Question 1

The Environmental Protection Agency (EPA) cannot reach a target level of pollution through the use of pollution permits.

Accepted Answer

A) True 
 B)False

Question 2

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. The market equilibrium quantity of output is

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 3

Scenario 10-3
​
Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. What are the market equilibrium quantity and price?

Accepted Answer

The market equilibri

Question 4

Figure 10-6
​  
-Refer to Figure 10-6. If 325 units of plastics are produced and consumed, then the

Accepted Answer

A) social optimum has been reached. 
B) market equilibrium has been reached. 
C) government must have imposed a corrective tax to guide the market to this outcome. 
D) government must have offered a corrective subsidy to guide the market to this outcome. 
A) social optimum has been reached. 
B) market equilibrium has been reached. 
C) government must have imposed a corrective tax to guide the market to this outcome. 
D) government must have offered a corrective subsidy to guide the market to this outcome.

Question 5

If a sawmill creates too much noise for local residents,

Accepted Answer

A) noise restrictions will force residents to move out of the area. 
B) a sense of social responsibility will cause owners of the mill to reduce noise levels. 
C) the government can raise economic well-being through noise-control regulations. 
D) the government should avoid intervening because the market will always allocate resources efficiently. 
A) noise restrictions will force residents to move out of the area. 
B) a sense of social responsibility will cause owners of the mill to reduce noise levels. 
C) the government can raise economic well-being through noise-control regulations. 
D) the government should avoid intervening because the market will always allocate resources efficiently.

Question 6

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Accepted Answer

A) True 
 B)False

Question 7

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Accepted Answer

@#IMG-DLM& ​
When a negative externality exists, t

Question 8

All externalities impose a cost on others. ​

Accepted Answer

A) True 
 B)False

Question 9

Figure 10-4
  
-Refer to Figure 10-4. The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the market for smokestack scrubbers is shown in

Accepted Answer

A) Graph (a). 
B) Graph (b) only. 
C) Graph (c) only. 
D) Graphs (b) and (c). 
A) Graph (a). 
B) Graph (b) only. 
C) Graph (c) only. 
D) Graphs (b) and (c).

Question 10

Tyler owns a dog and receives a $300 benefit from owning it. Tyler's neighbor, Liz, incurs a cost of $450 from the dog's barking. Suggest a deal between Tyler and Liz that would result in both individuals becoming better off.

Accepted Answer

Since Liz's cost exceeds Tyler's benefit

Question 11

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Accepted Answer

A) A well-maintained yard conveys a positive externality because it increases the home's market value. 
B) A well-maintained yard conveys a negative externality because it increases the property tax liability of the owner. 
C) A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood. 
D) A well-maintained yard cannot provide any type of externality. 
A) A well-maintained yard conveys a positive externality because it increases the home's market value. 
B) A well-maintained yard conveys a negative externality because it increases the property tax liability of the owner. 
C) A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood. 
D) A well-maintained yard cannot provide any type of externality.

Question 12

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Scenario 10-3
​
Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the social cost of producing 30 units of the good?

Accepted Answer

The social cost of p

Question 15

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

Accepted Answer

A) True 
 B)False

Question 16

Corrective taxes cause deadweight losses, reducing economic efficiency.

Accepted Answer

A) True 
 B)False

Question 17

Table 10-1
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. What is the socially optimal quantity of output in this market?

Accepted Answer

A) 5 units 
B) 4 units 
C) 6 units 
D) 7 units 
A) 5 units 
B) 4 units 
C) 6 units 
D) 7 units

Question 18

Which of the following statements is not correct?

Accepted Answer

A) Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level. 
B) Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution. 
C) Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution. 
D) Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment. 
A) Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level. 
B) Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution. 
C) Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution. 
D) Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment.

Question 19

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

Accepted Answer

The phenomenon of ex

Question 20

Table 10-1
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. What is the equilibrium quantity of output in the market?

Accepted Answer

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

Exam 10: Externalities

The Environmental Protection Agency (EPA) cannot reach a target level of pollution through the use of pollution permits.

Table 10-3 ​ ​ Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Benefit (Dollars) 1 22 12 10 2 20 15 10 3 18 18 10 4 16 21 10 5 14 24 10 6 12 27 10 -Refer to Table 10-3. The market equilibrium quantity of output is

Figure 10-6 ​ -Refer to Figure 10-6. If 325 units of plastics are produced and consumed, then the

If a sawmill creates too much noise for local residents,

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

All externalities impose a cost on others. ​

Figure 10-4 -Refer to Figure 10-4. The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the market for smokestack scrubbers is shown in

Tyler owns a dog and receives a $300 benefit from owning it. Tyler's neighbor, Liz, incurs a cost of $450 from the dog's barking. Suggest a deal between Tyler and Liz that would result in both individuals becoming better off.

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

Corrective taxes cause deadweight losses, reducing economic efficiency.

Table 10-1 ​ Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Cost (Dollars) 1 28 12 4 2 26 14 4 3 24 16 4 4 22 18 4 5 20 20 4 6 18 22 4 7 16 24 4 -Refer to Table 10-1. What is the socially optimal quantity of output in this market?

Which of the following statements is not correct?

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

Table 10-1 ​ Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Cost (Dollars) 1 28 12 4 2 26 14 4 3 24 16 4 4 22 18 4 5 20 20 4 6 18 22 4 7 16 24 4 -Refer to Table 10-1. What is the equilibrium quantity of output in the market?

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

Table 10-3 Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Benefit (Dollars) 1 22 12 10 2 20 15 10 3 18 18 10 4 16 21 10 5 14 24 10 6 12 27 10 -Refer to Table 10-3. The market equilibrium quantity of output is

Figure 10-6 -Refer to Figure 10-6. If 325 units of plastics are produced and consumed, then the

All externalities impose a cost on others.

Table 10-1 Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Cost (Dollars) 1 28 12 4 2 26 14 4 3 24 16 4 4 22 18 4 5 20 20 4 6 18 22 4 7 16 24 4 -Refer to Table 10-1. What is the socially optimal quantity of output in this market?

Table 10-1 Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Cost (Dollars) 1 28 12 4 2 26 14 4 3 24 16 4 4 22 18 4 5 20 20 4 6 18 22 4 7 16 24 4 -Refer to Table 10-1. What is the equilibrium quantity of output in the market?