Question 1

Air pollution generated by a paper mill factory is an example of

Accepted Answer

A) a positive production externality. 
B) a positive consumption externality. 
C) a negative consumption externality. 
D) diminishing returns. 
E) a negative production externality. 
A) a positive production externality. 
B) a positive consumption externality. 
C) a negative consumption externality. 
D) diminishing returns. 
E) a negative production externality.

Question 2

Use the table below to answer the following questions.
Table 15.2.1  
-Refer to Table 15.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.If the market is unregulated,the market price is

Accepted Answer

A) $10 a unit. 
B) $20 a unit. 
C) $30 a unit. 
D) $40 a unit. 
E) $50 a unit. 
A) $10 a unit. 
B) $20 a unit. 
C) $30 a unit. 
D) $40 a unit. 
E) $50 a unit.

Question 3

Choose the incorrect statement.

Accepted Answer

A) A patent encourages invention. 
B) A patent encourages innovation. 
C) A patent has an economic cost. 
D) A patent creates a negative externality. 
E) A patent produces a monopoly. 
A) A patent encourages invention. 
B) A patent encourages innovation. 
C) A patent has an economic cost. 
D) A patent creates a negative externality. 
E) A patent produces a monopoly.

Question 4

The Coase theorem tells us that in the presence of external costs in production,

Accepted Answer

A) the government must intervene in the market to assure that the efficient level of output is produced. 
B) private parties can negotiate to produce the good at a level where marginal willingness to pay for the good by consumers is zero. 
C) private parties can never arrive at the efficient solution. 
D) under certain conditions,private parties can arrive at the efficient solution without government involvement. 
E) and if transactions costs are high,then only the private sector will be able to produce the efficient amount of the good. 
A) the government must intervene in the market to assure that the efficient level of output is produced. 
B) private parties can negotiate to produce the good at a level where marginal willingness to pay for the good by consumers is zero. 
C) private parties can never arrive at the efficient solution. 
D) under certain conditions,private parties can arrive at the efficient solution without government involvement. 
E) and if transactions costs are high,then only the private sector will be able to produce the efficient amount of the good.

Question 5

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

Accepted Answer

A) subsidies. 
B) patents. 
C) copyrights. 
D) taxes. 
E) vouchers. 
A) subsidies. 
B) patents. 
C) copyrights. 
D) taxes. 
E) vouchers.

Question 6

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

Accepted Answer

A) marginal external benefit 
B) marginal social benefit 
C) marginal private benefit 
D) marginal social cost 
E) marginal external cost 
A) marginal external benefit 
B) marginal social benefit 
C) marginal private benefit 
D) marginal social cost 
E) marginal external cost

Question 7

Use the figure below to answer the following questions.   Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If a constant per unit tax is imposed that generates an efficient allocation of resources,then consumers pay a per unit price of

Accepted Answer

A) P3 - P1. 
B) P1. 
C) P2. 
D) P3. 
E) P4. 
A) P3 - P1. 
B) P1. 
C) P2. 
D) P3. 
E) P4.

Question 8

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day,and allowing trading.This is an example of

Accepted Answer

A) cap-and-trade. 
B) emission charges. 
C) the Coase theorem. 
D) a pollution tax. 
E) a voucher. 
A) cap-and-trade. 
B) emission charges. 
C) the Coase theorem. 
D) a pollution tax. 
E) a voucher.

Question 9

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

Accepted Answer

A) Market forces determine both the demand for pollution permits and their supply. 
B) Public choice determines both the demand for pollution permits and their supply. 
C) Market forces determine the demand for pollution permits,and property rights determine their supply. 
D) Property rights determine the demand for pollution permits,and the government determines their supply. 
E) Market forces determine the demand for marketable permits,and the government determines their supply. 
A) Market forces determine both the demand for pollution permits and their supply. 
B) Public choice determines both the demand for pollution permits and their supply. 
C) Market forces determine the demand for pollution permits,and property rights determine their supply. 
D) Property rights determine the demand for pollution permits,and the government determines their supply. 
E) Market forces determine the demand for marketable permits,and the government determines their supply.

Question 10

Means of coping with negative externalities include all of the following except

Accepted Answer

A) implementing abatement technology. 
B) patents. 
C) property rights. 
D) Pigovian taxes. 
E) cap-and-trade. 
A) implementing abatement technology. 
B) patents. 
C) property rights. 
D) Pigovian taxes. 
E) cap-and-trade.

Question 11

Use the figure below to answer the following questions.   Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If a constant per unit tax is imposed that generates an efficient allocation of resources,then producers receive a per unit price of

Accepted Answer

A) P3 - P1. 
B) P4. 
C) P3. 
D) P2. 
E) P1. 
A) P3 - P1. 
B) P4. 
C) P3. 
D) P2. 
E) P1.

Question 12

Use the figure below to answer the following questions.   Figure 15.3.3
-Refer to Figure 15.3.3.The figure shows the marginal private benefit and marginal social cost of a university education.If society's external benefit from university graduates is $10,000 each,then the

Accepted Answer

A) marginal social cost curve lies $10,000 to the left of the private marginal benefit curve. 
B) marginal social cost curve lies $10,000 to the right of the private marginal benefit curve. 
C) marginal social benefit curve lies $10,000 below the private marginal benefit curve. 
D) marginal social benefit curve lies $10,000 above the private marginal benefit curve. 
E) marginal social benefit curve is horizontal. 
A) marginal social cost curve lies $10,000 to the left of the private marginal benefit curve. 
B) marginal social cost curve lies $10,000 to the right of the private marginal benefit curve. 
C) marginal social benefit curve lies $10,000 below the private marginal benefit curve. 
D) marginal social benefit curve lies $10,000 above the private marginal benefit curve. 
E) marginal social benefit curve is horizontal.

Question 13

Smoking tobacco creates ________ externality.

Accepted Answer

A) a negative consumption 
B) a negative production 
C) a positive consumption 
D) a positive production 
E) no 
A) a negative consumption 
B) a negative production 
C) a positive consumption 
D) a positive production 
E) no

Question 14

When an additional unit of output is produced,the extra cost to society is the

Accepted Answer

A) average total cost. 
B) marginal social cost. 
C) marginal private cost. 
D) marginal external cost. 
E) total variable cost. 
A) average total cost. 
B) marginal social cost. 
C) marginal private cost. 
D) marginal external cost. 
E) total variable cost.

Question 15

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases,then the marginal social cost curve is a positively-sloped straight line

Accepted Answer

A) parallel to and above the MC curve. 
B) parallel to and below the MC curve. 
C) above the MC curve,and with a slope greater than the MC curve. 
D) below the MC curve,and with a slope less than the MC curve. 
E) above the MC curve,with a slope less than the MC curve. 
A) parallel to and above the MC curve. 
B) parallel to and below the MC curve. 
C) above the MC curve,and with a slope greater than the MC curve. 
D) below the MC curve,and with a slope less than the MC curve. 
E) above the MC curve,with a slope less than the MC curve.

Question 16

The Coase theorem applies when transactions costs are

Accepted Answer

A) low and property rights exist. 
B) low and property rights do not exist. 
C) high and property rights exist. 
D) high and property rights do not exist. 
E) low and there are no externalities. 
A) low and property rights exist. 
B) low and property rights do not exist. 
C) high and property rights exist. 
D) high and property rights do not exist. 
E) low and there are no externalities.

Question 17

Researchers produce the efficient quantity of research and development if they receive a voucher equal to the marginal ________ benefit,or a subsidy equal to the marginal ________ benefit. Patents and copyrights ________ result in an efficient amount of research and development.

Accepted Answer

A) social;social;cannot 
B) social;social;can 
C) external;external;cannot 
D) external;external;can 
E) external;social;can 
A) social;social;cannot 
B) social;social;can 
C) external;external;cannot 
D) external;external;can 
E) external;social;can

Question 18

The government department charged with monitoring and protecting the environment in Canada is

Accepted Answer

A) Protection Canada. 
B) Revenue Canada. 
C) Environment Canada. 
D) Industry Canada. 
E) the EPA. 
A) Protection Canada. 
B) Revenue Canada. 
C) Environment Canada. 
D) Industry Canada. 
E) the EPA.

Question 19

Use the figure below to answer the following questions.   Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If a constant per unit tax is imposed that generates an efficient allocation of resources,then the quantity produced is

Accepted Answer

A) zero. 
B) Q1. 
C) Q2. 
D) Q3. 
E) greater than Q3. 
A) zero. 
B) Q1. 
C) Q2. 
D) Q3. 
E) greater than Q3.

Question 20

A battery acid producer pollutes the water upstream from the Polar Bear Club,a swimming club.If transactions costs are low,the quantity of pollution will be efficient

Accepted Answer

A) if swimming club memberships are subsidized. 
B) only if the battery acid producer moves downstream. 
C) only if water property rights are assigned to the producer. 
D) only if water property rights are assigned to the Polar Bear Club. 
E) if water property rights are assigned either to the producer or to the Polar Bear Club. 
A) if swimming club memberships are subsidized. 
B) only if the battery acid producer moves downstream. 
C) only if water property rights are assigned to the producer. 
D) only if water property rights are assigned to the Polar Bear Club. 
E) if water property rights are assigned either to the producer or to the Polar Bear Club.

Air pollution generated by a paper mill factory is an example of

Choose the incorrect statement.

The Coase theorem tells us that in the presence of external costs in production,

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day,and allowing trading.This is an example of

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

Means of coping with negative externalities include all of the following except

Use the figure below to answer the following questions. Figure 15.3.3 -Refer to Figure 15.3.3.The figure shows the marginal private benefit and marginal social cost of a university education.If society's external benefit from university graduates is $10,000 each,then the

Smoking tobacco creates ________ externality.

When an additional unit of output is produced,the extra cost to society is the

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases,then the marginal social cost curve is a positively-sloped straight line

The Coase theorem applies when transactions costs are

Researchers produce the efficient quantity of research and development if they receive a voucher equal to the marginal benefit,or a subsidy equal to the marginal benefit. Patents and copyrights result in an efficient amount of research and development.

The government department charged with monitoring and protecting the environment in Canada is

A battery acid producer pollutes the water upstream from the Polar Bear Club,a swimming club.If transactions costs are low,the quantity of pollution will be efficient

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Externalities

Air pollution generated by a paper mill factory is an example of

Choose the incorrect statement.

The Coase theorem tells us that in the presence of external costs in production,

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day,and allowing trading.This is an example of

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

Means of coping with negative externalities include all of the following except

Use the figure below to answer the following questions. Figure 15.3.3 -Refer to Figure 15.3.3.The figure shows the marginal private benefit and marginal social cost of a university education.If society's external benefit from university graduates is $10,000 each,then the

Smoking tobacco creates ________ externality.

When an additional unit of output is produced,the extra cost to society is the

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases,then the marginal social cost curve is a positively-sloped straight line

The Coase theorem applies when transactions costs are

Researchers produce the efficient quantity of research and development if they receive a voucher equal to the marginal ________ benefit,or a subsidy equal to the marginal ________ benefit. Patents and copyrights ________ result in an efficient amount of research and development.

The government department charged with monitoring and protecting the environment in Canada is

A battery acid producer pollutes the water upstream from the Polar Bear Club,a swimming club.If transactions costs are low,the quantity of pollution will be efficient

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Researchers produce the efficient quantity of research and development if they receive a voucher equal to the marginal benefit,or a subsidy equal to the marginal benefit. Patents and copyrights result in an efficient amount of research and development.