Question 1

To eliminate the inefficiency resulting from pollution that creates an external cost,the government can impose a pollution tax on producers that is equal to the

Accepted Answer

A)  MSB. 
B)  MC. 
C)  marginal external cost. 
D)  MSC. 
E)  price. 
A)  MSB. 
B)  MC. 
C)  marginal external cost. 
D)  MSC. 
E)  price.

Question 2

Which of the following is an example of an activity that creates an external cost?
i.a smoker emitting second-hand smoke
ii.sulfur emitting from a smoke stack
iii.throwing garbage on the roadside

Accepted Answer

A)  i only 
B)  i and ii 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii 
A)  i only 
B)  i and ii 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii

Question 3

A carbon tax would ________ the cost of producing goods and services that create large carbon emissions,and would lead Americans to use ________ carbon-intensive goods and services,which could ________ climate change.

Accepted Answer

A)  raise; more; slow 
B)  raise; fewer; speed up 
C)  lower; fewer; slow 
D)  raise; fewer; slow 
E)  raise; more; speed up 
A)  raise; more; slow 
B)  raise; fewer; speed up 
C)  lower; fewer; slow 
D)  raise; fewer; slow 
E)  raise; more; speed up

Question 4

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost paid by the producers and everyone else in society when 100 billion kilowatt hours are produced is

Accepted Answer

A)  0¢ per kilowatt. 
B)  5¢ per kilowatt. 
C)  10¢ per kilowatt. 
D)  20¢ per kilowatt. 
E)  15¢ per kilowatt. 
A)  0¢ per kilowatt. 
B)  5¢ per kilowatt. 
C)  10¢ per kilowatt. 
D)  20¢ per kilowatt. 
E)  15¢ per kilowatt.

Question 5

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of steel } \
\text { (millions of tons } \
\text { per week) }
\end{array} & \begin{array} { c } 
\text { Marginal benefit } \
\text { (dollars per ton) }
\end{array} & \begin{array} { c } 
\text { Marginal social } \
\text { cost (dollars per } \
\text { ton) }
\end{array} \
\hline 5 & 40 & 20 \
\hline 10 & 35 & 25 \
\hline 15 & 30 & 30 \
\hline 20 & 25 & 35 \
\hline 25 & 20 & 40 \
\hline
\end{array}$$
-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city.If the marginal external cost is $10 per ton at every quantity of steel produced,the equilibrium quantity when the steel industry is unregulated is ________ tons per week.

Accepted Answer

A)  5 
B)  15 
C)  20 
D)  25 
E)  10 
A)  5 
B)  15 
C)  20 
D)  25 
E)  10

Question 6

Harry,the owner of a beauty salon,hires a new hair stylist.The wages paid to the new stylist are

Accepted Answer

A)  a private cost and not an external cost. 
B)  an external cost and not a private cost. 
C)  both a private cost and an external cost. 
D)  neither a private cost nor an external cost. 
E)  only a private benefit because people want their hair styled. 
A)  a private cost and not an external cost. 
B)  an external cost and not a private cost. 
C)  both a private cost and an external cost. 
D)  neither a private cost nor an external cost. 
E)  only a private benefit because people want their hair styled.

Question 7

The Coase theorem states that

Accepted Answer

A)  the level of pollution should be equal to zero to maximize social net benefit. 
B)  profit making producers pollute because they are forced to. 
C)  the efficient level of output is where marginal external cost equals marginal external benefit. 
D)  if property rights exist and transactions costs are low, private transactions are efficient. 
E)  the best way to limit pollution is by taxing producers who pollute. 
A)  the level of pollution should be equal to zero to maximize social net benefit. 
B)  profit making producers pollute because they are forced to. 
C)  the efficient level of output is where marginal external cost equals marginal external benefit. 
D)  if property rights exist and transactions costs are low, private transactions are efficient. 
E)  the best way to limit pollution is by taxing producers who pollute.

Question 8

If producing a good or a service creates pollution,then

Accepted Answer

A)  an unregulated competitive market produces an efficient output. 
B)  the industry's supply curve includes the extra cost of pollution. 
C)  at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price. 
D)  at the unregulated, competitive market equilibrium quantity, marginal social benefit and marginal social cost are equal. 
E)  at the unregulated, competitive market equilibrium quantity, marginal social benefit is less than the equilibrium price. 
A)  an unregulated competitive market produces an efficient output. 
B)  the industry's supply curve includes the extra cost of pollution. 
C)  at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price. 
D)  at the unregulated, competitive market equilibrium quantity, marginal social benefit and marginal social cost are equal. 
E)  at the unregulated, competitive market equilibrium quantity, marginal social benefit is less than the equilibrium price.

Question 9

-The above figure shows the market for fertilizer.When fertilizer is applied to lawns,it runs off into neighboring streams and ponds,killing fish and creating an external cost.
a.What is the equilibrium price and quantity of fertilizer in an unregulated,competitive market?
b.What is the efficient quantity of fertilizer?
c.Suppose government imposes a tax equal to the marginal external cost.What is the equilibrium price paid by consumers and the equilibrium quantity after implementation of the tax?
d.At the output level in part (c),how much is the tax?
e.How much tax revenue does government collect?
f.What is the deadweight loss borne by society if the externality is left uncorrected?

Accepted Answer

a.The equilibrium price is $1,000 a ton

Question 10

If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal private cost is $0.08,what is the marginal external cost?

Accepted Answer

A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02 
E)  $0.80 
A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02 
E)  $0.80

Question 11

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.If the government sets a pollution limit that achieves efficiency,how many tons of leather are produced?

Accepted Answer

A)  0 tons 
B)  200 tons 
C)  300 tons 
D)  more than 300 tons 
E)  more than 0 tons and less than 200 tons 
A)  0 tons 
B)  200 tons 
C)  300 tons 
D)  more than 300 tons 
E)  more than 0 tons and less than 200 tons

Question 12

Suppose unregulated production of pesticides results in an equilibrium price and quantity of $400 and 1,000 tons per day,respectively,and a marginal external cost of $10 a ton.
a.If the government were to eliminate the external cost by using pollution charges,what should the pollution charge be set at?
b.If the government were to eliminate the external cost by using taxes,what should the tax equal?
c.Would the government actions described above affect the quantity of pesticides produced? If yes,how? If no,why not?

Accepted Answer

a.$10 a ton
b.$10 a ton
c.Yes,

Question 13

-The figure above shows the costs and benefits associated with producing paper.What is the unregulated competitive market level of output?

Accepted Answer

A)  0 
B)  4 tons 
C)  6 tons 
D)  More than 6 tons 
E)  None of the above answers is correct. 
A)  0 
B)  4 tons 
C)  6 tons 
D)  More than 6 tons 
E)  None of the above answers is correct.

Question 14

What is the Coase theorem? What conditions need to be present for this theorem to work?

Accepted Answer

The Coase theorem states that if propert

Question 15

The existence of marginal external benefits for a product like higher education creates a deadweight loss for society because,without government intervention,________ would be consumed and ________ would be produced.

Accepted Answer

A)  more than the efficient amount; more than the efficient amount 
B)  more than the efficient amount; less than the efficient amount 
C)  less than the efficient amount; more than the efficient amount 
D)  less than the efficient amount; less than the efficient amount 
E)  the efficient amount; the efficient amount 
A)  more than the efficient amount; more than the efficient amount 
B)  more than the efficient amount; less than the efficient amount 
C)  less than the efficient amount; more than the efficient amount 
D)  less than the efficient amount; less than the efficient amount 
E)  the efficient amount; the efficient amount

Question 16

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost borne by producers when 100 billion kilowatt hours are produced is

Accepted Answer

A)  5¢ per kilowatt. 
B)  10¢ per kilowatt. 
C)  15¢ per kilowatt. 
D)  20¢ per kilowatt. 
E)  0¢ per kilowatt. 
A)  5¢ per kilowatt. 
B)  10¢ per kilowatt. 
C)  15¢ per kilowatt. 
D)  20¢ per kilowatt. 
E)  0¢ per kilowatt.

Question 17

Education leads to external benefits because

Accepted Answer

A)  the people who become better educated get better jobs. 
B)  better educated people commit fewer crimes. 
C)  better educated people are less lazy. 
D)  little pollution is created when educating people. 
E)  better educated people are more productive. 
A)  the people who become better educated get better jobs. 
B)  better educated people commit fewer crimes. 
C)  better educated people are less lazy. 
D)  little pollution is created when educating people. 
E)  better educated people are more productive.

Question 18

Legally established titles to the ownership,use,and disposal of factors of production are referred to as

Accepted Answer

A)  property rights. 
B)  Coase rights. 
C)  pollution rights. 
D)  emission rights. 
E)  price-setting rights. 
A)  property rights. 
B)  Coase rights. 
C)  pollution rights. 
D)  emission rights. 
E)  price-setting rights.

Question 19

Which of the following government actions is appropriate in a market with an external benefit?

Accepted Answer

A)  taxes 
B)  vouchers 
C)  marketable permits 
D)  setting a tax equal to the transactions costs 
E)  price ceiling 
A)  taxes 
B)  vouchers 
C)  marketable permits 
D)  setting a tax equal to the transactions costs 
E)  price ceiling

Question 20

-The figure above illustrates the gasoline market.There is no external benefit from gasoline.If a tax on gasoline is imposed as shown in the figure,then the total tax revenue earned by the government equals

Accepted Answer

A)  $24 million. 
B)  $16 million. 
C)  $8 million. 
D)  more than $24 million. 
E)  less than $8 million. 
A)  $24 million. 
B)  $16 million. 
C)  $8 million. 
D)  more than $24 million. 
E)  less than $8 million.

To eliminate the inefficiency resulting from pollution that creates an external cost,the government can impose a pollution tax on producers that is equal to the

Which of the following is an example of an activity that creates an external cost? i.a smoker emitting second-hand smoke ii.sulfur emitting from a smoke stack iii.throwing garbage on the roadside

A carbon tax would the cost of producing goods and services that create large carbon emissions,and would lead Americans to use carbon-intensive goods and services,which could climate change.

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost paid by the producers and everyone else in society when 100 billion kilowatt hours are produced is

Harry,the owner of a beauty salon,hires a new hair stylist.The wages paid to the new stylist are

The Coase theorem states that

If producing a good or a service creates pollution,then

If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal private cost is $0.08,what is the marginal external cost?

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.If the government sets a pollution limit that achieves efficiency,how many tons of leather are produced?

-The figure above shows the costs and benefits associated with producing paper.What is the unregulated competitive market level of output?

What is the Coase theorem? What conditions need to be present for this theorem to work?

The existence of marginal external benefits for a product like higher education creates a deadweight loss for society because,without government intervention, would be consumed and would be produced.

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost borne by producers when 100 billion kilowatt hours are produced is

Education leads to external benefits because

Legally established titles to the ownership,use,and disposal of factors of production are referred to as

Which of the following government actions is appropriate in a market with an external benefit?

-The figure above illustrates the gasoline market.There is no external benefit from gasoline.If a tax on gasoline is imposed as shown in the figure,then the total tax revenue earned by the government equals

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 10: Externalities

To eliminate the inefficiency resulting from pollution that creates an external cost,the government can impose a pollution tax on producers that is equal to the

Which of the following is an example of an activity that creates an external cost? i.a smoker emitting second-hand smoke ii.sulfur emitting from a smoke stack iii.throwing garbage on the roadside

A carbon tax would ________ the cost of producing goods and services that create large carbon emissions,and would lead Americans to use ________ carbon-intensive goods and services,which could ________ climate change.

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost paid by the producers and everyone else in society when 100 billion kilowatt hours are produced is

Harry,the owner of a beauty salon,hires a new hair stylist.The wages paid to the new stylist are

The Coase theorem states that

If producing a good or a service creates pollution,then

If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal private cost is $0.08,what is the marginal external cost?

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.If the government sets a pollution limit that achieves efficiency,how many tons of leather are produced?

-The figure above shows the costs and benefits associated with producing paper.What is the unregulated competitive market level of output?

What is the Coase theorem? What conditions need to be present for this theorem to work?

The existence of marginal external benefits for a product like higher education creates a deadweight loss for society because,without government intervention,________ would be consumed and ________ would be produced.

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost borne by producers when 100 billion kilowatt hours are produced is

Education leads to external benefits because

Legally established titles to the ownership,use,and disposal of factors of production are referred to as

Which of the following government actions is appropriate in a market with an external benefit?

-The figure above illustrates the gasoline market.There is no external benefit from gasoline.If a tax on gasoline is imposed as shown in the figure,then the total tax revenue earned by the government equals

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

A carbon tax would the cost of producing goods and services that create large carbon emissions,and would lead Americans to use carbon-intensive goods and services,which could climate change.

The existence of marginal external benefits for a product like higher education creates a deadweight loss for society because,without government intervention, would be consumed and would be produced.