Question 1

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) None of the above
F) All of the above

Question 2

The externality associated with technology spillovers

Accepted Answer

A)  cannot be internalized by government.
B)  is a negative externality.
C)  can be internalized, potentially, through taxation of firms that are responsible for technology spillovers.
D)  can be internalized, potentially, through patent protection.E) All of the above
F) A) and B)

Question 3

When the production of a good results in a positive externality, the social value curve is

Accepted Answer

A)  below the demand curve, indicating that the total value to society is less than the private benefit.
B)  above the demand curve, indicating that the total value to society is greater than the private benefit.
C)  identical to the demand curve, indicating that the total cost to society is the equal to the private benefit.
D)  above the supply curve, indicating that the total cost to society exceeds the private cost.E) A) and D)
F) None of the above

Question 4

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining. Under what circumstances will private bargaining fail to produce a solution?

Accepted Answer

Private parties may fail to bargain to a...

Question 5

Table 10-3 
-Refer to Table 10-3. The socially optimal quantity of output is

Accepted Answer

A)  3 units.
B)  4 units.
C)  5 units.
D)  6 units.E) B) and D)
F) B) and C)

Question 6

Two types of private solutions to the problem of externalities are

Accepted Answer

A)  charities and the Golden Rule.
B)  charities and subsidies.
C)  the Golden Rule and taxes.
D)  taxes and subsidies.E) A) and B)
F) B) and C)

Question 7

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, a government policy that internalized the externality would move the quantity of smokestack scrubbers installed 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) A) and B)
F) None of the above

Question 8

Table 10-1
The following table shows the private value, private cost, and external cost for various quantities of output in a market. 
-Refer to Table 10-1. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Accepted Answer

A)  $2
B)  $3
C)  $9
D)  $10E) B) and C)
F) B) and D)

Question 9

Figure 10-9   
-Refer to Figure 10-9, Panel (b) . The market equilibrium quantity is

Accepted Answer

A)  Q2, which is the socially optimal quantity.
B)  Q3, which is the socially optimal quantity.
C)  Q2, and the socially optimal quantity is Q3.
D)  Q3, and the socially optimal quantity is Q2.E) A) and B)
F) None of the above

Question 10

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

Question 11

Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality,

Accepted Answer

A)  the supply curve would adequately reflect the marginal social cost of production.
B)  consumers will be required to pay a higher price for steel than they would have if the externality were internalized.
C)  the market equilibrium quantity will not be the socially optimal quantity.
D)  producers will produce less steel than they otherwise would if the externality were internalized.E) A) and B)
F) A) and C)

Question 12

All externalities impose a cost on others. ​

Accepted Answer

A) True 
 B)False

Question 13

A former senator remarked that "We cannot give anyone the option of polluting for a fee." Do most economists agree with this statement, or do they disagree with it?

Accepted Answer

Most econo...

Question 14

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. 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 15

A positive externality arises when a person engages in an activity that has

Accepted Answer

A)  an adverse effect on a bystander who is not compensated by the person who causes the effect.
B)  an adverse effect on a bystander who is compensated by the person who causes the effect.
C)  a beneficial effect on a bystander who pays the person who causes the effect.
D)  a beneficial effect on a bystander who does not pay the person who causes the effect.E) A) and B)
F) All of the above

Question 16

A negative externality will cause a private market to produce

Accepted Answer

A)  less than is socially desirable.
B)  more than is socially desirable.
C)  exactly the quantity that is socially desirable.
D)  less than the same market would produce in the presence of a positive externality.E) None of the above
F) A) and D)

Question 17

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Accepted Answer

A)  shift up by an amount equal to the subsidy.
B)  shift down by an amount less than the subsidy.
C)  shift down by an amount equal to the subsidy.
D)  shift down by an amount greater than the subsidy.E) A) and C)
F) None of the above

Question 18

Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that

Accepted Answer

A)  Jenny pays Abe $150 to give the dog to his parents who live on an isolated farm.
B)  Abe pays Jenny $350 for her inconvenience.
C)  Jenny pays Abe $300 to give the dog to his parents who live on an isolated farm.
D)  There is no private transaction that would improve this situation.E) None of the above
F) A) and C)

Question 19

The impact of one person's actions on the well-being of a bystander is called

Accepted Answer

A)  an economic dilemma.
B)  deadweight loss.
C)  a multi-party problem.
D)  an externality.E) None of the above
F) C) and D)

Question 20

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

Exam 10: Externalities

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The government could...
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Figure 10-9 -Refer to Figure 10-9, Panel (b) . The market equilibrium quantity is

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Table 10-3 -Refer to Table 10-3. The socially optimal quantity of output is

Correct Answer
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When the production of a good results in a positive externality, the social value curve is

Correct Answer
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The impact of one person's actions on the well-being of a bystander is called

Correct Answer
verified

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Correct Answer
verified

All externalities impose a cost on others.

Correct Answer
verified

Correct Answer
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A positive externality arises when a person engages in an activity that has

Correct Answer
verified

Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality,

Correct Answer
verified

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

Correct Answer
verified

Table 10-1 The following table shows the private value, private cost, and external cost for various quantities of output in a market. -Refer to Table 10-1. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct Answer
verified

Correct Answer
verified

A former senator remarked that "We cannot give anyone the option of polluting for a fee." Do most economists agree with this statement, or do they disagree with it?

Correct Answer
verified
Most econo...
View Answer

A negative externality will cause a private market to produce

Correct Answer
verified

Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that

Correct Answer
verified

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining. Under what circumstances will private bargaining fail to produce a solution?

Correct Answer
verified
Private parties may fail to bargain to a...
View Answer

The externality associated with technology spillovers

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

Two types of private solutions to the problem of externalities are

Correct Answer
verified

Exam 10: Externalities

Correct AnswerverifiedThe government could...View AnswerShow Answer

Figure 10-9 -Refer to Figure 10-9, Panel (b) . The market equilibrium quantity is

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Table 10-3 -Refer to Table 10-3. The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

When the production of a good results in a positive externality, the social value curve is

Correct AnswerverifiedShow Answer

The impact of one person's actions on the well-being of a bystander is called

Correct AnswerverifiedShow Answer

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Correct AnswerverifiedShow Answer

All externalities impose a cost on others. ​

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A positive externality arises when a person engages in an activity that has

Correct AnswerverifiedShow Answer

Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 10-1 The following table shows the private value, private cost, and external cost for various quantities of output in a market. -Refer to Table 10-1. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A former senator remarked that "We cannot give anyone the option of polluting for a fee." Do most economists agree with this statement, or do they disagree with it?

Correct AnswerverifiedMost econo...View AnswerShow Answer

A negative externality will cause a private market to produce

Correct AnswerverifiedShow Answer

Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that

Correct AnswerverifiedShow Answer

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining. Under what circumstances will private bargaining fail to produce a solution?

Correct AnswerverifiedPrivate parties may fail to bargain to a...View AnswerShow Answer

The externality associated with technology spillovers

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

Two types of private solutions to the problem of externalities are

Correct AnswerverifiedShow Answer

Correct Answer
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The government could...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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All externalities impose a cost on others.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Most econo...
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Correct Answer
verified

Correct Answer
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Correct Answer
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Private parties may fail to bargain to a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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