Question 1

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) None of the above
F) All of the above

Question 2

Tyler owns a dog and receives a $300 benefit from owning it. Tyler's neighbor, Liz, incurs a cost of $450 from the dog's barking. Suggest a deal between Tyler and Liz that would result in both individuals becoming better off.

Accepted Answer

Since Liz's cost exceeds Tyler's benefit...

Question 3

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. Which of the following statements is correct?

Accepted Answer

A)   If the external benefit per unit of output were $0 instead of $2, then the socially efficient quantity of output would be 4 units.
B)   A tax of $4 per unit would enable this market to move from the equilibrium quantity of output to the socially optimal level of output.
C)   Taking the external cost into account, total surplus declines when the 3rd unit of output is produced and consumed.
D)   The market for flu shots is a market to which the concepts in this table apply very well.E) B) and D)
F) B) and C)

Question 4

Suppose the market-equilibrium quantity of good x is larger than the socially-optimal quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Accepted Answer

The production of go...

Question 5

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to

Accepted Answer

A)   stop her messy habits or else move out.
B)   pay you at least $60 but less than $80 to live with the clutter.
C)   continue to be messy and force you to move out.
D)   demand payment of at least $60 but no more than $80 to clean up after herself.E) A) and B)
F) All of the above

Question 6

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

Accepted Answer

A)   The private value of the 240th unit of output is $24.
B)   The social value of the 240th unit of output is $42.
C)   The external benefit of the 240th unit of output is $18.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 7

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. In order to reach the social optimum, the government could

Accepted Answer

A)   impose a tax of $2 per unit on plastics.
B)   impose a tax of $6 per unit on plastics.
C)   impose a tax of $8 per unit on plastics.
D)   offer a subsidy of $6 per unit on plastics.E) B) and D)
F) A) and D)

Question 8

Industrial policy aims to

Accepted Answer

A)   reduce pollution by requiring factories to reduce their pollution by a certain number of tons per year.
B)   reduce pollution by levying a tax on factories of a certain number of dollars for every ton of pollution that the factory emits.
C)   encourage business firms to subsidize continuing education for their employees.
D)   promote technology-enhancing industries.E) None of the above
F) C) and D)

Question 9

Research into new technologies

Accepted Answer

A)   provides positive externalities because it creates knowledge others can use.
B)   results in negative externalities because government funding for research causes less government spending in other areas.
C)   is protected by patent laws, which eliminates the need for government intervention.
D)   should only be funded by the corporations that will receive the profits from the research.E) A) and B)
F) C) and D)

Question 10

Figure 10-15 
-Refer to Figure 10-15. Which graph illustrates a pollution permit program?

Accepted Answer

A)   the left graph
B)   the right graph
C)   both graphs
D)   neither graphE) All of the above
F) A) and B)

Question 11

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

Question 12

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where is the quantity supplied.
 
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the social cost of producing 30 units of the good?

Accepted Answer

The social cost of p...

Question 13

Which of the following statements is not correct?

Accepted Answer

A)   Patents help internalize the externalities associated with technological advances.
B)   Economists typically prefer regulations to corrective taxes because regulations provide more incentives for firms to seek continued reductions in pollution.
C)   Allowing firms to trade pollution permits will lower the total cost of reducing pollution.
D)   A big impediment to implementing the Coase theorem in many cases is high transactions costs.E) A) and B)
F) A) and C)

Question 14

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 15

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Accepted Answer

Economists generally...

Question 16

If education produces positive externalities, we would expect

Accepted Answer

A)   the government to tax education.
B)   the government to subsidize education.
C)   people to realize the benefits, which would increase the demand for education.
D)   colleges to relax admission requirements.E) A) and B)
F) C) and D)

Question 17

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Accepted Answer

A)   taxing production, which would decrease supply.
B)   taxing production, which would increase supply.
C)   subsidizing production, which would decrease supply.
D)   subsidizing production, which would increase supply.E) B) and D)
F) A) and C)

Question 18

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-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) B) and D)
F) A) and D)

Question 19

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Accepted Answer

Sheryl's guitar­playing gives ...

Question 20

Table 10-4
 
-Refer to Table 10-4. Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

Accepted Answer

A)   a tax of $4 per unit of output
B)   a subsidy of $4 per unit of output
C)   a tax of $6 per unit of output
D)   a subsidy of $6 per unit of outputE) B) and C)
F) B) and D)

Exam 10: Externalities

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a pollution permit program?

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

If education produces positive externalities, we would expect

Correct Answer
verified

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to

Correct Answer
verified

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. In order to reach the social optimum, the government could

Correct Answer
verified

Industrial policy aims to

Correct Answer
verified

Table 10-4 -Refer to Table 10-4. Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

Correct Answer
verified

Suppose the market-equilibrium quantity of good x is larger than the socially-optimal quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Correct Answer
verified
The production of go...
View Answer

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Correct Answer
verified
Economists generally...
View Answer

Tyler owns a dog and receives a $300 benefit from owning it. Tyler's neighbor, Liz, incurs a cost of $450 from the dog's barking. Suggest a deal between Tyler and Liz that would result in both individuals becoming better off.

Correct Answer
verified
Since Liz's cost exceeds Tyler's benefit...
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Figure 10-11 -Refer to Figure 10-11. Which of the following statements is correct?

Correct Answer
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Correct Answer
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The social cost of p...
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Research into new technologies

Correct Answer
verified

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Correct Answer
verified

Which of the following statements is not correct?

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. Which of the following statements is correct?

Correct Answer
verified

Externalities can be corrected by each of the following except

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-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

Patents do not

Correct Answer
verified

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Correct Answer
verified
Sheryl's guitarplaying gives ...
View Answer

Exam 10: Externalities

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a pollution permit program?

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

If education produces positive externalities, we would expect

Correct AnswerverifiedShow Answer

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to

Correct AnswerverifiedShow Answer

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. In order to reach the social optimum, the government could

Correct AnswerverifiedShow Answer

Industrial policy aims to

Correct AnswerverifiedShow Answer

Table 10-4 -Refer to Table 10-4. Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

Correct AnswerverifiedShow Answer

Suppose the market-equilibrium quantity of good x is larger than the socially-optimal quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Correct AnswerverifiedThe production of go...View AnswerShow Answer

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Correct AnswerverifiedEconomists generally...View AnswerShow Answer

Tyler owns a dog and receives a $300 benefit from owning it. Tyler's neighbor, Liz, incurs a cost of $450 from the dog's barking. Suggest a deal between Tyler and Liz that would result in both individuals becoming better off.

Correct AnswerverifiedSince Liz's cost exceeds Tyler's benefit...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe social cost of p...View AnswerShow Answer

Research into new technologies

Correct AnswerverifiedShow Answer

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

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. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Externalities can be corrected by each of the following except

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-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

Patents do not

Correct AnswerverifiedShow Answer

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Correct AnswerverifiedSheryl's guitar­playing gives ...View AnswerShow Answer

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Private parties may fail to bargain to a...
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Correct Answer
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Correct Answer
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Correct Answer
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The production of go...
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Correct Answer
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Economists generally...
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Correct Answer
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Since Liz's cost exceeds Tyler's benefit...
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Correct Answer
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Correct Answer
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The social cost of p...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Sheryl's guitarplaying gives ...
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