Question 1

Does research into new technologies create a positive externality or does it create a negative externality?

Accepted Answer

Research into new te

Question 2

Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently.

Accepted Answer

A) True 
 B)False

Question 3

Figure 10-7  
-Refer to Figure 10-7. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is

Accepted Answer

A) 50. 
B) 100. 
C) 1,000. 
D) 2,000. 
A) 50. 
B) 100. 
C) 1,000. 
D) 2,000.

Question 4

Figure 10-2  
-Refer to Figure 10-2. The socially optimal quantity would be

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Question 5

Table 10-2
​
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Social Value } \
\text { (Dollars) }
\end{array} \
\hline 1 & 51 & 45 & 57 \
\hline 2 & 48 & 48 & 54 \
\hline 3 & 45 & 51 & 51 \
\hline 4 & 42 & 54 & 48 \
\hline 5 & 39 & 57 & 45 \
\hline 6 & 36 & 60 & 42 \
\hline
\end{array}$$ ​
-Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially optimal level of output?

Accepted Answer

A) $5 
B) $8 
C) $6 
D) $11 
A) $5 
B) $8 
C) $6 
D) $11

Question 6

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat.
​

Accepted Answer

A) True 
 B)False

Question 7

According to recent research, the gas tax in the United States is lower than the optimal level.

Accepted Answer

A) True 
 B)False

Question 8

Figure 10-4
  
-Refer to Figure 10-4, Graph (b) and Graph (c). The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the external benefit of smokestack scrubber installation is represented by

Accepted Answer

A) Q3 − Q2. 
B) Q5 − Q4. 
C) P3a − P3b. 
D) P4a − P4b. 
A) Q3 − Q2. 
B) Q5 − Q4. 
C) P3a − P3b. 
D) P4a − P4b.

Question 9

Figure 10-3  
-Refer to Figure 10-3. If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would

Accepted Answer

A) introduce a subsidy of $2 per unit. 
B) impose a tax of $4 per unit. 
C) introduce a subsidy of $4 per unit. 
D) impose a tax of $2 per unit. 
A) introduce a subsidy of $2 per unit. 
B) impose a tax of $4 per unit. 
C) introduce a subsidy of $4 per unit. 
D) impose a tax of $2 per unit.

Question 10

Figure 10-6
​  
-Refer to Figure 10-6. 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) $2,600. 
B) $300. 
C) $2,000. 
D) $2,300. 
A) $2,600. 
B) $300. 
C) $2,000. 
D) $2,300.

Question 11

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 400th gallon of gasoline entails the following:
F1F1F1S1F1F1F10F1F1F1S1F1F1F10a private cost of $2.83;
F1F1F1S1F1F1F10F1F1F1S1F1F1F10a social cost of $3.12;
F1F1F1S1F1F1F10F1F1F1S1F1F1F10a value to consumers of $3.23.
-Refer to Scenario 10-1. Suppose the equilibrium quantity of gasoline is 440 gallons; that is, QMARKET = 440. Then the equilibrium price of a gallon could be

Accepted Answer

A) $3.66. 
B) $2.63. 
C) $2.88. 
D) $2.51. 
A) $3.66. 
B) $2.63. 
C) $2.88. 
D) $2.51.

Question 12

Describe the circumstances under which it would be better for the government to sell pollution permits than to levy a corrective tax.

Accepted Answer

When the governmental authority (e.g., E

Question 13

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

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 14

Figure 10-2  
-Refer to Figure 10-2. Without government intervention, the equilibrium quantity would be

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Question 15

Economists believe that the optimal level of pollution is zero.

Accepted Answer

A) True 
 B)False

Question 16

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Accepted Answer

A) True 
 B)False

Question 17

In some circumstances, selling pollution permits may be better than levying a corrective tax.

Accepted Answer

A) True 
 B)False

Question 18

Government can be used to solve externality problems that are too costly for private parties to solve.

Accepted Answer

A) True 
 B)False

Question 19

Table 10-3
​
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Benefit } \
\text { (Dollars) }
\end{array} \
\hline 1 & 22 & 12 & 10 \
\hline 2 & 20 & 15 & 10 \
\hline 3 & 18 & 18 & 10 \
\hline 4 & 16 & 21 & 10 \
\hline 5 & 14 & 24 & 10 \
\hline 6 & 12 & 27 & 10 \
\hline
\end{array}$$
-Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Accepted Answer

A) $2 
B) $3 
C) $5 
D) $10 
A) $2 
B) $3 
C) $5 
D) $10

Question 20

Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

Does research into new technologies create a positive externality or does it create a negative externality?

Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently.

Figure 10-7 -Refer to Figure 10-7. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is

Figure 10-2 -Refer to Figure 10-2. The socially optimal quantity would be

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat. ​

According to recent research, the gas tax in the United States is lower than the optimal level.

Figure 10-4 -Refer to Figure 10-4, Graph (b) and Graph (c). The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the external benefit of smokestack scrubber installation is represented by

Figure 10-3 -Refer to Figure 10-3. If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would

Figure 10-6 ​ -Refer to Figure 10-6. 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

Describe the circumstances under which it would be better for the government to sell pollution permits than to levy a corrective tax.

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

Figure 10-2 -Refer to Figure 10-2. Without government intervention, the equilibrium quantity would be

Economists believe that the optimal level of pollution is zero.

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

In some circumstances, selling pollution permits may be better than levying a corrective tax.

Government can be used to solve externality problems that are too costly for private parties to solve.

Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

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 Nations 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

Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat.

Figure 10-6 -Refer to Figure 10-6. 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