Question 1

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

Accepted Answer

A)  the price and marginal private benefit 
B)  the economically efficient output 
C)  the price and the marginal social benefit 
D)  the size of the deadweight loss 
A)  the price and marginal private benefit 
B)  the economically efficient output 
C)  the price and the marginal social benefit 
D)  the size of the deadweight loss

Question 2

What is an individual transferable quota (ITQ)?

Accepted Answer

An ITQ is a production limit that is ass

Question 3

A copper ore refiner pollutes the water upstream from a brewery. These are the only two parties involved. The transactions costs of reaching an agreement between the refinery and the brewery are low. The amount of water pollution will be at the efficient level

Accepted Answer

A)  only when the property right to the stream is assigned to the ore refinery. 
B)  only when the property right to the stream is assigned to the brewery. 
C)  when the property right to the stream is assigned to either the refinery or to the brewery. 
D)  when no one has clear property rights. 
A)  only when the property right to the stream is assigned to the ore refinery. 
B)  only when the property right to the stream is assigned to the brewery. 
C)  when the property right to the stream is assigned to either the refinery or to the brewery. 
D)  when no one has clear property rights.

Question 4

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

Accepted Answer

A)  marginal external benefit 
B)  marginal social benefit 
C)  marginal private benefit 
D)  marginal social cost 
A)  marginal external benefit 
B)  marginal social benefit 
C)  marginal private benefit 
D)  marginal social cost

Question 5

-The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California.
a) When 4,500 students attend DVC, what does the marginal external benefit equal?
b) If the market is competitive and left without government intervention, what is the quantity of students that will attend DVC and what will be the price of a course?
c) What is the efficient quantity of students attending DVC?
d) If the government can set the price per course, in order to have the efficient quantity of students attending DVC, what should the government set as the price?

Accepted Answer

a) The marginal external benefit equals

Question 6

Which of the following illustrates the concept of external benefit?

Accepted Answer

A)  Good weather increases the size of the wheat crop. 
B)  A new pesticide increases the size of the wheat crop. 
C)  A gardener enjoys his flowers. 
D)  Neighbors enjoy a gardener's flowers. 
A)  Good weather increases the size of the wheat crop. 
B)  A new pesticide increases the size of the wheat crop. 
C)  A gardener enjoys his flowers. 
D)  Neighbors enjoy a gardener's flowers.

Question 7

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water.
-If this pollution occurs, one way of reaching efficient production levels is by setting a Pigovian Tax. To achieve efficiency with this tax means that the tax must equal the

Accepted Answer

A)  marginal social cost. 
B)  marginal private cost. 
C)  marginal private benefit. 
D)  marginal external cost. 
A)  marginal social cost. 
B)  marginal private cost. 
C)  marginal private benefit. 
D)  marginal external cost.

Question 8

The Loma Linda City Council made it official in June 2008, passing the most restrictive smoking ordinance yet in the Inland area. Dr. Linda Ferry, who counsels veterans on quitting smoking at Jerry L. Pettis Memorial VA Medical Center, said that the smoking ordinance would protect children from exposure to secondhand smoke and discourage teenagers and adults from taking up smoking. What is TRUE about this situation?

Accepted Answer

A)  Marginal external costs are negative. 
B)  Marginal external benefits are positive. 
C)  Marginal external costs are positive. 
D)  Marginal external benefits are negative. 
A)  Marginal external costs are negative. 
B)  Marginal external benefits are positive. 
C)  Marginal external costs are positive. 
D)  Marginal external benefits are negative.

Question 9

What is a cap-and-trade policy? (Be certain to mention marketable permits.) Suppose there are two firms in an area, each emitting tons of sulfur. The government decides on a target level of 200 tons of sulfur, and gives each firm a permit to emit 100 tons of sulfur. Suppose Firm A is very efficient and can reduce pollution by 100 tons with an abatement cost of $500. Firm B has an older plant, so it will cost Firm B $1,000 to reduce emissions by 100 tons. What will occur with marketable permits?

Accepted Answer

A cap-and-trade policy involves the gove

Question 10

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

Accepted Answer

A)  is zero. 
B)  equals the marginal social cost. 
C)  equals the marginal social benefit. 
D)  equals the marginal private benefit. 
A)  is zero. 
B)  equals the marginal social cost. 
C)  equals the marginal social benefit. 
D)  equals the marginal private benefit.

Question 11

-Use the figure above to answer this question. Explain what the marginal social cost curve and the marginal external cost mean. In the figure, if the market is competitive and unregulated, what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

Accepted Answer

@#IMG-DLM& The marginal social cost curve shows th

Question 12

The cost of producing one more unit of a good or service that is paid by the producer

Accepted Answer

A)  has to be equal to the benefit that the consumer derives from that good. 
B)  is equal to the cost borne by people other than the producer. 
C)  is the marginal private cost. 
D)  is the marginal external cost. 
A)  has to be equal to the benefit that the consumer derives from that good. 
B)  is equal to the cost borne by people other than the producer. 
C)  is the marginal private cost. 
D)  is the marginal external cost.

Question 13

-In the figure above, if the market is unregulated

Accepted Answer

A)  more than the efficient amount of output will be produced. 
B)  less than the efficient amount of output will be produced. 
C)  the allocation of resources will be efficient because the efficient amount of output will be produced. 
D)  the deadweight loss will be zero. 
A)  more than the efficient amount of output will be produced. 
B)  less than the efficient amount of output will be produced. 
C)  the allocation of resources will be efficient because the efficient amount of output will be produced. 
D)  the deadweight loss will be zero.

Question 14

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition?

Accepted Answer

A)  $4,000 
B)  $8,000 
C)  $12,000 
D)  $16,000 
A)  $4,000 
B)  $8,000 
C)  $12,000 
D)  $16,000

Question 15

-The above figure shows the marginal benefits and marginal costs of a college education. What is the amount of the external benefit in the figure?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $10,000 
D)  $15,000 
A)  $0 
B)  $5,000 
C)  $10,000 
D)  $15,000

Question 16

-In the above table, the efficient level of output can be achieved through a per unit subsidy of

Accepted Answer

A)  zero. 
B)  $20. 
C)  $60. 
D)  $120. 
A)  zero. 
B)  $20. 
C)  $60. 
D)  $120.

Question 17

-Based on the data in the table above, the efficient level of output equals

Accepted Answer

A)  550 units. 
B)  600 units. 
C)  650 units. 
D)  700 units. 
A)  550 units. 
B)  600 units. 
C)  650 units. 
D)  700 units.

Question 18

The cost of producing a good or service that is paid by people other than the producers is

Accepted Answer

A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  an external cost. 
A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  an external cost.

Question 19

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

Accepted Answer

A)  cap-and-trade. 
B)  mandating clean technology. 
C)  subsidies. 
D)  taxes. 
A)  cap-and-trade. 
B)  mandating clean technology. 
C)  subsidies. 
D)  taxes.

Question 20

The external benefit of a good

Accepted Answer

A)  equals its consumer surplus. 
B)  equals its producer surplus. 
C)  equals its total surplus. 
D)  is a benefit from the good falling on people who are not the consumers of the good. 
A)  equals its consumer surplus. 
B)  equals its producer surplus. 
C)  equals its total surplus. 
D)  is a benefit from the good falling on people who are not the consumers of the good.

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

What is an individual transferable quota (ITQ)?

A copper ore refiner pollutes the water upstream from a brewery. These are the only two parties involved. The transactions costs of reaching an agreement between the refinery and the brewery are low. The amount of water pollution will be at the efficient level

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

Which of the following illustrates the concept of external benefit?

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

The cost of producing one more unit of a good or service that is paid by the producer

-In the figure above, if the market is unregulated

-The above figure shows the marginal benefits and marginal costs of a college education. What is the amount of the external benefit in the figure?

-In the above table, the efficient level of output can be achieved through a per unit subsidy of

-Based on the data in the table above, the efficient level of output equals

The cost of producing a good or service that is paid by people other than the producers is

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

The external benefit of a good

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

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

What is an individual transferable quota (ITQ)?

A copper ore refiner pollutes the water upstream from a brewery. These are the only two parties involved. The transactions costs of reaching an agreement between the refinery and the brewery are low. The amount of water pollution will be at the efficient level

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

Which of the following illustrates the concept of external benefit?

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

The cost of producing one more unit of a good or service that is paid by the producer

-In the figure above, if the market is unregulated

-The above figure shows the marginal benefits and marginal costs of a college education. What is the amount of the external benefit in the figure?

-In the above table, the efficient level of output can be achieved through a per unit subsidy of

-Based on the data in the table above, the efficient level of output equals

The cost of producing a good or service that is paid by people other than the producers is

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

The external benefit of a good

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