answer

According to the Coase theorem, private parties can solve the problem of externalities if

Correct AnswerverifiedShow Answer

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Correct Answerverified When a negative externality exists, the...View AnswerShow Answer

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

Correct AnswerverifiedShow Answer

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Correct AnswerverifiedShow Answer

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedEach fire extinguish...View AnswerShow Answer

Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the

Correct AnswerverifiedShow Answer

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Correct AnswerverifiedFor each college degree, the s...View AnswerShow Answer

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

Correct AnswerverifiedShow Answer

A technology spillover is a type of negative externality.

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11. On the

Correct AnswerverifiedShow Answer

Figure 10-10 -Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Correct AnswerverifiedShow Answer

​The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

Correct AnswerverifiedShow Answer

Which of the following is not a negative externality associated with driving cars?

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

When the social cost curve is above a product's supply curve,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When a negative externality exists, the...
View Answer

Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Each fire extinguish...
View Answer

Correct Answer
verified

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500^th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500^th college degree?

Correct Answer
verified
For each college degree, the s...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified