Question 1

Which of the following is an example of a product that is made available through public provision?
i.local police protection
ii.public schools
iii.local fire department

Accepted Answer

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

Question 2

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

Accepted Answer

If a good or service has an external ben

Question 3

When property rights are assigned and transactions costs are low,

Accepted Answer

A)  all costs and benefits are taken into account by the transacting parties so the transaction is efficient. 
B)  externalities will result in market failure. 
C)  the marginal social benefit curve shifts leftward and the marginal social cost curve does not shift. 
D)  the marginal social cost curve shifts rightward and the marginal social benefit curve does not shift. 
E)  the marginal social cost curve shifts rightward and the marginal social benefit curve also shifts rightward. 
A)  all costs and benefits are taken into account by the transacting parties so the transaction is efficient. 
B)  externalities will result in market failure. 
C)  the marginal social benefit curve shifts leftward and the marginal social cost curve does not shift. 
D)  the marginal social cost curve shifts rightward and the marginal social benefit curve does not shift. 
E)  the marginal social cost curve shifts rightward and the marginal social benefit curve also shifts rightward.

Question 4

A landfill site produces an obnoxious odor.Homes downwind of the site rent for $1000 per month while homes upwind of the site rent for $1500 per month.If the odor is the only detectable difference between two neighborhoods,the difference in the rent is the ________ of the odor.

Accepted Answer

A)  social cost 
B)  external cost 
C)  private cost 
D)  marginal cost-benefit 
E)  private benefit 
A)  social cost 
B)  external cost 
C)  private cost 
D)  marginal cost-benefit 
E)  private benefit

Question 5

Which of the following is an example of a voucher?

Accepted Answer

A)  the postal service 
B)  police services 
C)  social security 
D)  food stamps 
E)  a patent on a pharmaceutical drug 
A)  the postal service 
B)  police services 
C)  social security 
D)  food stamps 
E)  a patent on a pharmaceutical drug

Question 6

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 7

Marginal social cost is the

Accepted Answer

A)  price a consumer pays for one more unit of a good. 
B)  cost a producer incurs producing one more unit of a good. 
C)  cost of producing one more unit of a good that falls on someone other than the producer. 
D)  sum of the cost a producer incurs from producing one more unit of a good plus the cost of producing one more unit of a good that falls on someone other than the producer. 
E)  same as marginal cost only if there is an external cost when the good is produced. 
A)  price a consumer pays for one more unit of a good. 
B)  cost a producer incurs producing one more unit of a good. 
C)  cost of producing one more unit of a good that falls on someone other than the producer. 
D)  sum of the cost a producer incurs from producing one more unit of a good plus the cost of producing one more unit of a good that falls on someone other than the producer. 
E)  same as marginal cost only if there is an external cost when the good is produced.

Question 8

Pell grants are money given to students attending college.Pell grants are most closely similar to

Accepted Answer

A)  public provision of a good. 
B)  private subsidies given to producers of a good. 
C)  vouchers given to consumers of a good. 
D)  property rights assigned to consumers of a good. 
E)  a subsidy given to the producer of a good. 
A)  public provision of a good. 
B)  private subsidies given to producers of a good. 
C)  vouchers given to consumers of a good. 
D)  property rights assigned to consumers of a good. 
E)  a subsidy given to the producer of a good.

Question 9

Why does government provide educational opportunities in the form of vouchers,private subsidies,and public provision?

Accepted Answer

Education generates external benefits.Wi

Question 10

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 11

-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 12

Which of the following are devices that the government uses to achieve a more efficient allocation of resources in the presence of external benefits?

Accepted Answer

A)  taxes, private subsidies, and regulation 
B)  public provision, taxes, and private subsidies 
C)  regulations, public provision, and vouchers 
D)  vouchers, public provision, and private subsidies 
E)  public provision, taxes, and vouchers 
A)  taxes, private subsidies, and regulation 
B)  public provision, taxes, and private subsidies 
C)  regulations, public provision, and vouchers 
D)  vouchers, public provision, and private subsidies 
E)  public provision, taxes, and vouchers

Question 13

When logging in the Pacific Northwest destroys forests that hikers would have used for eco-tourism,the destruction of the trails is an example of

Accepted Answer

A)  an external cost. 
B)  a private cost. 
C)  a government cost. 
D)  an external benefit. 
E)  None of the above answers is correct. 
A)  an external cost. 
B)  a private cost. 
C)  a government cost. 
D)  an external benefit. 
E)  None of the above answers is correct.

Question 14

Cost effective technologies to reduce pollution are most likely to result from

Accepted Answer

A)  marketable pollution permits. 
B)  pollution charges. 
C)  taxes. 
D)  pollution limits. 
E)  quotas. 
A)  marketable pollution permits. 
B)  pollution charges. 
C)  taxes. 
D)  pollution limits. 
E)  quotas.

Question 15

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

Accepted Answer

A)  always equals the benefit the consumer derives from that good or service. 
B)  equals the cost borne by people other than the producer. 
C)  is the marginal private cost. 
D)  is the external cost. 
E)  is the marginal social cost. 
A)  always equals the benefit the consumer derives from that good or service. 
B)  equals the cost borne by people other than the producer. 
C)  is the marginal private cost. 
D)  is the external cost. 
E)  is the marginal social cost.

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 a subsidy of $15,000 per student is provided to private colleges.Then,the market equilibrium occurs at a tuition of ________ a year and ________ million students.

Accepted Answer

A)  $10,000; 15 
B)  $25,000; 15 
C)  $15,000; 15 
D)  $15,000; 7.5 
E)  $20,000; 20 
A)  $10,000; 15 
B)  $25,000; 15 
C)  $15,000; 15 
D)  $15,000; 7.5 
E)  $20,000; 20

Question 17

If a good has an external cost,the

Accepted Answer

A)  unregulated competitive market outcome is efficient. 
B)  marginal private cost reflects the external cost. 
C)  unregulated competitive market outcome is inefficient. 
D)  marginal social benefit is equal to the marginal social cost when the market is in equilibrium. 
E)  external benefit must equal the external cost. 
A)  unregulated competitive market outcome is efficient. 
B)  marginal private cost reflects the external cost. 
C)  unregulated competitive market outcome is inefficient. 
D)  marginal social benefit is equal to the marginal social cost when the market is in equilibrium. 
E)  external benefit must equal the external cost.

Question 18

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

Accepted Answer

A)  the price and marginal private benefit 
B)  the economically efficient output 
C)  the price and the marginal social benefit 
D)  the size of the deadweight loss 
E)  the size of the external benefit and the price 
A)  the price and marginal private benefit 
B)  the economically efficient output 
C)  the price and the marginal social benefit 
D)  the size of the deadweight loss 
E)  the size of the external benefit and the price

Question 19

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

Accepted Answer

A)  gain in efficiency from the illustrated subsidy. 
B)  remaining deadweight loss when there is the illustrated subsidy. 
C)  deadweight loss when there is not the illustrated subsidy. 
D)  equilibrium with the illustrated subsidy. 
E)  loss in efficiency from the illustrated subsidy. 
A)  gain in efficiency from the illustrated subsidy. 
B)  remaining deadweight loss when there is the illustrated subsidy. 
C)  deadweight loss when there is not the illustrated subsidy. 
D)  equilibrium with the illustrated subsidy. 
E)  loss in efficiency from the illustrated subsidy.

Question 20

The government can overcome the inefficiency created by a good with an external benefit by using

Accepted Answer

A)  public provision. 
B)  marketable permits. 
C)  taxes. 
D)  emission charges. 
E)  None of the above answers is correct. 
A)  public provision. 
B)  marketable permits. 
C)  taxes. 
D)  emission charges. 
E)  None of the above answers is correct.

Which of the following is an example of a product that is made available through public provision? i.local police protection ii.public schools iii.local fire department

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

When property rights are assigned and transactions costs are low,

A landfill site produces an obnoxious odor.Homes downwind of the site rent for $1000 per month while homes upwind of the site rent for $1500 per month.If the odor is the only detectable difference between two neighborhoods,the difference in the rent is the ________ of the odor.

Which of the following is an example of a voucher?

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.

Marginal social cost is the

Pell grants are money given to students attending college.Pell grants are most closely similar to

Why does government provide educational opportunities in the form of vouchers,private subsidies,and public provision?

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 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

Which of the following are devices that the government uses to achieve a more efficient allocation of resources in the presence of external benefits?

When logging in the Pacific Northwest destroys forests that hikers would have used for eco-tourism,the destruction of the trails is an example of

Cost effective technologies to reduce pollution are most likely to result from

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

If a good has an external cost,the

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

The government can overcome the inefficiency created by a good with an external benefit by using

Getting Started

The Usand 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

Which of the following is an example of a product that is made available through public provision? i.local police protection ii.public schools iii.local fire department

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

When property rights are assigned and transactions costs are low,

A landfill site produces an obnoxious odor.Homes downwind of the site rent for $1000 per month while homes upwind of the site rent for $1500 per month.If the odor is the only detectable difference between two neighborhoods,the difference in the rent is the ________ of the odor.

Which of the following is an example of a voucher?

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.

Marginal social cost is the

Pell grants are money given to students attending college.Pell grants are most closely similar to

Why does government provide educational opportunities in the form of vouchers,private subsidies,and public provision?

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 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

Which of the following are devices that the government uses to achieve a more efficient allocation of resources in the presence of external benefits?

When logging in the Pacific Northwest destroys forests that hikers would have used for eco-tourism,the destruction of the trails is an example of

Cost effective technologies to reduce pollution are most likely to result from

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

If a good has an external cost,the

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

The government can overcome the inefficiency created by a good with an external benefit by using

Getting Started

The Usand 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