Question 1

Once tradable pollution permits have been allocated to firms,

Accepted Answer

A)  the government controls the price of permits. 
B)  firms that can reduce pollution only at high cost will be willing to pay the most for the pollution permits. 
C)  the value of pollution-saving technology will be lower than the market value of a pollution permit. 
D)  the Coase theorem is no longer applicable as a solution to reducing pollution. 
A)  the government controls the price of permits. 
B)  firms that can reduce pollution only at high cost will be willing to pay the most for the pollution permits. 
C)  the value of pollution-saving technology will be lower than the market value of a pollution permit. 
D)  the Coase theorem is no longer applicable as a solution to reducing pollution.

Question 2

Patents do not

Accepted Answer

A)  provide firms an incentive to research. 
B)  assign property rights to inventors. 
C)  protect the rights of inventors for their lifetimes. 
D)  internalize externalities. 
A)  provide firms an incentive to research. 
B)  assign property rights to inventors. 
C)  protect the rights of inventors for their lifetimes. 
D)  internalize externalities.

Question 3

Figure 10-5
  
-Refer to Figure 10-5.Which of the following statements is correct?

Accepted Answer

A)  The marginal benefit of the positive externality is measured by P3 - P1. 
B)  The marginal cost of the negative externality is measured by P3 - P2. 
C)  The marginal cost of the negative externality is measured by P3 - P1. 
D)  The marginal cost of the negative externality is measured by P3 - P0. 
A)  The marginal benefit of the positive externality is measured by P3 - P1. 
B)  The marginal cost of the negative externality is measured by P3 - P2. 
C)  The marginal cost of the negative externality is measured by P3 - P1. 
D)  The marginal cost of the negative externality is measured by P3 - P0.

Question 4

Figure 10-12
  
-Refer to Figure 10-12.Suppose,on the figure,Q represents the quantity of education and P represents the price of education.Then the quantity represents

Accepted Answer

A)  an inefficiency. 
B)  the extent of the negative externality that pertains to the market for education. 
C)  the amount of the tax that would be required to correct the negative externality that pertains to the market for education. 
D)  the amount of the subsidy that would be required to correct the positive externality that pertains to the market for education. 
A)  an inefficiency. 
B)  the extent of the negative externality that pertains to the market for education. 
C)  the amount of the tax that would be required to correct the negative externality that pertains to the market for education. 
D)  the amount of the subsidy that would be required to correct the positive externality that pertains to the market for education.

Question 5

Figure 10-19
  
-Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

Accepted Answer

A)  benefit of $15. 
B)  benefit of $36. 
C)  cost of $15. 
D)  cost of $36. 
A)  benefit of $15. 
B)  benefit of $36. 
C)  cost of $15. 
D)  cost of $36.

Question 6

Transaction costs

Accepted Answer

A)  can keep private parties from solving externality problems. 
B)  are incurred in the production process due to externalities. 
C)  increase when taxes are imposed to correct negative externalities. 
D)  are eliminated when the government intervenes in a market with externalities. 
A)  can keep private parties from solving externality problems. 
B)  are incurred in the production process due to externalities. 
C)  increase when taxes are imposed to correct negative externalities. 
D)  are eliminated when the government intervenes in a market with externalities.

Question 7

Two firms,A and B,each currently emit 100 tons of chemicals into the air.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air.The government gives each firm 40 pollution permits,which it can either use or sell to the other firm.It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air,and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air.It is likely that

Accepted Answer

A)  Firm A will buy all of Firm B's pollution permits. Each one will cost between $100 and $200. 
B)  Firm B will buy all of Firm A's pollution permits. Each one will cost between $100 and $200. 
C)  Both firms will use their own pollution permits. 
D)  Firm A will buy some of Firm B's pollution permits. Each one will cost less than $100. 
A)  Firm A will buy all of Firm B's pollution permits. Each one will cost between $100 and $200. 
B)  Firm B will buy all of Firm A's pollution permits. Each one will cost between $100 and $200. 
C)  Both firms will use their own pollution permits. 
D)  Firm A will buy some of Firm B's pollution permits. Each one will cost less than $100.

Question 8

In the case of a technology spillover,internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Accepted Answer

A)  shift up by an amount equal to the subsidy. 
B)  shift down by an amount less than the subsidy. 
C)  shift down by an amount equal to the subsidy. 
D)  shift down by an amount greater than the subsidy. 
A)  shift up by an amount equal to the subsidy. 
B)  shift down by an amount less than the subsidy. 
C)  shift down by an amount equal to the subsidy. 
D)  shift down by an amount greater than the subsidy.

Question 9

Suppose that smoking creates a negative externality.If the government imposes a per-cigarette tax equal to the per-cigarette externality,then

Accepted Answer

A)  the after-tax equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. 
B)  the after-tax equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. 
C)  the after-tax equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. 
D)  There is not enough information to answer the question. 
A)  the after-tax equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. 
B)  the after-tax equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. 
C)  the after-tax equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. 
D)  There is not enough information to answer the question.

Question 10

With pollution permits,the supply curve for pollution rights is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  upward sloping. 
D)  downward sloping. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  upward sloping. 
D)  downward sloping.

Question 11

Table 10-5
The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67.
  
-Refer to Table 10-5.If the government charged a fee of $69 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)  7 
B)  8 
C)  9 
D)  10 
A)  7 
B)  8 
C)  9 
D)  10

Question 12

Research into new technologies conveys neither negative externalities nor positive externalities.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Figure 10-19
  
-Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Accepted Answer

A)  $15. 
B)  $23. 
C)  $36. 
D)  $89. 
A)  $15. 
B)  $23. 
C)  $36. 
D)  $89.

Question 15

Corrective taxes are typically advocated to correct for the effects of

Accepted Answer

A)  positive externalities. 
B)  negative externalities. 
C)  patents. 
D)  All of the above are correct. 
A)  positive externalities. 
B)  negative externalities. 
C)  patents. 
D)  All of the above are correct.

Question 16

A technology spillover is a type of negative externality.

Accepted Answer

A) True 
 B)False

Question 17

When the government intervenes in markets with externalities,it does so in order to

Accepted Answer

A)  increase production when negative externalities are present. 
B)  protect the interests of bystanders. 
C)  make certain all benefits are received by market participants. 
D)  reduce production when positive externalities are present. 
A)  increase production when negative externalities are present. 
B)  protect the interests of bystanders. 
C)  make certain all benefits are received by market participants. 
D)  reduce production when positive externalities are present.

Question 18

Figure 10-3
  
This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.

-Refer to Figure 10-3.The difference between the social cost curve and the supply curve reflects the

Accepted Answer

A)  profit margin of each concert. 
B)  cost of spillover effects from the concert (e.g., noise and traffic). 
C)  value of concerts to society as a whole. 
D)  amount by which the city should subsidize the concert organizers. 
A)  profit margin of each concert. 
B)  cost of spillover effects from the concert (e.g., noise and traffic). 
C)  value of concerts to society as a whole. 
D)  amount by which the city should subsidize the concert organizers.

Question 19

Which of the following policies is the government most inclined to use when faced with a positive externality?

Accepted Answer

A)  taxation 
B)  permits 
C)  subsidies 
D)  usage fees 
A)  taxation 
B)  permits 
C)  subsidies 
D)  usage fees

Question 20

Which of the following statements is correct about a market in which pollution is emitted?

Accepted Answer

A)  Both corrective taxes and pollution permits internalize the externality of pollution. 
B)  Corrective taxes internalize the externality of pollution, but pollution permits do not internalize that externality. 
C)  Corrective taxes fail to internalize the externality of pollution, but corrective taxes internalize that externality. 
D)  Neither corrective taxes nor pollution permits internalize the externality of pollution. 
A)  Both corrective taxes and pollution permits internalize the externality of pollution. 
B)  Corrective taxes internalize the externality of pollution, but pollution permits do not internalize that externality. 
C)  Corrective taxes fail to internalize the externality of pollution, but corrective taxes internalize that externality. 
D)  Neither corrective taxes nor pollution permits internalize the externality of pollution.

Once tradable pollution permits have been allocated to firms,

Patents do not

Figure 10-5 -Refer to Figure 10-5.Which of the following statements is correct?

Figure 10-12 -Refer to Figure 10-12.Suppose,on the figure,Q represents the quantity of education and P represents the price of education.Then the quantity represents

Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

Transaction costs

In the case of a technology spillover,internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Suppose that smoking creates a negative externality.If the government imposes a per-cigarette tax equal to the per-cigarette externality,then

With pollution permits,the supply curve for pollution rights is

Research into new technologies conveys neither negative externalities nor positive externalities.

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

Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Corrective taxes are typically advocated to correct for the effects of

A technology spillover is a type of negative externality.

When the government intervenes in markets with externalities,it does so in order to

Figure 10-3 This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. -Refer to Figure 10-3.The difference between the social cost curve and the supply curve reflects the

Which of the following policies is the government most inclined to use when faced with a positive externality?

Which of the following statements is correct about a market in which pollution is emitted?

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters

Exam 10: Externalities.

Once tradable pollution permits have been allocated to firms,

Patents do not

Figure 10-5 -Refer to Figure 10-5.Which of the following statements is correct?

Figure 10-12 -Refer to Figure 10-12.Suppose,on the figure,Q represents the quantity of education and P represents the price of education.Then the quantity represents

Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

Transaction costs

In the case of a technology spillover,internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Suppose that smoking creates a negative externality.If the government imposes a per-cigarette tax equal to the per-cigarette externality,then

With pollution permits,the supply curve for pollution rights is

Research into new technologies conveys neither negative externalities nor positive externalities.

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

Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Corrective taxes are typically advocated to correct for the effects of

A technology spillover is a type of negative externality.

When the government intervenes in markets with externalities,it does so in order to

Figure 10-3 This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. -Refer to Figure 10-3.The difference between the social cost curve and the supply curve reflects the

Which of the following policies is the government most inclined to use when faced with a positive externality?

Which of the following statements is correct about a market in which pollution is emitted?

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters