Question 1

A well-maintained waterfront property that is enjoyed by other property owners is an example of

Accepted Answer

A) an inefficient allocation of resources. 
B) a negative consumption externality. 
C) a positive consumption externality. 
D) a negative production externality. 
E) a positive production externality. 
A) an inefficient allocation of resources. 
B) a negative consumption externality. 
C) a positive consumption externality. 
D) a negative production externality. 
E) a positive production externality.

Question 2

Use the figure below to answer the following questions.   Figure 15.2.2
-Refer to Figure 15.2.2.This figure shows the demand curve,the marginal private cost curve and the marginal social cost curve of good A.Production of the 6th unit of output generates a marginal external

Accepted Answer

A) cost of $1.50. 
B) cost of $3. 
C) cost of $6. 
D) benefit of $3. 
E) cost of $9. 
A) cost of $1.50. 
B) cost of $3. 
C) cost of $6. 
D) benefit of $3. 
E) cost of $9.

Question 3

Use the figure below to answer the following questions.   Figure 15.2.2
-Refer to Figure 15.2.2.This figure shows the demand curve,the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

Accepted Answer

A) 0 units 
B) 5 units 
C) 6 units 
D) 8 units 
E) 9 units 
A) 0 units 
B) 5 units 
C) 6 units 
D) 8 units 
E) 9 units

Question 4

The economic benefit of a patent or copyright must be balanced against

Accepted Answer

A) the external benefit from the good. 
B) the external cost of the good. 
C) the marginal private cost of the good. 
D) the cost of temporary monopoly. 
E) the marginal social cost of the good. 
A) the external benefit from the good. 
B) the external cost of the good. 
C) the marginal private cost of the good. 
D) the cost of temporary monopoly. 
E) the marginal social cost of the good.

Question 5

Which one of the following is a means of coping with a negative externality?

Accepted Answer

A) emission subsidies 
B) patents 
C) vouchers 
D) Pigovian taxes 
E) copyrights 
A) emission subsidies 
B) patents 
C) vouchers 
D) Pigovian taxes 
E) copyrights

Question 6

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.Assume the market is perfectly competitive.If the market is unregulated,the marginal

Accepted Answer

A) social cost equals the marginal private benefit. 
B) private cost is less than the marginal social benefit. 
C) private cost equals the marginal social benefit. 
D) social cost equals the marginal private cost. 
E) private cost is greater than the marginal social benefit. 
A) social cost equals the marginal private benefit. 
B) private cost is less than the marginal social benefit. 
C) private cost equals the marginal social benefit. 
D) social cost equals the marginal private cost. 
E) private cost is greater than the marginal social benefit.

Question 7

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 government decides to correct the externality problem,it could

Accepted Answer

A) subsidize production by $20 per unit. 
B) subsidize production by $10 per unit. 
C) provide the good itself. 
D) tax production by $10 per unit. 
E) tax production by $20 per unit. 
A) subsidize production by $20 per unit. 
B) subsidize production by $10 per unit. 
C) provide the good itself. 
D) tax production by $10 per unit. 
E) tax production by $20 per unit.

Question 8

Use the table below to answer the following questions.
Table 15.3.1  
-Refer to Table 15.3.1.The table shows marginal private benefit and the marginal social benefit from flu vaccinations and the marginal social cost of vaccination production.If production is left to the private market,the market price is

Accepted Answer

A) $70 a unit. 
B) $60 a unit. 
C) $50 a unit. 
D) $40 a unit. 
E) $30 a unit. 
A) $70 a unit. 
B) $60 a unit. 
C) $50 a unit. 
D) $40 a unit. 
E) $30 a unit.

Question 9

An externality is

Accepted Answer

A) the amount by which price exceeds marginal private cost. 
B) the amount by which price exceeds marginal social cost. 
C) the effect of government regulation on market price and output. 
D) someone who consumes a good without paying for it. 
E) a cost or benefit that arises from an activity but affects people not part of the original activity. 
A) the amount by which price exceeds marginal private cost. 
B) the amount by which price exceeds marginal social cost. 
C) the effect of government regulation on market price and output. 
D) someone who consumes a good without paying for it. 
E) a cost or benefit that arises from an activity but affects people not part of the original activity.

Question 10

Complete the following sentence.Knowledge

Accepted Answer

A) generates external benefits. 
B) generates external costs. 
C) displays diminishing marginal benefit. 
D) is encouraged by intellectual property rights. 
E) A and D are correct. 
A) generates external benefits. 
B) generates external costs. 
C) displays diminishing marginal benefit. 
D) is encouraged by intellectual property rights. 
E) A and D are correct.

Question 11

Choose the statement that is incorrect.

Accepted Answer

A) Firms that have a high marginal abatement cost sell pollution permits. 
B) A cap is an upper limit. 
C) A cap is a pollution quota. 
D) A government that uses cap-and-trade must first estimate the efficient quantity of pollution and set the overall cap at that level. 
E) The government solves the problem of allocating the cap by making an initial distribution of the cap across firms and allowing them to trade in a market for pollution permits. 
A) Firms that have a high marginal abatement cost sell pollution permits. 
B) A cap is an upper limit. 
C) A cap is a pollution quota. 
D) A government that uses cap-and-trade must first estimate the efficient quantity of pollution and set the overall cap at that level. 
E) The government solves the problem of allocating the cap by making an initial distribution of the cap across firms and allowing them to trade in a market for pollution permits.

Question 12

In recent years,as provincial governments attempt to balance their budgets,they have increased tuition fees considerably.This increase will likely result in

Accepted Answer

A) more students. 
B) fewer students. 
C) underprovision of education compared to the efficient level. 
D) overprovision of education compared to the efficient level. 
E) B and C. 
A) more students. 
B) fewer students. 
C) underprovision of education compared to the efficient level. 
D) overprovision of education compared to the efficient level. 
E) B and C.

Question 13

When the production of a good has an external cost,the

Accepted Answer

A) marginal social cost curve lies below the marginal private cost curve. 
B) marginal social benefit curve lies above the marginal private benefit curve. 
C) equilibrium quantity in an unregulated,competitive market has a marginal social cost greater than the marginal social benefit. 
D) equilibrium quantity in an unregulated,competitive market has a marginal social cost less than the marginal social benefit. 
E) good should not be produced. 
A) marginal social cost curve lies below the marginal private cost curve. 
B) marginal social benefit curve lies above the marginal private benefit curve. 
C) equilibrium quantity in an unregulated,competitive market has a marginal social cost greater than the marginal social benefit. 
D) equilibrium quantity in an unregulated,competitive market has a marginal social cost less than the marginal social benefit. 
E) good should not be produced.

Question 14

Use the figure below to answer the following questions.   Figure 15.3.1
-Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If a subsidy is granted that generates an efficient quantity,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 15

An example of an activity that creates a positive consumption externality is

Accepted Answer

A) logging,which pollutes rivers. 
B) locating beehives next to an orange orchard. 
C) smoking,which harms the health of a bystander. 
D) a flu vaccination. 
E) a noisy party. 
A) logging,which pollutes rivers. 
B) locating beehives next to an orange orchard. 
C) smoking,which harms the health of a bystander. 
D) a flu vaccination. 
E) a noisy party.

Question 16

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.Society's external benefit from university graduates is $10,000 each.With no subsidy,

Accepted Answer

A) no students go to university. 
B) less than 10 million students go to university. 
C) 10 million students go to university. 
D) more than 10 million students go to university. 
E) the market is efficient. 
A) no students go to university. 
B) less than 10 million students go to university. 
C) 10 million students go to university. 
D) more than 10 million students go to university. 
E) the market is efficient.

Question 17

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

Accepted Answer

A) a subsidy of $10,000 per student paid to the universities achieves efficiency. 
B) a tax of $10,000 per student imposed on the universities achieves efficiency. 
C) 10 million students per year is the efficient number students. 
D) a subsidy of $20,000 per student paid to the universities achieves efficiency. 
E) a tax of $5,000 per student paid by taxpayers achieves efficiency. 
A) a subsidy of $10,000 per student paid to the universities achieves efficiency. 
B) a tax of $10,000 per student imposed on the universities achieves efficiency. 
C) 10 million students per year is the efficient number students. 
D) a subsidy of $20,000 per student paid to the universities achieves efficiency. 
E) a tax of $5,000 per student paid by taxpayers achieves efficiency.

Question 18

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

Accepted Answer

A) the quantity produced is the efficient quantity. 
B) the quantity produced is greater than the efficient quantity. 
C) the quantity produced is less than the efficient quantity. 
D) marginal external cost is maximized. 
E) the price of fertilizer is too high. 
A) the quantity produced is the efficient quantity. 
B) the quantity produced is greater than the efficient quantity. 
C) the quantity produced is less than the efficient quantity. 
D) marginal external cost is maximized. 
E) the price of fertilizer is too high.

Question 19

Use the figure below to answer the following questions.   Figure 15.3.1
-Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If production is left to the private market,then

Accepted Answer

A) the quantity produced is less than the efficient quantity. 
B) the quantity produced is greater than the efficient quantity. 
C) price is greater than marginal social benefit quantity. 
D) the marginal cost curve is horizontal. 
E) the quantity produced is zero. 
A) the quantity produced is less than the efficient quantity. 
B) the quantity produced is greater than the efficient quantity. 
C) price is greater than marginal social benefit quantity. 
D) the marginal cost curve is horizontal. 
E) the quantity produced is zero.

Question 20

Use the figure below to answer the following questions.   Figure 15.3.1
-Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If production is left to the private market,then at the equilibrium quantity the marginal social benefit from consumption is

Accepted Answer

A) less than the marginal cost to producers. 
B) less than the marginal social cost of production. 
C) equal to the marginal cost to producers. 
D) equal to the marginal private benefit from consumption. 
E) greater than the marginal cost to producers. 
A) less than the marginal cost to producers. 
B) less than the marginal social cost of production. 
C) equal to the marginal cost to producers. 
D) equal to the marginal private benefit from consumption. 
E) greater than the marginal cost to producers.

A well-maintained waterfront property that is enjoyed by other property owners is an example of

Use the figure below to answer the following questions. Figure 15.2.2 -Refer to Figure 15.2.2.This figure shows the demand curve,the marginal private cost curve and the marginal social cost curve of good A.Production of the 6th unit of output generates a marginal external

Use the figure below to answer the following questions. Figure 15.2.2 -Refer to Figure 15.2.2.This figure shows the demand curve,the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

The economic benefit of a patent or copyright must be balanced against

Which one of the following is a means of coping with a negative externality?

An externality is

Complete the following sentence.Knowledge

Choose the statement that is incorrect.

In recent years,as provincial governments attempt to balance their budgets,they have increased tuition fees considerably.This increase will likely result in

When the production of a good has an external cost,the

Use the figure below to answer the following questions. Figure 15.3.1 -Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If a subsidy is granted that generates an efficient quantity,then the quantity produced is

An example of an activity that creates a positive consumption externality is

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.Society's external benefit from university graduates is $10,000 each.With no subsidy,

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

Use the figure below to answer the following questions. Figure 15.3.1 -Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If production is left to the private market,then

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

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Exam 15: Externalities

A well-maintained waterfront property that is enjoyed by other property owners is an example of

Use the figure below to answer the following questions. Figure 15.2.2 -Refer to Figure 15.2.2.This figure shows the demand curve,the marginal private cost curve and the marginal social cost curve of good A.Production of the 6th unit of output generates a marginal external

Use the figure below to answer the following questions. Figure 15.2.2 -Refer to Figure 15.2.2.This figure shows the demand curve,the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

The economic benefit of a patent or copyright must be balanced against

Which one of the following is a means of coping with a negative externality?

An externality is

Complete the following sentence.Knowledge

Choose the statement that is incorrect.

In recent years,as provincial governments attempt to balance their budgets,they have increased tuition fees considerably.This increase will likely result in

When the production of a good has an external cost,the

Use the figure below to answer the following questions. Figure 15.3.1 -Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If a subsidy is granted that generates an efficient quantity,then the quantity produced is

An example of an activity that creates a positive consumption externality is

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.Society's external benefit from university graduates is $10,000 each.With no subsidy,

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

Use the figure below to answer the following questions. Figure 15.3.1 -Refer to Figure 15.3.1.The figure shows the marginal private benefit curve,the marginal social benefit curve,and the market supply curve.If production is left to the private market,then

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