Question 1

A command-and-control policy is another term for a

Accepted Answer

A) pollution permit. 
B) government regulation. 
C) corrective tax. 
D) Both a and b are correct. 
A) pollution permit. 
B) government regulation. 
C) corrective tax. 
D) Both a and b are correct.

Question 2

Table 10-1
The following table shows the private value, private cost, and external cost for various quantities of output in a market.  
-Refer to Table 10-1. Which of the following statements is correct?

Accepted Answer

A) If the external cost per unit of output were $0 instead of $2, then the socially efficient quantity of output would be 4 units. 
B) A tax of $4 per unit would enable this market to move from the equilibrium quantity of output to the socially optimal level of output. 
C) Taking the external cost into account, total surplus declines when the 3rd unit of output is produced and consumed. 
D) The market for flu shots is a market to which the concepts in this table apply very well. 
A) If the external cost per unit of output were $0 instead of $2, then the socially efficient quantity of output would be 4 units. 
B) A tax of $4 per unit would enable this market to move from the equilibrium quantity of output to the socially optimal level of output. 
C) Taking the external cost into account, total surplus declines when the 3rd unit of output is produced and consumed. 
D) The market for flu shots is a market to which the concepts in this table apply very well.

Question 3

Which of the following statements is correct?

Accepted Answer

A) Government should tax goods with either positive or negative externalities. 
B) Government should tax goods with negative externalities and subsidize goods with positive externalities. 
C) Government should subsidize goods with either positive or negative externalities. 
D) Government should tax goods with positive externalities and subsidize goods with negative externalities. 
A) Government should tax goods with either positive or negative externalities. 
B) Government should tax goods with negative externalities and subsidize goods with positive externalities. 
C) Government should subsidize goods with either positive or negative externalities. 
D) Government should tax goods with positive externalities and subsidize goods with negative externalities.

Question 4

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3  
-Refer to Figure 10-3. The social cost curve is above the supply curve because

Accepted Answer

A) it takes into account the external costs imposed on society by the concert. 
B) it takes into account the effect of local noise restrictions on concerts in parks surrounded by residential neighborhoods. 
C) concert tickets are likely to cost more than the concert actually costs the organizers. 
D) residents in the surrounding neighborhoods get to listen to the concert for free. 
A) it takes into account the external costs imposed on society by the concert. 
B) it takes into account the effect of local noise restrictions on concerts in parks surrounded by residential neighborhoods. 
C) concert tickets are likely to cost more than the concert actually costs the organizers. 
D) residents in the surrounding neighborhoods get to listen to the concert for free.

Question 5

A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.

Accepted Answer

A) True 
 B)False

Question 6

Figure 10-12  
-Refer to Figure 10-12. An alternative label for the quantity   would be

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
A)    . 
B)    . 
C)    . 
D)    .

Question 7

Which of the following illustrates the concept of a negative externality?

Accepted Answer

A) A college professor plays a vigorous game of racquet ball with the racquet he recently purchased. 
B) A flood wipes out a farmer's corn crop. 
C) A college student plays loud music on his new stereo system at 2:00 a.m. 
D)  A janitor eats a hamburger during his lunch break. 
A) A college professor plays a vigorous game of racquet ball with the racquet he recently purchased. 
B) A flood wipes out a farmer's corn crop. 
C) A college student plays loud music on his new stereo system at 2:00 a.m. 
D)  A janitor eats a hamburger during his lunch break.

Question 8

Which of the following is not a necessary condition for the Coase theorem?

Accepted Answer

A) Property rights are clearly defined. 
B) The costs of bargaining are sufficiently low. 
C) The government intervenes to internalize the externality. 
D) There are only a few parties involved. 
A) Property rights are clearly defined. 
B) The costs of bargaining are sufficiently low. 
C) The government intervenes to internalize the externality. 
D) There are only a few parties involved.

Question 9

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

Accepted Answer

The term i

Question 10

Why can't private individuals always internalize an externality without the help of government?

Accepted Answer

A) Legal restrictions prevent side payments between individuals. 
B) Transactions costs may be too high. 
C) Side payments between individuals are inefficient. 
D) Side payments between individuals are insufficient. 
A) Legal restrictions prevent side payments between individuals. 
B) Transactions costs may be too high. 
C) Side payments between individuals are inefficient. 
D) Side payments between individuals are insufficient.

Question 11

Negative externalities occur when one person's actions

Accepted Answer

A) cause another person to lose money in a stock market transaction. 
B) cause his or her employer to lose business. 
C) reveal his or her preference for foreign-produced goods. 
D) adversely affect the well-being of a bystander who is not a party to the action. 
A) cause another person to lose money in a stock market transaction. 
B) cause his or her employer to lose business. 
C) reveal his or her preference for foreign-produced goods. 
D) adversely affect the well-being of a bystander who is not a party to the action.

Question 12

​Figure 10-20. ​  
-​Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an example of a positive externality?

Accepted Answer

A) air pollution 
B) a person littering in a public park 
C) a nice garden in front of your neighbor's house 
D) the pollution of a stream 
A) air pollution 
B) a person littering in a public park 
C) a nice garden in front of your neighbor's house 
D) the pollution of a stream

Question 14

A patent is used to

Accepted Answer

A) disseminate information. 
B) offset the negative effects of taxes. 
C) protect inventors for as long as they live. 
D) assign property rights. 
A) disseminate information. 
B) offset the negative effects of taxes. 
C) protect inventors for as long as they live. 
D) assign property rights.

Question 15

Figure 10-9      
-Refer to Figure 10-9, Panel (c). The market equilibrium quantity is

Accepted Answer

A) Q4, which is the socially optimal quantity. 
B) Q5, which is the socially optimal quantity. 
C) Q4, and the socially optimal quantity is Q5. 
D) Q5, and the socially optimal quantity is Q4. 
A) Q4, which is the socially optimal quantity. 
B) Q5, which is the socially optimal quantity. 
C) Q4, and the socially optimal quantity is Q5. 
D) Q5, and the socially optimal quantity is Q4.

Question 16

Research into new technologies provides a

Accepted Answer

A) negative externality, and too few resources are devoted to research as a result. 
B) negative externality, and too many resources are devoted to research as a result. 
C) positive externality, and too few resources are devoted to research as a result. 
D) positive externality, and too many resources are devoted to research as a result. 
A) negative externality, and too few resources are devoted to research as a result. 
B) negative externality, and too many resources are devoted to research as a result. 
C) positive externality, and too few resources are devoted to research as a result. 
D) positive externality, and too many resources are devoted to research as a result.

Question 17

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

Accepted Answer

A) encourage the production of computer chips with subsidies. 
B) discourage the production of potato chips with taxes. 
C) encourage the production of potato chips with subsidies. 
D) discourage the production of computer chips with taxes. 
A) encourage the production of computer chips with subsidies. 
B) discourage the production of potato chips with taxes. 
C) encourage the production of potato chips with subsidies. 
D) discourage the production of computer chips with taxes.

Question 18

Which of the following is not an advantage of corrective taxes?

Accepted Answer

A) They raise revenues for the government. 
B) They enhance economic efficiency. 
C) They subsidize the production of goods with positive externalities. 
D) They move the allocation of resources closer to the social optimum. 
A) They raise revenues for the government. 
B) They enhance economic efficiency. 
C) They subsidize the production of goods with positive externalities. 
D) They move the allocation of resources closer to the social optimum.

Question 19

The Golden Rule is an example of a private solution for

Accepted Answer

A) subsidizing higher education. 
B) internalizing externalities. 
C) increasing production. 
D) reducing scarcity. 
A) subsidizing higher education. 
B) internalizing externalities. 
C) increasing production. 
D) reducing scarcity.

Question 20

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics.  
-Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

Accepted Answer

A) $1,250. 
B) $1,600. 
C) $2,000. 
D) $2,500. 
A) $1,250. 
B) $1,600. 
C) $2,000. 
D) $2,500.

Exam 10: Externalities

A command-and-control policy is another term for a

Table 10-1 The following table shows the private value, private cost, and external cost for various quantities of output in a market. -Refer to Table 10-1. Which of the following statements is correct?

Which of the following statements is correct?

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The social cost curve is above the supply curve because

A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity would be

Which of the following illustrates the concept of a negative externality?

Which of the following is not a necessary condition for the Coase theorem?

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

Why can't private individuals always internalize an externality without the help of government?

Negative externalities occur when one person's actions

​Figure 10-20. ​ -​Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.

Which of the following is an example of a positive externality?

A patent is used to

Figure 10-9 -Refer to Figure 10-9, Panel (c). The market equilibrium quantity is

Research into new technologies provides a

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

Which of the following is not an advantage of corrective taxes?

The Golden Rule is an example of a private solution for

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 10-20. -Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.