Question 1

An externality can be a cost or benefit arising from the production of a good that falls upon

Accepted Answer

A)  consumers but not producers. 
B)  producers but not consumers. 
C)  both the consumer and the producer. 
D)  someone other than the consumer or producer. 
E)  no one, so it goes unpaid. 
A)  consumers but not producers. 
B)  producers but not consumers. 
C)  both the consumer and the producer. 
D)  someone other than the consumer or producer. 
E)  no one, so it goes unpaid.

Question 2

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

Accepted Answer

A)  $250 thousand 
B)  $125 thousand 
C)  $150 thousand 
D)  $50 thousand 
E)  zero 
A)  $250 thousand 
B)  $125 thousand 
C)  $150 thousand 
D)  $50 thousand 
E)  zero

Question 3

The marginal cost of production that is borne by the entire society is called the marginal

Accepted Answer

A)  private cost. 
B)  social cost. 
C)  external cost. 
D)  public cost. 
E)  user cost. 
A)  private cost. 
B)  social cost. 
C)  external cost. 
D)  public cost. 
E)  user cost.

Question 4

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the deadweight loss equals ________ per year.

Accepted Answer

A)  $28 billion 
B)  $14 billion 
C)  $280 billion 
D)  $224 billion 
E)  $7 billion 
A)  $28 billion 
B)  $14 billion 
C)  $280 billion 
D)  $224 billion 
E)  $7 billion

Question 5

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.Suppose the marginal private cost of the 5th concert is $10,000.Then,for the 5th concert,the

Accepted Answer

A)  marginal external cost equals $30,000. 
B)  marginal social cost equals $30,000. 
C)  marginal external cost equals the marginal private cost. 
D)  marginal external cost equals $40,000. 
E)  marginal external cost equals $10,000. 
A)  marginal external cost equals $30,000. 
B)  marginal social cost equals $30,000. 
C)  marginal external cost equals the marginal private cost. 
D)  marginal external cost equals $40,000. 
E)  marginal external cost equals $10,000.

Question 6

Which of the following actions would most likely have an external benefit?

Accepted Answer

A)  eating a peanut butter sandwich 
B)  throwing trash out your car window as you drive to class 
C)  sleeping 
D)  attending college 
E)  developing a better marketing strategy for Honda 
A)  eating a peanut butter sandwich 
B)  throwing trash out your car window as you drive to class 
C)  sleeping 
D)  attending college 
E)  developing a better marketing strategy for Honda

Question 7

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.In the absence of any government regulation,how many tons of leather will be produced?

Accepted Answer

A)  0 tons 
B)  200 tons 
C)  300 tons 
D)  more than 300 tons 
E)  None of the above answers is correct. 
A)  0 tons 
B)  200 tons 
C)  300 tons 
D)  more than 300 tons 
E)  None of the above answers is correct.

Question 8

A loud band plays a concert late at night in a neighborhood park.The noise produced by the band that keeps the neighbors not attending the concert awake is

Accepted Answer

A)  only a private cost. 
B)  only an external cost. 
C)  both a private cost and an external cost. 
D)  neither a private cost nor an external cost. 
E)  a private benefit because the neighbors get to hear the band. 
A)  only a private cost. 
B)  only an external cost. 
C)  both a private cost and an external cost. 
D)  neither a private cost nor an external cost. 
E)  a private benefit because the neighbors get to hear the band.

Question 9

If an external benefit is present in the consumption of a good or service,then

Accepted Answer

A)  there can be no external cost. 
B)  the marginal social benefit is greater than the marginal private benefit. 
C)  the marginal social benefit is equal to the marginal private benefit. 
D)  the marginal private benefit is equal to the marginal social benefit plus the marginal external benefit. 
E)  the marginal external benefit is equal to the marginal private benefit minus the marginal social benefit. 
A)  there can be no external cost. 
B)  the marginal social benefit is greater than the marginal private benefit. 
C)  the marginal social benefit is equal to the marginal private benefit. 
D)  the marginal private benefit is equal to the marginal social benefit plus the marginal external benefit. 
E)  the marginal external benefit is equal to the marginal private benefit minus the marginal social benefit.

Question 10

Explain why a producer who is causing external costs does not have the incentive to reduce these costs.

Accepted Answer

The answer lies in the fact that the cos

Question 11

Which of the following is an example of an external benefit?

Accepted Answer

A)  a ton of coal burned in a power plant to produce electricity 
B)  a car accident that crowds a major Los Angeles freeway 
C)  the production of a slice of pizza 
D)  the cleanup of a large lake 
E)  the consumption of a can of Mountain Dew 
A)  a ton of coal burned in a power plant to produce electricity 
B)  a car accident that crowds a major Los Angeles freeway 
C)  the production of a slice of pizza 
D)  the cleanup of a large lake 
E)  the consumption of a can of Mountain Dew

Question 12

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is ________ units and the equilibrium price is ________ per unit.

Accepted Answer

A)  8; $150 
B)  8; $300 
C)  10; $250 
D)  10; $100 
E)  10; $150 
A)  8; $150 
B)  8; $300 
C)  10; $250 
D)  10; $100 
E)  10; $150

Question 13

If a producer must pay the cost of his or her pollution because property rights have been assigned,then

Accepted Answer

A)  pollution will be completely eliminated. 
B)  the supply curve will shift rightward as the new costs are added. 
C)  the supply curve will shift leftward as the new costs are added. 
D)  consumers will now consume more of the good because the external costs are reduced. 
E)  there is no longer any marginal benefit from the good or service being produced. 
A)  pollution will be completely eliminated. 
B)  the supply curve will shift rightward as the new costs are added. 
C)  the supply curve will shift leftward as the new costs are added. 
D)  consumers will now consume more of the good because the external costs are reduced. 
E)  there is no longer any marginal benefit from the good or service being produced.

Question 14

Externalities

Accepted Answer

A)  can be either benefits or costs. 
B)  always create extra social costs. 
C)  always make society better off. 
D)  cannot be expressed in dollar amounts. 
E)  are always part of private costs or private benefits. 
A)  can be either benefits or costs. 
B)  always create extra social costs. 
C)  always make society better off. 
D)  cannot be expressed in dollar amounts. 
E)  are always part of private costs or private benefits.

Question 15

Transactions costs are the

Accepted Answer

A)  costs of using the Coase theorem. 
B)  opportunity costs of conducting a transaction. 
C)  external marginal costs of the externality. 
D)  reason why taxes cannot affect the inefficiency resulting from an external cost. 
E)  external costs when a firm pollutes. 
A)  costs of using the Coase theorem. 
B)  opportunity costs of conducting a transaction. 
C)  external marginal costs of the externality. 
D)  reason why taxes cannot affect the inefficiency resulting from an external cost. 
E)  external costs when a firm pollutes.

Question 16

If the production of a good causes an external cost,then the efficient quantity is

Accepted Answer

A)  equal to the quantity at which the marginal benefit equals marginal cost. 
B)  less than the quantity at which the marginal benefit equals the marginal cost. 
C)  more than the quantity at which the marginal benefit equals the marginal cost. 
D)  the quantity at which the marginal private benefit is greater than the marginal social benefit. 
E)  None of the above answers is correct. 
A)  equal to the quantity at which the marginal benefit equals marginal cost. 
B)  less than the quantity at which the marginal benefit equals the marginal cost. 
C)  more than the quantity at which the marginal benefit equals the marginal cost. 
D)  the quantity at which the marginal private benefit is greater than the marginal social benefit. 
E)  None of the above answers is correct.

Question 17

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is ________ because health care generates ________.

Accepted Answer

A)  efficient; positive external benefits 
B)  inefficient; positive external benefits 
C)  inefficient; positive external costs 
D)  efficient; positive external costs 
E)  inefficient; public goods 
A)  efficient; positive external benefits 
B)  inefficient; positive external benefits 
C)  inefficient; positive external costs 
D)  efficient; positive external costs 
E)  inefficient; public goods

Question 18

Joanne rents a TV production studio to produce an extra hour of a TV show.The rent is

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)  a private benefit because viewers will benefit from watching the extra hour of the show. 
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)  a private benefit because viewers will benefit from watching the extra hour of the show.

Question 19

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.The government imposes the pollution tax shown in the above figure.What quantity is produced after the pollution tax is imposed?

Accepted Answer

A)  zero pounds 
B)  80 million pounds 
C)  160 million pounds 
D)  more than 160 million pounds 
E)  more than 80 million pounds and less than 160 million pounds. 
A)  zero pounds 
B)  80 million pounds 
C)  160 million pounds 
D)  more than 160 million pounds 
E)  more than 80 million pounds and less than 160 million pounds.

Question 20

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500,then the

Accepted Answer

A)  marginal benefit of a ton of cement will equal $4,000. 
B)  total cost of producing a ton of cement is $7,500. 
C)  marginal external cost of producing a ton of cement is $500. 
D)  marginal external cost of producing a ton of cement is $7,500. 
E)  marginal external cost of producing a ton of cement is $4,000. 
A)  marginal benefit of a ton of cement will equal $4,000. 
B)  total cost of producing a ton of cement is $7,500. 
C)  marginal external cost of producing a ton of cement is $500. 
D)  marginal external cost of producing a ton of cement is $7,500. 
E)  marginal external cost of producing a ton of cement is $4,000.

An externality can be a cost or benefit arising from the production of a good that falls upon

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

The marginal cost of production that is borne by the entire society is called the marginal

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the deadweight loss equals ________ per year.

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.Suppose the marginal private cost of the 5th concert is $10,000.Then,for the 5th concert,the

Which of the following actions would most likely have an external benefit?

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.In the absence of any government regulation,how many tons of leather will be produced?

A loud band plays a concert late at night in a neighborhood park.The noise produced by the band that keeps the neighbors not attending the concert awake is

If an external benefit is present in the consumption of a good or service,then

Explain why a producer who is causing external costs does not have the incentive to reduce these costs.

Which of the following is an example of an external benefit?

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is units and the equilibrium price is per unit.

If a producer must pay the cost of his or her pollution because property rights have been assigned,then

Externalities

Transactions costs are the

If the production of a good causes an external cost,then the efficient quantity is

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is because health care generates .

Joanne rents a TV production studio to produce an extra hour of a TV show.The rent is

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.The government imposes the pollution tax shown in the above figure.What quantity is produced after the pollution tax is imposed?

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500,then the

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

An externality can be a cost or benefit arising from the production of a good that falls upon

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

The marginal cost of production that is borne by the entire society is called the marginal

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the deadweight loss equals ________ per year.

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.Suppose the marginal private cost of the 5th concert is $10,000.Then,for the 5th concert,the

Which of the following actions would most likely have an external benefit?

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.In the absence of any government regulation,how many tons of leather will be produced?

A loud band plays a concert late at night in a neighborhood park.The noise produced by the band that keeps the neighbors not attending the concert awake is

If an external benefit is present in the consumption of a good or service,then

Explain why a producer who is causing external costs does not have the incentive to reduce these costs.

Which of the following is an example of an external benefit?

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is ________ units and the equilibrium price is ________ per unit.

If a producer must pay the cost of his or her pollution because property rights have been assigned,then

Externalities

Transactions costs are the

If the production of a good causes an external cost,then the efficient quantity is

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is ________ because health care generates ________.

Joanne rents a TV production studio to produce an extra hour of a TV show.The rent is

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.The government imposes the pollution tax shown in the above figure.What quantity is produced after the pollution tax is imposed?

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500,then the

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 a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is units and the equilibrium price is per unit.

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is because health care generates .