Question 1

Figure 10-8  
-Refer to Figure 10-8. What is the equilibrium price in this market?

Accepted Answer

A) $8 
B) Between $8 and $10 
C) $10 
D) More than $10 
A) $8 
B) Between $8 and $10 
C) $10 
D) More than $10

Question 2

An externality is

Accepted Answer

A) the costs that parties incur in the process of agreeing and following through on a bargain. 
B) the uncompensated impact of one person's actions on the well-being of a bystander. 
C) the proposition that private parties can bargain without cost over the allocation of resources. 
D) a market equilibrium tax. 
A) the costs that parties incur in the process of agreeing and following through on a bargain. 
B) the uncompensated impact of one person's actions on the well-being of a bystander. 
C) the proposition that private parties can bargain without cost over the allocation of resources. 
D) a market equilibrium tax.

Question 3

If gasoline taxes were significantly increased in the United States, then

Accepted Answer

A) some of the government regulations that require automakers to produce more fuel-efficient cars would become unnecessary. 
B) other taxes, such as income taxes, could be lowered. 
C) it is likely that roads would become safer and the environment would become cleaner. 
D) All of the above are correct. 
A) some of the government regulations that require automakers to produce more fuel-efficient cars would become unnecessary. 
B) other taxes, such as income taxes, could be lowered. 
C) it is likely that roads would become safer and the environment would become cleaner. 
D) All of the above are correct.

Question 4

Figure 10-9      
-Refer to Figure 10-9. Which graph represents a market with a negative externality?

Accepted Answer

A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Both (b) and (c) are correct. 
A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Both (b) and (c) are correct.

Question 5

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Accepted Answer

A) True 
 B)False

Question 6

Tradable pollution permits

Accepted Answer

A) have prices that are set by the government. 
B) will be more valuable to firms that can reduce pollution only at high costs. 
C) are likely to create a higher level of total pollution. 
D) are less desirable than command-and-control policies to reduce pollution. 
A) have prices that are set by the government. 
B) will be more valuable to firms that can reduce pollution only at high costs. 
C) are likely to create a higher level of total pollution. 
D) are less desirable than command-and-control policies to reduce pollution.

Question 7

Which of the following is NOT an example of a negative externality?

Accepted Answer

A) air pollution from a manufacturing plant. 
B) disrupted sleep from a neighbor's loud music. 
C) an illness caused by secondhand cigarette smoke. 
D) a decrease in your property value from neglecting your lawn and garden. 
A) air pollution from a manufacturing plant. 
B) disrupted sleep from a neighbor's loud music. 
C) an illness caused by secondhand cigarette smoke. 
D) a decrease in your property value from neglecting your lawn and garden.

Question 8

Which of the following suggests that private markets can be effective in dealing with externalities?

Accepted Answer

A) the "invisible hand" 
B) the law of diminishing social returns 
C) the Coase theorem 
D) technology policy 
A) the "invisible hand" 
B) the law of diminishing social returns 
C) the Coase theorem 
D) technology policy

Question 9

The difference between social cost and private cost is a measure of the

Accepted Answer

A) loss in profit to the seller as the result of a negative externality. 
B) cost of an externality. 
C) cost reduction when the negative externality is eliminated. 
D) cost incurred by the government when it intervenes in the market. 
A) loss in profit to the seller as the result of a negative externality. 
B) cost of an externality. 
C) cost reduction when the negative externality is eliminated. 
D) cost incurred by the government when it intervenes in the market.

Question 10

When one firm sells its pollution permit to another firm,

Accepted Answer

A) both firms benefit. 
B) the total amount of pollution remains the same. 
C) the total amount of pollution decreases. 
D) Both a and b are correct. 
A) both firms benefit. 
B) the total amount of pollution remains the same. 
C) the total amount of pollution decreases. 
D) Both a and b are correct.

Question 11

When we identify public policies toward externalities, we contrast command-and-control policies with what other type of policies?

Accepted Answer

The other type of po

Question 12

​Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture

Accepted Answer

A) ​increases the value of other properties in the neighborhood. 
B) ​increases the value of Josiah's home. 
C) ​is visually unappealing to Josiah's neighbors. 
D) ​creates a safety hazard for neighborhood children. 
A) ​increases the value of other properties in the neighborhood. 
B) ​increases the value of Josiah's home. 
C) ​is visually unappealing to Josiah's neighbors. 
D) ​creates a safety hazard for neighborhood children.

Question 13

Figure 10-6  
-Refer to Figure 10-6. Which quantity represents the socially-optimal quantity of output in this market?

Accepted Answer

A) Q 
B) Q' 
C) Either Q or Q'. It is necessary to know whether the externality is positive or negative to determine the socially-optimal quantity. 
D) Some quantity between Q and Q'. The socially-optimal quantity depends on the negotiating skills of the interested parties. 
A) Q 
B) Q' 
C) Either Q or Q'. It is necessary to know whether the externality is positive or negative to determine the socially-optimal quantity. 
D) Some quantity between Q and Q'. The socially-optimal quantity depends on the negotiating skills of the interested parties.

Question 14

Table 10-2
The following table shows the private value, private cost, and social value for a market with a positive externality.  
-Refer to Table 10-2. What is the socially-optimal level of output in this market?

Accepted Answer

A) 3 units 
B) 4 units 
C) 5 units 
D) 6 units 
A) 3 units 
B) 4 units 
C) 5 units 
D) 6 units

Question 15

Figure 10-4  
-Refer to Figure 10-4. This market

Accepted Answer

A) has no need for government intervention. 
B) would benefit from a tax on the product. 
C) would benefit from a subsidy for the product. 
D) would maximize total well-being at Q3. 
A) has no need for government intervention. 
B) would benefit from a tax on the product. 
C) would benefit from a subsidy for the product. 
D) would maximize total well-being at Q3.

Question 16

Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 40 pollution permits, which it can either use or sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. It is likely that

Accepted Answer

A) Firm A will buy all of Firm B's pollution permits. Each one will cost between $100 and $200. 
B) Firm B will buy all of Firm A's pollution permits. Each one will cost between $100 and $200. 
C) Both firms will use their own pollution permits. 
D) Firm A will buy some of Firm B's pollution permits. Each one will cost less than $100. 
A) Firm A will buy all of Firm B's pollution permits. Each one will cost between $100 and $200. 
B) Firm B will buy all of Firm A's pollution permits. Each one will cost between $100 and $200. 
C) Both firms will use their own pollution permits. 
D) Firm A will buy some of Firm B's pollution permits. Each one will cost less than $100.

Question 17

Cameron lives in an apartment building and gets a $700 benefit from playing his stereo. Renee, who lives next door to Cameron and often loses sleep due to the music coming from Cameron's stereo, bears a $1,000 cost from the noise. At which of the following offers from Renee could both Renee and Cameron benefit from the silencing of Cameron's stereo?

Accepted Answer

A) $250 
B) $550 
C) $750 
D) $1,020 
A) $250 
B) $550 
C) $750 
D) $1,020

Question 18

All externalities

Accepted Answer

A) cause markets to fail to allocate resources efficiently. 
B) cause equilibrium prices to be too high. 
C) benefit producers at the expense of consumers. 
D) cause equilibrium prices to be too low. 
A) cause markets to fail to allocate resources efficiently. 
B) cause equilibrium prices to be too high. 
C) benefit producers at the expense of consumers. 
D) cause equilibrium prices to be too low.

Question 19

Private solutions may not be possible due to the costs of negotiating and enforcing these solutions. Such costs are called

Accepted Answer

A) transaction costs. 
B) corrective costs. 
C) input costs. 
D) private costs. 
A) transaction costs. 
B) corrective costs. 
C) input costs. 
D) private costs.

Question 20

Figure 10-2. The graph depicts the market for plastic.  
-Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic?

Accepted Answer

A) 200 units 
B) 450 units 
C) 500 units 
D) 650 units 
A) 200 units 
B) 450 units 
C) 500 units 
D) 650 units

Figure 10-8 -Refer to Figure 10-8. What is the equilibrium price in this market?

An externality is

If gasoline taxes were significantly increased in the United States, then

Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with a negative externality?

The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Tradable pollution permits

Which of the following is NOT an example of a negative externality?

Which of the following suggests that private markets can be effective in dealing with externalities?

The difference between social cost and private cost is a measure of the

When one firm sells its pollution permit to another firm,

When we identify public policies toward externalities, we contrast command-and-control policies with what other type of policies?

Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture

Figure 10-6 -Refer to Figure 10-6. Which quantity represents the socially-optimal quantity of output in this market?

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. What is the socially-optimal level of output in this market?

Figure 10-4 -Refer to Figure 10-4. This market

All externalities

Private solutions may not be possible due to the costs of negotiating and enforcing these solutions. Such costs are called

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

Exam 10: Externalities

Figure 10-8 -Refer to Figure 10-8. What is the equilibrium price in this market?

An externality is

If gasoline taxes were significantly increased in the United States, then

Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with a negative externality?

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Tradable pollution permits

Which of the following is NOT an example of a negative externality?

Which of the following suggests that private markets can be effective in dealing with externalities?

The difference between social cost and private cost is a measure of the

When one firm sells its pollution permit to another firm,

When we identify public policies toward externalities, we contrast command-and-control policies with what other type of policies?

​Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture

Figure 10-6 -Refer to Figure 10-6. Which quantity represents the socially-optimal quantity of output in this market?

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. What is the socially-optimal level of output in this market?

Figure 10-4 -Refer to Figure 10-4. This market

All externalities

Private solutions may not be possible due to the costs of negotiating and enforcing these solutions. Such costs are called

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture