Question 1

Many economists believe that there are more efficient ways to deal with pollution than with environmental standards because these standards do NOT:

Accepted Answer

A) reduce pollution enough. 
B) allow reductions in pollution to be achieved at minimum cost. 
C) specify the behavior that needs to be changed. 
D) target behaviors in a way that can be enforced. 
A) reduce pollution enough. 
B) allow reductions in pollution to be achieved at minimum cost. 
C) specify the behavior that needs to be changed. 
D) target behaviors in a way that can be enforced.

Question 2

According to many economists,the government should:

Accepted Answer

A) reduce the level of carbon emissions as far as possible. 
B) use policies to achieve the optimal level of carbon-emissions reduction in the least costly way. 
C) set policy to achieve the efficient level of pollution by reducing the costs of pollution,which will always increase the benefits to society. 
D) reduce carbon emissions whenever the marginal cost exceeds a predetermined level set by the courts. 
A) reduce the level of carbon emissions as far as possible. 
B) use policies to achieve the optimal level of carbon-emissions reduction in the least costly way. 
C) set policy to achieve the efficient level of pollution by reducing the costs of pollution,which will always increase the benefits to society. 
D) reduce carbon emissions whenever the marginal cost exceeds a predetermined level set by the courts.

Question 3

Use the following to answer question:
Figure: Model of a Competitive Market  
-(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if there are external costs:

Accepted Answer

A) resources will be underallocated to the production of the good. 
B) resources will be overallocated to the production of the good. 
C) resources will be efficiently allocated to the production of the good. 
D) the price at P will be higher than if there were no external costs. 
A) resources will be underallocated to the production of the good. 
B) resources will be overallocated to the production of the good. 
C) resources will be efficiently allocated to the production of the good. 
D) the price at P will be higher than if there were no external costs.

Question 4

Use the following to answer question:
Figure: Model of a Competitive Market  
-(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if there are no external benefits or costs,the output at Q will be:

Accepted Answer

A) larger than is socially desirable. 
B) smaller than is socially desirable. 
C) efficient. 
D) inefficient. 
A) larger than is socially desirable. 
B) smaller than is socially desirable. 
C) efficient. 
D) inefficient.

Question 5

Use the following to answer question:  
-(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution,the marginal social cost of pollution is:

Accepted Answer

A) $0. 
B) $100. 
C) $200. 
D) $400. 
A) $0. 
B) $100. 
C) $200. 
D) $400.

Question 6

Pigouvian taxes are designed to reduce:

Accepted Answer

A) the marginal cost of production. 
B) the marginal benefit of consumption. 
C) external costs. 
D) external benefits. 
A) the marginal cost of production. 
B) the marginal benefit of consumption. 
C) external costs. 
D) external benefits.

Question 7

If an emissions tax is too low:

Accepted Answer

A) there will be too little pollution. 
B) there will be too much pollution. 
C) the marginal social cost of pollution will be less than the marginal social benefit of pollution. 
D) there could be either too much or too little pollution. 
A) there will be too little pollution. 
B) there will be too much pollution. 
C) the marginal social cost of pollution will be less than the marginal social benefit of pollution. 
D) there could be either too much or too little pollution.

Question 8

Use the following to answer question:  
-(Table: Externalities from Parks)Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If 1 acre is dedicated to the park,this outcome is _____ because _____.

Accepted Answer

A) efficient;MSB = MSC B) efficient;MSB > MSC C) inefficient;MSB > MSC D) inefficient;MSB < MSC A) efficient;MSB = MSC B) efficient;MSB > MSC C) inefficient;MSB > MSC D) inefficient;MSB < MSC

Question 9

If externalities are fully internalized,an outcome is efficient,even without government intervention.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer question:  
-(Table: Externalities from Parks)Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.The socially optimum amount of land dedicated to the public park will be _____ acres.

Accepted Answer

A) 0 
B) 1 
C) 3 
D) 9 
A) 0 
B) 1 
C) 3 
D) 9

Question 11

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

Accepted Answer

A) a Pigouvian tax. 
B) a network externality. 
C) a technology spillover. 
D) the Coase theorem. 
A) a Pigouvian tax. 
B) a network externality. 
C) a technology spillover. 
D) the Coase theorem.

Question 12

Network externalities are often:

Accepted Answer

A) separate from positive feedback. 
B) a reason for natural monopolies. 
C) less likely to occur in the communications or technology industries than they are in other industries. 
D) not likely to move toward market domination. 
A) separate from positive feedback. 
B) a reason for natural monopolies. 
C) less likely to occur in the communications or technology industries than they are in other industries. 
D) not likely to move toward market domination.

Question 13

Use the following to answer question:  
-(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.From the perspective of efficiency,2 tons of pollution is:

Accepted Answer

A) too much. 
B) the efficient amount. 
C) not enough. 
D) the socially optimum amount. 
A) too much. 
B) the efficient amount. 
C) not enough. 
D) the socially optimum amount.

Question 14

Tony has a cell phone,and his service provider is Verizon.When he calls his wife,Meleah,who is also a Verizon customer,he does not have to pay for those minutes.The more Verizon customers there are in the market,the more benefit Tony receives.This is:

Accepted Answer

A) a network externality. 
B) the Coase theorem. 
C) a Pigouvian subsidy. 
D) a technology spillover. 
A) a network externality. 
B) the Coase theorem. 
C) a Pigouvian subsidy. 
D) a technology spillover.

Question 15

Use the following to answer question:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution is one in which:

Accepted Answer

A) MSB < MSC. 
B) MSC < MSB. 
C) total cost = total benefit. 
D) MSC = MSB. 
A) MSB < MSC. 
B) MSC < MSB. 
C) total cost = total benefit. 
D) MSC = MSB.

Question 16

The Coase theorem states that,in the presence of externalities,a market economy will:

Accepted Answer

A) always reach an efficient solution. 
B) never reach an efficient solution. 
C) reach an efficient solution if transaction costs are sufficiently low and property rights are well-defined. 
D) reach an efficient solution only in the case of government regulation. 
A) always reach an efficient solution. 
B) never reach an efficient solution. 
C) reach an efficient solution if transaction costs are sufficiently low and property rights are well-defined. 
D) reach an efficient solution only in the case of government regulation.

Question 17

Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighborhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _____ because the market quantity of rosebushes is _____ than the socially optimal quantity.

Accepted Answer

A) provide a subsidy;greater 
B) impose a tax;lower 
C) provide a subsidy;lower 
D) impose a tax;greater 
A) provide a subsidy;greater 
B) impose a tax;lower 
C) provide a subsidy;lower 
D) impose a tax;greater

Question 18

With tradable emissions permits,if the demand for goods that produce emissions shifts to the left,the equilibrium price of permits _____ and the equilibrium quantity _____.

Accepted Answer

A) increases;stays the same 
B) decreases;increases 
C) decreases;stays the same 
D) increases;increases 
A) increases;stays the same 
B) decreases;increases 
C) decreases;stays the same 
D) increases;increases

Question 19

Your community requires the sewage-treatment plant to process raw sewage so that it is safe to return the water to the environment.This example illustrates:

Accepted Answer

A) an emissions tax. 
B) the Coase theorem. 
C) a tradable emissions permit. 
D) an environmental standard. 
A) an emissions tax. 
B) the Coase theorem. 
C) a tradable emissions permit. 
D) an environmental standard.

Question 20

External benefits are associated with the production of batteries.Without government regulation,the market will:

Accepted Answer

A) produce too many batteries. 
B) price batteries at less than the marginal social cost. 
C) price batteries at less than the marginal social benefit. 
D) price batteries above the marginal social cost. 
A) produce too many batteries. 
B) price batteries at less than the marginal social cost. 
C) price batteries at less than the marginal social benefit. 
D) price batteries above the marginal social cost.

Many economists believe that there are more efficient ways to deal with pollution than with environmental standards because these standards do NOT:

According to many economists,the government should:

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if there are external costs:

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if there are no external benefits or costs,the output at Q will be:

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution,the marginal social cost of pollution is:

Pigouvian taxes are designed to reduce:

If an emissions tax is too low:

If externalities are fully internalized,an outcome is efficient,even without government intervention.

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

Network externalities are often:

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.From the perspective of efficiency,2 tons of pollution is:

Tony has a cell phone,and his service provider is Verizon.When he calls his wife,Meleah,who is also a Verizon customer,he does not have to pay for those minutes.The more Verizon customers there are in the market,the more benefit Tony receives.This is:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution is one in which:

The Coase theorem states that,in the presence of externalities,a market economy will:

Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighborhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _ because the market quantity of rosebushes is _ than the socially optimal quantity.

With tradable emissions permits,if the demand for goods that produce emissions shifts to the left,the equilibrium price of permits _ and the equilibrium quantity _.

Your community requires the sewage-treatment plant to process raw sewage so that it is safe to return the water to the environment.This example illustrates:

External benefits are associated with the production of batteries.Without government regulation,the market will:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Exam 16: Externalities

Many economists believe that there are more efficient ways to deal with pollution than with environmental standards because these standards do NOT:

According to many economists,the government should:

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if there are external costs:

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if there are no external benefits or costs,the output at Q will be:

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution,the marginal social cost of pollution is:

Pigouvian taxes are designed to reduce:

If an emissions tax is too low:

If externalities are fully internalized,an outcome is efficient,even without government intervention.

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

Network externalities are often:

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.From the perspective of efficiency,2 tons of pollution is:

Tony has a cell phone,and his service provider is Verizon.When he calls his wife,Meleah,who is also a Verizon customer,he does not have to pay for those minutes.The more Verizon customers there are in the market,the more benefit Tony receives.This is:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution is one in which:

The Coase theorem states that,in the presence of externalities,a market economy will:

Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighborhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _____ because the market quantity of rosebushes is _____ than the socially optimal quantity.

With tradable emissions permits,if the demand for goods that produce emissions shifts to the left,the equilibrium price of permits _____ and the equilibrium quantity _____.

Your community requires the sewage-treatment plant to process raw sewage so that it is safe to return the water to the environment.This example illustrates:

External benefits are associated with the production of batteries.Without government regulation,the market will:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighborhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _ because the market quantity of rosebushes is _ than the socially optimal quantity.

With tradable emissions permits,if the demand for goods that produce emissions shifts to the left,the equilibrium price of permits _ and the equilibrium quantity _.