Question 1

Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.

Accepted Answer

A) True 
 B)False

Question 2

Use a graph to illustrate the quantity of pollution that would be emitted (a) after a corrective tax has been imposed and (b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Accepted Answer

@#IMG-DLM& Yes, these two quantities cou

Question 3

An externality is the impact of

Accepted Answer

A) society's decisions on the well-being of society. 
B) a person's actions on that person's well-being. 
C) one person's actions on the well-being of a bystander. 
D) society's decisions on the poorest person in the society. 
A) society's decisions on the well-being of society. 
B) a person's actions on that person's well-being. 
C) one person's actions on the well-being of a bystander. 
D) society's decisions on the poorest person in the society.

Question 4

Externalities can be corrected by each of the following except

Accepted Answer

A) self-interest. 
B) moral codes and social sanctions. 
C) charity. 
D) normal market adjustments. 
A) self-interest. 
B) moral codes and social sanctions. 
C) charity. 
D) normal market adjustments.

Question 5

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Accepted Answer

A) True 
 B)False

Question 6

In a market economy, government intervention

Accepted Answer

A) will always improve market outcomes. 
B) reduces efficiency in the presence of externalities. 
C) may improve market outcomes in the presence of externalities. 
D) is necessary to control individual greed. 
A) will always improve market outcomes. 
B) reduces efficiency in the presence of externalities. 
C) may improve market outcomes in the presence of externalities. 
D) is necessary to control individual greed.

Question 7

​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 8

Which of the following is true of markets characterized by positive externalities?

Accepted Answer

A) Social value exceeds private value, and market quantity exceeds the socially optimal quantity. 
B) Social value is less than private value, and market quantity exceeds the socially optimal quantity. 
C) Social value exceeds private value, and market quantity is less than the socially optimal quantity. 
D) Social value seldom exceeds private value; therefore, social quantity is less than private quantity. 
A) Social value exceeds private value, and market quantity exceeds the socially optimal quantity. 
B) Social value is less than private value, and market quantity exceeds the socially optimal quantity. 
C) Social value exceeds private value, and market quantity is less than the socially optimal quantity. 
D) Social value seldom exceeds private value; therefore, social quantity is less than private quantity.

Question 9

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1thS1S1P0 fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
-Refer to Scenario 10-4. In order to maximize the total benefit of fire extinguishers to society as a whole, should the number of fire extinguishers produced be less than, equal to, or greater than 500? Explain.

Accepted Answer

For the 500^th fire extinguisher, the socia

Question 10

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Accepted Answer

A) They are equal. 
B) The equilibrium quantity is greater than the socially optimal quantity. 
C) The equilibrium quantity is less than the socially optimal quantity. 
D) There is not enough information to answer the question. 
A) They are equal. 
B) The equilibrium quantity is greater than the socially optimal quantity. 
C) The equilibrium quantity is less than the socially optimal quantity. 
D) There is not enough information to answer the question.

Question 11

Figure 10-10  
-Refer to Figure 10-10. The socially optimal quantity of output is

Accepted Answer

A) 120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by the seller of the 120th unit. 
B) 120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit. 
C) 160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit. 
D) 160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit. 
A) 120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by the seller of the 120th unit. 
B) 120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit. 
C) 160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit. 
D) 160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit.

Question 12

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

Accepted Answer

A) the market for good x is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone. 
B) the market for good x is characterized by a positive externality. 
C) the market for good x is characterized by a negative externality. 
D) the supply curve for good x fails to reflect the cost to society of producing that good. 
A) the market for good x is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone. 
B) the market for good x is characterized by a positive externality. 
C) the market for good x is characterized by a negative externality. 
D) the supply curve for good x fails to reflect the cost to society of producing that good.

Question 13

Patents do not

Accepted Answer

A) provide firms an incentive to research. 
B) assign property rights to inventors. 
C) protect the rights of inventors for their lifetimes. 
D) internalize externalities. 
A) provide firms an incentive to research. 
B) assign property rights to inventors. 
C) protect the rights of inventors for their lifetimes. 
D) internalize externalities.

Question 14

Figure 10-15  
-Refer to Figure 10-15. Which graph illustrates a pollution permit program?

Accepted Answer

A) the left graph 
B) the right graph 
C) both graphs 
D) neither graph 
A) the left graph 
B) the right graph 
C) both graphs 
D) neither graph

Question 15

Figure 10-4  
-Refer to Figure 10-4. At Q3

Accepted Answer

A) the marginal consumer values this product less than the social cost of producing it. 
B) every consumer values this product less than the social cost of producing it. 
C) the cost to society is equal to the value to society. 
D) the marginal consumer values this product more than the private cost. 
A) the marginal consumer values this product less than the social cost of producing it. 
B) every consumer values this product less than the social cost of producing it. 
C) the cost to society is equal to the value to society. 
D) the marginal consumer values this product more than the private cost.

Question 16

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

Accepted Answer

A) True 
 B)False

Question 17

The Coase theorem states that

Accepted Answer

A) under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present. 
B) government intervention is always required to reach an efficient outcome when an externality is present. 
C) government intervention cannot lead to an efficient outcome when an externality is present. 
D) only negative externalities can be resolved using government intervention. 
A) under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present. 
B) government intervention is always required to reach an efficient outcome when an externality is present. 
C) government intervention cannot lead to an efficient outcome when an externality is present. 
D) only negative externalities can be resolved using government intervention.

Question 18

Figure 10-4  
-Refer to Figure 10-4. This market is characterized by

Accepted Answer

A) government intervention. 
B) a positive externality. 
C) a negative externality. 
D) None of the above is correct. 
A) government intervention. 
B) a positive externality. 
C) a negative externality. 
D) None of the above is correct.

Question 19

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Accepted Answer

A) True 
 B)False

Question 20

Figure 10-9      
-Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

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.

Exam 10: Externalities

Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.

Use a graph to illustrate the quantity of pollution that would be emitted (a) after a corrective tax has been imposed and (b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

An externality is the impact of

Externalities can be corrected by each of the following except

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

In a market economy, government intervention

​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.

Which of the following is true of markets characterized by positive externalities?

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Figure 10-10 -Refer to Figure 10-10. The socially optimal quantity of output is

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

Patents do not

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a pollution permit program?

Figure 10-4 -Refer to Figure 10-4. At Q3

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

The Coase theorem states that

Figure 10-4 -Refer to Figure 10-4. This market is characterized by

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

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

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.

Figure 10-4 -Refer to Figure 10-4. At Q₃