Question 1

What do we mean by "property rights" and why are they important?

Accepted Answer

Property rights are legally established

Question 2

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

Accepted Answer

A) True 
 B)False

Question 3

The catch of American lobster off the shores of New England is regulated using quotas. If the quota is set correctly, then at this quantity, the marginal social cost ________ the marginal social benefit.

Accepted Answer

A)  is less than 
B)  is greater than 
C)  is not comparable to 
D)  equals 
A)  is less than 
B)  is greater than 
C)  is not comparable to 
D)  equals

Question 4

-The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is

Accepted Answer

A)  $20,000 per year. 
B)  $16,000 per year. 
C)  $12,000 per year. 
D)  $14,000 per year. 
A)  $20,000 per year. 
B)  $16,000 per year. 
C)  $12,000 per year. 
D)  $14,000 per year.

Question 5

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency?

Accepted Answer

A)  The government could subsidize the production of steel. 
B)  The government could tax the production of steel. 
C)  The government could issue vouchers to steel consumers. 
D)  None of the above answers is correct. 
A)  The government could subsidize the production of steel. 
B)  The government could tax the production of steel. 
C)  The government could issue vouchers to steel consumers. 
D)  None of the above answers is correct.

Question 6

The marginal private cost of a chemical is $100 per ton and its marginal external cost is $20 per ton. What is the marginal social cost of the chemical?

Accepted Answer

Marginal social cost equals ma

Question 7

-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What subsidy per student must be given to colleges to make the efficient number of students undertake education?

Accepted Answer

A)  It depends on the demand. 
B)  $20,000 
C)  $30,000 
D)  $10,000 
A)  It depends on the demand. 
B)  $20,000 
C)  $30,000 
D)  $10,000

Question 8

-Based on the data in the above table, to assure that the efficient amount is produced the government can

Accepted Answer

A)  subsidize the suppliers $8 per unit. 
B)  subsidize the suppliers $2 per unit. 
C)  tax suppliers $2 per unit. 
D)  tax suppliers $8 per unit. 
A)  subsidize the suppliers $8 per unit. 
B)  subsidize the suppliers $2 per unit. 
C)  tax suppliers $2 per unit. 
D)  tax suppliers $8 per unit.

Question 9

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then producers will receive a total amount (price plus subsidy) equal to

Accepted Answer

A)  $20 per unit. 
B)  $15 per unit. 
C)  $10 per unit. 
D)  $5 per unit. 
A)  $20 per unit. 
B)  $15 per unit. 
C)  $10 per unit. 
D)  $5 per unit.

Question 10

-Left unregulated, the equilibrium amount produced in the market described in the table above is

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 11

An external cost is a cost of producing a good or service that is

Accepted Answer

A)  not paid by the producers. 
B)  paid by the producers. 
C)  paid by the government. 
D)  paid by the consumer and the government. 
A)  not paid by the producers. 
B)  paid by the producers. 
C)  paid by the government. 
D)  paid by the consumer and the government.

Question 12

If the number of ITQs issued equals the efficient production level, what is the price of an ITQ?

Accepted Answer

The price of an ITQ equals the

Question 13

Which of the following does NOT contain an externality?

Accepted Answer

A)  I sell you an ice cream and you drip it all over the person sitting next to you. 
B)  I sell you an ice cream and it gives you a headache. 
C)  I sell you an ice cream and you share it with your friend. 
D)  I give you an ice cream and you share it with a friend. 
A)  I sell you an ice cream and you drip it all over the person sitting next to you. 
B)  I sell you an ice cream and it gives you a headache. 
C)  I sell you an ice cream and you share it with your friend. 
D)  I give you an ice cream and you share it with a friend.

Question 14

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

Accepted Answer

A)  upward; upward 
B)  upward; downward 
C)  downward; upward 
D)  downward; downward 
A)  upward; upward 
B)  upward; downward 
C)  downward; upward 
D)  downward; downward

Question 15

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

Accepted Answer

The statement is false. Extern

Question 16

Cap-and-trade policies make use of ________ to reduce different types of pollutants from the atmosphere.

Accepted Answer

A)  pigovian taxes 
B)  the Coase Theorem 
C)  emissions charges 
D)  marketable permits 
A)  pigovian taxes 
B)  the Coase Theorem 
C)  emissions charges 
D)  marketable permits

Question 17

Why would the amount of education provided be inefficient if subsidies to education were not provided?

Accepted Answer

Private decision makers consider only pr

Question 18

-A chemical factory and a fishing club share a lake. The marginal social costs, private marginal costs, and marginal benefits from producing chemicals are in the figure above. The chemicals dumped into the lake have always harmed the fish, but now they begin to damage the fishing boats as well. As a result, the

Accepted Answer

A)  marginal social cost curve shifts leftward. 
B)  marginal social cost curve shifts rightward. 
C)  marginal benefit curve shifts leftward. 
D)  marginal benefit curve shifts rightward. 
A)  marginal social cost curve shifts leftward. 
B)  marginal social cost curve shifts rightward. 
C)  marginal benefit curve shifts leftward. 
D)  marginal benefit curve shifts rightward.

Question 19

-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, the marginal cost of the externality is ________ per unit.

Accepted Answer

A)  $3 
B)  $4 
C)  $6 
D)  $7 
A)  $3 
B)  $4 
C)  $6 
D)  $7

Question 20

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland

Accepted Answer

A)  produces the efficient quantity of gasoline. 
B)  overproduces by 0.2 million gallons of gasoline a month. 
C)  underproduces by 0.1 million gallons of gasoline a month. 
D)  overproduces by 0.1 million gallons of gasoline a month. 
A)  produces the efficient quantity of gasoline. 
B)  overproduces by 0.2 million gallons of gasoline a month. 
C)  underproduces by 0.1 million gallons of gasoline a month. 
D)  overproduces by 0.1 million gallons of gasoline a month.

What do we mean by "property rights" and why are they important?

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

The catch of American lobster off the shores of New England is regulated using quotas. If the quota is set correctly, then at this quantity, the marginal social cost ________ the marginal social benefit.

-The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency?

The marginal private cost of a chemical is $100 per ton and its marginal external cost is $20 per ton. What is the marginal social cost of the chemical?

-Based on the data in the above table, to assure that the efficient amount is produced the government can

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then producers will receive a total amount (price plus subsidy) equal to

-Left unregulated, the equilibrium amount produced in the market described in the table above is

An external cost is a cost of producing a good or service that is

If the number of ITQs issued equals the efficient production level, what is the price of an ITQ?

Which of the following does NOT contain an externality?

For a common resource, the marginal private cost curve slopes and the marginal social cost curve slopes .

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

Cap-and-trade policies make use of ________ to reduce different types of pollutants from the atmosphere.

Why would the amount of education provided be inefficient if subsidies to education were not provided?

-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, the marginal cost of the externality is ________ per unit.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland

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

What do we mean by "property rights" and why are they important?

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

The catch of American lobster off the shores of New England is regulated using quotas. If the quota is set correctly, then at this quantity, the marginal social cost ________ the marginal social benefit.

-The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency?

The marginal private cost of a chemical is $100 per ton and its marginal external cost is $20 per ton. What is the marginal social cost of the chemical?

-Based on the data in the above table, to assure that the efficient amount is produced the government can

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then producers will receive a total amount (price plus subsidy) equal to

-Left unregulated, the equilibrium amount produced in the market described in the table above is

An external cost is a cost of producing a good or service that is

If the number of ITQs issued equals the efficient production level, what is the price of an ITQ?

Which of the following does NOT contain an externality?

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

Cap-and-trade policies make use of ________ to reduce different types of pollutants from the atmosphere.

Why would the amount of education provided be inefficient if subsidies to education were not provided?

-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, the marginal cost of the externality is ________ per unit.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland

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

For a common resource, the marginal private cost curve slopes and the marginal social cost curve slopes .