Question 1

In cases where there is low productivity in extraction methods for a common resource,

Accepted Answer

A)  overuse is more likely. 
B)  overuse is less of a problem. 
C)  the resource becomes nonrival in consumption. 
D)  the resource becomes excludable. 
A)  overuse is more likely. 
B)  overuse is less of a problem. 
C)  the resource becomes nonrival in consumption. 
D)  the resource becomes excludable.

Question 2

For production to be at the ________ level of output, marginal benefit must equal social cost.

Accepted Answer

A)  profit-maximizing 
B)  loss-minimizing 
C)  shut-down 
D)  efficient 
A)  profit-maximizing 
B)  loss-minimizing 
C)  shut-down 
D)  efficient

Question 3

People cannot be excluded from using a common resource.

Accepted Answer

A) True 
 B)False

Question 4

Public goods are nonrival in ________ and their ________ are nonexcludable.

Accepted Answer

A)  consumption; costs 
B)  production; benefits 
C)  consumption; benefits 
D)  production; costs 
A)  consumption; costs 
B)  production; benefits 
C)  consumption; benefits 
D)  production; costs

Question 5

One of the most important characteristics of information is that it is essentially a private good.

Accepted Answer

A) True 
 B)False

Question 6

You spend $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true?

Accepted Answer

A)  You are spending too much on your yard, because your neighbor derives only $50 worth of benefits. 
B)  You should refuse to spend anything on your yard unless your neighbor pays you $50 a month. 
C)  If you took into consideration the benefits your neighbor derived, the efficient level of lawn maintenance would be greater than $300 a month. 
D)  If you took into consideration the benefits your neighbor derived, the efficient level of lawn maintenance would be less than $300 a month. 
A)  You are spending too much on your yard, because your neighbor derives only $50 worth of benefits. 
B)  You should refuse to spend anything on your yard unless your neighbor pays you $50 a month. 
C)  If you took into consideration the benefits your neighbor derived, the efficient level of lawn maintenance would be greater than $300 a month. 
D)  If you took into consideration the benefits your neighbor derived, the efficient level of lawn maintenance would be less than $300 a month.

Question 7

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow.   Figure 16.2
-Refer to Figure 16.2. To force this firm to produce the ________ level of output, the government should ________ of $10.00 per car.

Accepted Answer

A)  market; impose a tax 
B)  efficient; impose a tax 
C)  market; issue a subsidy 
D)  efficient; issue a subsidy 
A)  market; impose a tax 
B)  efficient; impose a tax 
C)  market; issue a subsidy 
D)  efficient; issue a subsidy

Question 8

Taxes on a producing firm's spillovers

Accepted Answer

A)  are designed to make it easier for economists to measure spillovers. 
B)  will lead to a zero level of output. 
C)  are simply meant to force decision makers to consider the full costs of their actions. 
D)  are designed primarily as a way to raise money so that the government can compensate the victims of the externality. 
A)  are designed to make it easier for economists to measure spillovers. 
B)  will lead to a zero level of output. 
C)  are simply meant to force decision makers to consider the full costs of their actions. 
D)  are designed primarily as a way to raise money so that the government can compensate the victims of the externality.

Question 9

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits and all possible trades are made, Firm B will reduce its pollution by a total of ________ unit(s).

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 10

Which of the following conditions are necessary for the Coase theorem to apply?

Accepted Answer

A)  The basic rights of the individuals must be clearly understood. 
B)  There must be no impediments to bargaining. 
C)  Only a few people can be involved. 
D)  all of the above 
A)  The basic rights of the individuals must be clearly understood. 
B)  There must be no impediments to bargaining. 
C)  Only a few people can be involved. 
D)  all of the above

Question 11

Price will increase and output will decrease once government makes a firm

Accepted Answer

A)  internalize a negative externality. 
B)  externalize a negative externality. 
C)  internalize a positive externality. 
D)  externalize a positive externality. 
A)  internalize a negative externality. 
B)  externalize a negative externality. 
C)  internalize a positive externality. 
D)  externalize a positive externality.

Question 12

If there are external costs of production not accounted for, then marginal

Accepted Answer

A)  cost equals marginal social cost. 
B)  cost is less than marginal social cost. 
C)  cost is greater than marginal social cost. 
D)  social cost is zero. 
A)  cost equals marginal social cost. 
B)  cost is less than marginal social cost. 
C)  cost is greater than marginal social cost. 
D)  social cost is zero.

Question 13

My neighbor ________ is an example of an external benefit.

Accepted Answer

A)  smoking a cigarette in my presence 
B)  playing loud music on his radio that I can hear 
C)  dumping hazardous chemicals on a stream that passes through my property 
D)  keeping the leaves from his trees away from my yard 
A)  smoking a cigarette in my presence 
B)  playing loud music on his radio that I can hear 
C)  dumping hazardous chemicals on a stream that passes through my property 
D)  keeping the leaves from his trees away from my yard

Question 14

________ is a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction.

Accepted Answer

A)  An externality 
B)  Marginality 
C)  Utility 
D)  A provisional injunction 
A)  An externality 
B)  Marginality 
C)  Utility 
D)  A provisional injunction

Question 15

Refer to the data provided in Table 16.2 below to answer the following question(s).
Table 16.2 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.2
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 1 & \$ 1 & 1 & \$ 8 & \$ 8 \
\hline 2 & 3 & 4 & 2 & 12 & 20 \
\hline 3 & 6 & 10 & 3 & 16 & 36 \
\hline 4 & 10 & 20 & 4 & 20 & 56 \
\hline 5 & 15 & 35 & 5 & 24 & 80 \
\hline
\end{array}\]
-Refer to Table 16.2. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, how many permits will be traded between the two firms?

Accepted Answer

A)  A will buy two permits from B. 
B)  B will buy two permits from A. 
C)  A will buy one permit from B. 
D)  B will buy one permit from A. 
A)  A will buy two permits from B. 
B)  B will buy two permits from A. 
C)  A will buy one permit from B. 
D)  B will buy one permit from A.

Question 16

Samuelson's theory of public expenditure demonstrates that

Accepted Answer

A)  government is inefficient and will always engage in too much spending. 
B)  an optimal (or most efficient) level of output exists for every public good. 
C)  an efficient mix of public goods is produced when local land/housing prices and taxes come to reflect consumer preferences. 
D)  through government regulation of private industry, the optimal level of public good provision is achieved. 
A)  government is inefficient and will always engage in too much spending. 
B)  an optimal (or most efficient) level of output exists for every public good. 
C)  an efficient mix of public goods is produced when local land/housing prices and taxes come to reflect consumer preferences. 
D)  through government regulation of private industry, the optimal level of public good provision is achieved.

Question 17

Because people enjoy the benefits of public goods whether they pay for them or not, people are usually ________ to pay for them. This is known as the free-rider problem, and is intrinsic to ________ goods.

Accepted Answer

A)  willing; private 
B)  willing; public 
C)  unwilling; private 
D)  unwilling; public 
A)  willing; private 
B)  willing; public 
C)  unwilling; private 
D)  unwilling; public

Question 18

Refer to the information in Figure 16.5 below to answer the question(s) that follow.   Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Before any tax on pollution is imposed, the total amount of pollution being emitted in this industry is ________ tons.

Accepted Answer

A)  50 
B)  100 
C)  150 
D)  200 
A)  50 
B)  100 
C)  150 
D)  200

Question 19

A television signal sent by cable is ________ in consumption, and viewers are ________.

Accepted Answer

A)  rival; excludable 
B)  nonrival; excludable 
C)  nonrival; nonexcludable 
D)  rival; nonexcludable 
A)  rival; excludable 
B)  nonrival; excludable 
C)  nonrival; nonexcludable 
D)  rival; nonexcludable

Question 20

The field of environmental economics is concerned with

Accepted Answer

A)  externalities. 
B)  public goods. 
C)  government inefficiency. 
D)  economies of scale. 
A)  externalities. 
B)  public goods. 
C)  government inefficiency. 
D)  economies of scale.

In cases where there is low productivity in extraction methods for a common resource,

For production to be at the ________ level of output, marginal benefit must equal social cost.

People cannot be excluded from using a common resource.

Public goods are nonrival in and their are nonexcludable.

One of the most important characteristics of information is that it is essentially a private good.

You spend $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true?

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. To force this firm to produce the level of output, the government should of $10.00 per car.

Taxes on a producing firm's spillovers

Which of the following conditions are necessary for the Coase theorem to apply?

Price will increase and output will decrease once government makes a firm

If there are external costs of production not accounted for, then marginal

My neighbor ________ is an example of an external benefit.

________ is a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction.

Samuelson's theory of public expenditure demonstrates that

Because people enjoy the benefits of public goods whether they pay for them or not, people are usually to pay for them. This is known as the free-rider problem, and is intrinsic to goods.

A television signal sent by cable is in consumption, and viewers are .

The field of environmental economics is concerned with

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 16: Externalities, Public Goods, and Common Resources

In cases where there is low productivity in extraction methods for a common resource,

For production to be at the ________ level of output, marginal benefit must equal social cost.

People cannot be excluded from using a common resource.

Public goods are nonrival in ________ and their ________ are nonexcludable.

One of the most important characteristics of information is that it is essentially a private good.

You spend $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true?

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. To force this firm to produce the ________ level of output, the government should ________ of $10.00 per car.

Taxes on a producing firm's spillovers

Which of the following conditions are necessary for the Coase theorem to apply?

Price will increase and output will decrease once government makes a firm

If there are external costs of production not accounted for, then marginal

My neighbor ________ is an example of an external benefit.

________ is a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction.

Samuelson's theory of public expenditure demonstrates that

Because people enjoy the benefits of public goods whether they pay for them or not, people are usually ________ to pay for them. This is known as the free-rider problem, and is intrinsic to ________ goods.

A television signal sent by cable is ________ in consumption, and viewers are ________.

The field of environmental economics is concerned with

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Public goods are nonrival in and their are nonexcludable.

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. To force this firm to produce the level of output, the government should of $10.00 per car.

Because people enjoy the benefits of public goods whether they pay for them or not, people are usually to pay for them. This is known as the free-rider problem, and is intrinsic to goods.

A television signal sent by cable is in consumption, and viewers are .