Question 1

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Accepted Answer

A)  The size of marginal external benefit must be accurately determined. 
B)  The government must produce the product. 
C)  Private production and private consumption must both be directly subsidized. 
D)  The quantity demanded must be decreased to the efficient amount. 
E)  Private production without the subsidy must be prohibited. 
A)  The size of marginal external benefit must be accurately determined. 
B)  The government must produce the product. 
C)  Private production and private consumption must both be directly subsidized. 
D)  The quantity demanded must be decreased to the efficient amount. 
E)  Private production without the subsidy must be prohibited.

Question 2

Which of the following is a method used by government to cope with the situation in which production of a good creates an external benefit?

Accepted Answer

A)  removing property rights 
B)  subsidizing production 
C)  marketable permits 
D)  running a lottery 
E)  imposing Coasian taxes 
A)  removing property rights 
B)  subsidizing production 
C)  marketable permits 
D)  running a lottery 
E)  imposing Coasian taxes

Question 3

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

Accepted Answer

A)  0¢ 
B)  7.5¢ 
C)  10¢ 
D)  15¢ 
E)  2.5¢ 
A)  0¢ 
B)  7.5¢ 
C)  10¢ 
D)  15¢ 
E)  2.5¢

Question 4

A private cost is a cost of production that is

Accepted Answer

A)  borne by the producer of a good. 
B)  measured in marginal terms. 
C)  borne by someone other than the producer of a good. 
D)  measured in total terms. 
E)  the same as an external cost. 
A)  borne by the producer of a good. 
B)  measured in marginal terms. 
C)  borne by someone other than the producer of a good. 
D)  measured in total terms. 
E)  the same as an external cost.

Question 5

When the production of a good has a marginal external cost,which of the following occurs in an unregulated market?
i.Overproduction relative to the efficient level will occur.
ii.The market price is less than the marginal social cost at the equilibrium quantity.
iii.A deadweight loss occurs.

Accepted Answer

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

Question 6

MSB equals

Accepted Answer

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

Question 7

A problem with pollution charges or taxes as a solution to pollution is that

Accepted Answer

A)  people don't want the government to regulate industry. 
B)  the necessary information about the polluting industry is costly and usually unavailable. 
C)  taxes are already too high. 
D)  pollution would still continue. 
E)  the producers do not want the property right to their pollution. 
A)  people don't want the government to regulate industry. 
B)  the necessary information about the polluting industry is costly and usually unavailable. 
C)  taxes are already too high. 
D)  pollution would still continue. 
E)  the producers do not want the property right to their pollution.

Question 8

In order for pollution taxes to be effective in eliminating the deadweight loss resulting from pollution,the pollution tax must be set equal to the

Accepted Answer

A)  marginal private cost. 
B)  marginal external cost. 
C)  marginal social cost. 
D)  marginal benefit of polluting. 
E)  price of the good. 
A)  marginal private cost. 
B)  marginal external cost. 
C)  marginal social cost. 
D)  marginal benefit of polluting. 
E)  price of the good.

Question 9

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy per student equals ________ and each student pays ________ per year.

Accepted Answer

A)  $16,000; $13,000 
B)  $7,000; $13,000 
C)  $5,000; $13,000 
D)  $11,000; $16,000 
E)  $5,000; $11,000 
A)  $16,000; $13,000 
B)  $7,000; $13,000 
C)  $5,000; $13,000 
D)  $11,000; $16,000 
E)  $5,000; $11,000

Question 10

If tuition at a college is $30,000 and the external benefit of graduating from this college is $10,000,then
i.in the absence of any government intervention,the number of students graduating is less than the efficient number.
ii.the government could increase the number of graduates by giving the college a $10,000 subsidy per student.
iii.the government could increase the number of graduates by giving the students $10,000 vouchers.

Accepted Answer

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

Question 11

Explain the process by which a private subsidy corrects an external benefit.

Accepted Answer

If a good or service has an external ben

Question 12

"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.Externa

Question 13

Which of the following is true?
i.In an unregulated market with an external benefit,consumers don't take it into account and consume less than the efficient quantity.
ii.Marginal social cost equals marginal private cost minus marginal external cost.
iii.An unregulated market produces more than the efficient quantity of a good with an external cost.

Accepted Answer

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

Question 14

If a good has an external cost,then the marginal private cost curve

Accepted Answer

A)  lies below then the marginal social cost curve. 
B)  lies above the marginal social cost curve. 
C)  lies below the horizontal axis. 
D)  is the same as the marginal external cost curve. 
E)  is undefined because the firms' costs are not equal to the social costs. 
A)  lies below then the marginal social cost curve. 
B)  lies above the marginal social cost curve. 
C)  lies below the horizontal axis. 
D)  is the same as the marginal external cost curve. 
E)  is undefined because the firms' costs are not equal to the social costs.

Question 15

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 200 billion kilowatt hours are produced is

Accepted Answer

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

Question 16

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-Using the figure above,suppose education is provided by public colleges,where tuition is set at $10,000 a year.When the market is in equilibrium,the marginal social benefit is ________,the marginal cost is ________,and the number of students enrolled is ________.

Accepted Answer

A)  $25,000; $25,000; efficient 
B)  $25,000; $10,000; inefficient 
C)  $15,000; $25,000; inefficient 
D)  $15,000; $15,000; efficient 
E)  $25,000; $15,000; inefficient 
A)  $25,000; $25,000; efficient 
B)  $25,000; $10,000; inefficient 
C)  $15,000; $25,000; inefficient 
D)  $15,000; $15,000; efficient 
E)  $25,000; $15,000; inefficient

Question 17

-The figure above shows the market for college education in the United States.If the government intervenes in the market and provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy equals ________ per student.

Accepted Answer

A)  $5,000 
B)  $16,000 
C)  $13,000 
D)  $11,000 
E)  $7,000 
A)  $5,000 
B)  $16,000 
C)  $13,000 
D)  $11,000 
E)  $7,000

Question 18

-The figure above represents the relationship between output and cost in an industry with an external cost.When output is at D,what distance represents the marginal external cost?

Accepted Answer

A)  AB 
B)  BC 
C)  CD 
D)  BD 
E)  None of the above answers is correct. 
A)  AB 
B)  BC 
C)  CD 
D)  BD 
E)  None of the above answers is correct.

Question 19

In the figure above,the unregulated market equilibrium occurs at a price of ________ a ton and quantity of ________ tons.

Accepted Answer

A)  $100; 4,000 
B)  $150; 2,000 
C)  $150; 4,000 
D)  $225; 4,000 
E)  $100; 2,000 
A)  $100; 4,000 
B)  $150; 2,000 
C)  $150; 4,000 
D)  $225; 4,000 
E)  $100; 2,000

Question 20

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

Accepted Answer

A)  20 million per year. 
B)  exactly 10 million per year. 
C)  between 15 and 20 million per year. 
D)  less than 10 million per year. 
E)  more than 10 million and less than 15 million. 
A)  20 million per year. 
B)  exactly 10 million per year. 
C)  between 15 and 20 million per year. 
D)  less than 10 million per year. 
E)  more than 10 million and less than 15 million.

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Which of the following is a method used by government to cope with the situation in which production of a good creates an external benefit?

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

A private cost is a cost of production that is

When the production of a good has a marginal external cost,which of the following occurs in an unregulated market? i.Overproduction relative to the efficient level will occur. ii.The market price is less than the marginal social cost at the equilibrium quantity. iii.A deadweight loss occurs.

MSB equals

A problem with pollution charges or taxes as a solution to pollution is that

In order for pollution taxes to be effective in eliminating the deadweight loss resulting from pollution,the pollution tax must be set equal to the

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy per student equals and each student pays per year.

Explain the process by which a private subsidy corrects an external benefit.

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

If a good has an external cost,then the marginal private cost curve

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 200 billion kilowatt hours are produced is

-The figure above shows the market for college education in the United States.If the government intervenes in the market and provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy equals ________ per student.

-The figure above represents the relationship between output and cost in an industry with an external cost.When output is at D,what distance represents the marginal external cost?

In the figure above,the unregulated market equilibrium occurs at a price of a ton and quantity of tons.

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

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

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Which of the following is a method used by government to cope with the situation in which production of a good creates an external benefit?

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

A private cost is a cost of production that is

When the production of a good has a marginal external cost,which of the following occurs in an unregulated market? i.Overproduction relative to the efficient level will occur. ii.The market price is less than the marginal social cost at the equilibrium quantity. iii.A deadweight loss occurs.

MSB equals

A problem with pollution charges or taxes as a solution to pollution is that

In order for pollution taxes to be effective in eliminating the deadweight loss resulting from pollution,the pollution tax must be set equal to the

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy per student equals ________ and each student pays ________ per year.

Explain the process by which a private subsidy corrects an external benefit.

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

If a good has an external cost,then the marginal private cost curve

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 200 billion kilowatt hours are produced is

-The figure above shows the market for college education in the United States.If the government intervenes in the market and provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy equals ________ per student.

-The figure above represents the relationship between output and cost in an industry with an external cost.When output is at D,what distance represents the marginal external cost?

In the figure above,the unregulated market equilibrium occurs at a price of ________ a ton and quantity of ________ tons.

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

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

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students,the amount of the subsidy per student equals and each student pays per year.

In the figure above,the unregulated market equilibrium occurs at a price of a ton and quantity of tons.