Question 1

Marginal social cost is the

Accepted Answer

A)  difference between the marginal social benefit and the marginal private cost. 
B)  sum of the marginal private benefit and the marginal private cost. 
C)  difference between the marginal external cost and the marginal private cost. 
D)  sum of the marginal external cost and the marginal private cost. 
A)  difference between the marginal social benefit and the marginal private cost. 
B)  sum of the marginal private benefit and the marginal private cost. 
C)  difference between the marginal external cost and the marginal private cost. 
D)  sum of the marginal external cost and the marginal private cost.

Question 2

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low

Accepted Answer

A)  external costs result in deadweight losses. 
B)  external benefits result in deadweight losses. 
C)  private transactions are efficient. 
D)  public transactions are efficient. 
A)  external costs result in deadweight losses. 
B)  external benefits result in deadweight losses. 
C)  private transactions are efficient. 
D)  public transactions are efficient.

Question 3

Governments can use subsidies

Accepted Answer

A)  as a means of increasing government spending. 
B)  when they want to increase taxes. 
C)  to achieve an efficient outcome if there are external costs. 
D)  to achieve an efficient outcome if there are external benefits. 
A)  as a means of increasing government spending. 
B)  when they want to increase taxes. 
C)  to achieve an efficient outcome if there are external costs. 
D)  to achieve an efficient outcome if there are external benefits.

Question 4

Why does government provide educational opportunities in the form of vouchers, subsidies, and public provision?

Accepted Answer

Education generates external benefits. W

Question 5

If an external cost exists, then who bears the external cost in an unregulated competitive market transaction?

Accepted Answer

A)  nobody 
B)  the federal government 
C)  someone other than the producers 
D)  the buyers of the product 
A)  nobody 
B)  the federal government 
C)  someone other than the producers 
D)  the buyers of the product

Question 6

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. When calculating the marginal social benefit of the vaccine, it is necessary to include

Accepted Answer

A)  only the marginal private benefit. 
B)  only the marginal external benefit. 
C)  both the marginal private benefit and the marginal external benefit. 
D)  either the marginal private benefit or the marginal external benefit, whichever is larger. 
A)  only the marginal private benefit. 
B)  only the marginal external benefit. 
C)  both the marginal private benefit and the marginal external benefit. 
D)  either the marginal private benefit or the marginal external benefit, whichever is larger.

Question 7

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium output will be

Accepted Answer

A)  1,000 units. 
B)  2,000 units. 
C)  3,000 units. 
D)  4,000 units. 
A)  1,000 units. 
B)  2,000 units. 
C)  3,000 units. 
D)  4,000 units.

Question 8

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that

Accepted Answer

A)  polluters are taxed on the amount of pollution they discharge. 
B)  emission charges are established by the government. 
C)  each polluter is assigned a pollution limit and is given tradable permits that allow this amount of pollution. 
D)  only some producers pollute and the others go out of business. 
A)  polluters are taxed on the amount of pollution they discharge. 
B)  emission charges are established by the government. 
C)  each polluter is assigned a pollution limit and is given tradable permits that allow this amount of pollution. 
D)  only some producers pollute and the others go out of business.

Question 9

The marginal social cost of a chemical is $100 per ton and its marginal private cost is $85 per ton. What is the marginal external cost of the chemical?

Accepted Answer

Marginal external cost equals

Question 10

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide.
-In the figure above, if no one owns the lake, what is the equilibrium price of the pesticide?

Accepted Answer

A)  $80 per ton 
B)  $40 per ton 
C)  $60 per ton 
D)  $30 per ton 
A)  $80 per ton 
B)  $40 per ton 
C)  $60 per ton 
D)  $30 per ton

Question 11

-Keeping in mind the Coase theorem, in the figure above, if the pesticide factories own the lake, the market does what?

Accepted Answer

A)  overproduces 120 tons of pesticide 
B)  underproduces 120 tons of pesticide 
C)  overproduces 60 tons of pesticide 
D)  produces the efficient quantity of pesticide 
A)  overproduces 120 tons of pesticide 
B)  underproduces 120 tons of pesticide 
C)  overproduces 60 tons of pesticide 
D)  produces the efficient quantity of pesticide

Question 12

When property rights are assigned and transactions costs are low

Accepted Answer

A)  all costs and benefits are taken into account by the transacting parties so the transaction is efficient. 
B)  externalities will lead to market failure. 
C)  the marginal social benefit curve shifts leftward. 
D)  the marginal social cost curve shifts rightward. 
A)  all costs and benefits are taken into account by the transacting parties so the transaction is efficient. 
B)  externalities will lead to market failure. 
C)  the marginal social benefit curve shifts leftward. 
D)  the marginal social cost curve shifts rightward.

Question 13

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then

Accepted Answer

A)  a competitive, unregulated market produces less than the efficient quantity of Good A. 
B)  a competitive, unregulated market produces the efficient quantity of Good A. 
C)  a competitive, unregulated market produces more than the efficient quantity of Good A. 
D)  the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves. 
A)  a competitive, unregulated market produces less than the efficient quantity of Good A. 
B)  a competitive, unregulated market produces the efficient quantity of Good A. 
C)  a competitive, unregulated market produces more than the efficient quantity of Good A. 
D)  the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.

Question 14

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external ________ of ________ per ton.

Accepted Answer

A)  benefit; $200 
B)  benefit; $100 
C)  cost; $200 
D)  cost; $100 
A)  benefit; $200 
B)  benefit; $100 
C)  cost; $200 
D)  cost; $100

Question 15

When external costs are present

Accepted Answer

A)  competitive, unregulated markets are efficient. 
B)  transaction costs will be high. 
C)  a tax might be able to create efficiency. 
D)  property rights have already been established. 
A)  competitive, unregulated markets are efficient. 
B)  transaction costs will be high. 
C)  a tax might be able to create efficiency. 
D)  property rights have already been established.

Question 16

Explain how a Pigovian tax works.

Accepted Answer

A Pigovian tax is a method of dealing wi

Question 17

If there are externalities present in a market, resources are allocated efficiently when marginal social cost equals marginal social benefit.

Accepted Answer

A) True 
 B)False

Question 18

What are ITQs? Where are they used?

Accepted Answer

An ITQ, or individual transferable quota

Question 19

The marginal social cost, MSC, of producing a good or service equals

Accepted Answer

A)  MC + MB. 
B)  MB + marginal external cost. 
C)  MB + marginal external benefit. 
D)  MC + marginal external cost. 
A)  MC + MB. 
B)  MB + marginal external cost. 
C)  MB + marginal external benefit. 
D)  MC + marginal external cost.

Question 20

Why does an external cost lead to inefficient overproduction?

Accepted Answer

If there is an external cost, then the m

Marginal social cost is the

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low

Governments can use subsidies

Why does government provide educational opportunities in the form of vouchers, subsidies, and public provision?

If an external cost exists, then who bears the external cost in an unregulated competitive market transaction?

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. When calculating the marginal social benefit of the vaccine, it is necessary to include

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium output will be

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that

The marginal social cost of a chemical is $100 per ton and its marginal private cost is $85 per ton. What is the marginal external cost of the chemical?

-Keeping in mind the Coase theorem, in the figure above, if the pesticide factories own the lake, the market does what?

When property rights are assigned and transactions costs are low

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external of per ton.

When external costs are present

Explain how a Pigovian tax works.

If there are externalities present in a market, resources are allocated efficiently when marginal social cost equals marginal social benefit.

What are ITQs? Where are they used?

The marginal social cost, MSC, of producing a good or service equals

Why does an external cost lead to inefficient overproduction?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 17: Externalities

Marginal social cost is the

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low

Governments can use subsidies

Why does government provide educational opportunities in the form of vouchers, subsidies, and public provision?

If an external cost exists, then who bears the external cost in an unregulated competitive market transaction?

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. When calculating the marginal social benefit of the vaccine, it is necessary to include

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium output will be

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that

The marginal social cost of a chemical is $100 per ton and its marginal private cost is $85 per ton. What is the marginal external cost of the chemical?

-Keeping in mind the Coase theorem, in the figure above, if the pesticide factories own the lake, the market does what?

When property rights are assigned and transactions costs are low

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external ________ of ________ per ton.

When external costs are present

Explain how a Pigovian tax works.

If there are externalities present in a market, resources are allocated efficiently when marginal social cost equals marginal social benefit.

What are ITQs? Where are they used?

The marginal social cost, MSC, of producing a good or service equals

Why does an external cost lead to inefficient overproduction?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external of per ton.