Question 1

A tax on a polluting industry

Accepted Answer

A)  is not desirable because it reduces efficiency. 
B)  leads to less output in this industry. 
C)  causes more resources to be used in the polluting industry. 
D)  shifts the marginal social benefit curve leftward. 
E)  shifts the marginal social benefit curve rightward. 
A)  is not desirable because it reduces efficiency. 
B)  leads to less output in this industry. 
C)  causes more resources to be used in the polluting industry. 
D)  shifts the marginal social benefit curve leftward. 
E)  shifts the marginal social benefit curve rightward.

Question 2

When a person receives a flu vaccination,the ________ is the additional benefit the person receives from getting the shot.

Accepted Answer

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

Question 3

The deadweight loss associated with producing a product that has an external cost occurs because

Accepted Answer

A)  too much output is produced. 
B)  too little output is produced. 
C)  the price firms charge for the good is too high. 
D)  not enough resources are allocated to producing the good. 
E)  the marginal social cost does not equal zero. 
A)  too much output is produced. 
B)  too little output is produced. 
C)  the price firms charge for the good is too high. 
D)  not enough resources are allocated to producing the good. 
E)  the marginal social cost does not equal zero.

Question 4

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 5

Private subsidies granted to producers affect

Accepted Answer

A)  the supply side of the market by shifting the supply curve. 
B)  the demand side of the market by shifting the demand curve. 
C)  property rights. 
D)  transaction costs. 
E)  both the the supply side of the market and the demand side because they shift both the supply curve and the demand curve. 
A)  the supply side of the market by shifting the supply curve. 
B)  the demand side of the market by shifting the demand curve. 
C)  property rights. 
D)  transaction costs. 
E)  both the the supply side of the market and the demand side because they shift both the supply curve and the demand curve.

Question 6

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).
-In the figure above,suppose the government provides vouchers worth $15,000 per student per year.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

A)  exceeds; above the efficient quantity 
B)  exceeds; below the efficient quantity 
C)  is below; above the efficient quantity 
D)  is below; below the efficient quantity 
E)  equals; efficient 
A)  exceeds; above the efficient quantity 
B)  exceeds; below the efficient quantity 
C)  is below; above the efficient quantity 
D)  is below; below the efficient quantity 
E)  equals; efficient

Question 7

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

Accepted Answer

A)  external cost. 
B)  private cost. 
C)  social cost. 
D)  public cost. 
E)  None of the above answers is correct. 
A)  external cost. 
B)  private cost. 
C)  social cost. 
D)  public cost. 
E)  None of the above answers is correct.

Question 8

The marginal social cost of burning garbage in Houston is the sum of the marginal private cost and the marginal external cost." Is this assertion correct or incorrect?

Accepted Answer

The statement is correct.The m

Question 9

-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 of ________ units is inefficient because ________.

Accepted Answer

A)  8; marginal benefit exceeds marginal cost 
B)  8; marginal cost exceeds marginal benefit 
C)  10; marginal cost exceeds marginal benefit 
D)  10; marginal social benefit exceeds marginal benefit 
E)  10; marginal external benefit exceeds marginal social benefit 
A)  8; marginal benefit exceeds marginal cost 
B)  8; marginal cost exceeds marginal benefit 
C)  10; marginal cost exceeds marginal benefit 
D)  10; marginal social benefit exceeds marginal benefit 
E)  10; marginal external benefit exceeds marginal social benefit

Question 10

If a product has zero external costs,then

Accepted Answer

A)  marginal social cost equals marginal private cost. 
B)  marginal social cost is greater than marginal private cost. 
C)  marginal social cost is less than marginal private cost. 
D)  marginal social cost equals zero. 
E)  We need more information to determine the relationship between marginal private cost and marginal social cost. 
A)  marginal social cost equals marginal private cost. 
B)  marginal social cost is greater than marginal private cost. 
C)  marginal social cost is less than marginal private cost. 
D)  marginal social cost equals zero. 
E)  We need more information to determine the relationship between marginal private cost and marginal social cost.

Question 11

-The above figure shows the market for college education in the United States.With no government intervention,the unregulated market equilibrium is ________ because education 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 12

What do we mean by "property rights" and why are they important?

Accepted Answer

Property rights are legally established

Question 13

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).
-The figure above shows that at the unregulated market equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

A)  exceeds; above the efficient quantity 
B)  exceeds; below the efficient quantity 
C)  is below; above the efficient quantity 
D)  is below; below the efficient quantity 
E)  equals; efficient 
A)  exceeds; above the efficient quantity 
B)  exceeds; below the efficient quantity 
C)  is below; above the efficient quantity 
D)  is below; below the efficient quantity 
E)  equals; efficient

Question 14

If the government taxes producers that create pollution,the government's policy

Accepted Answer

A)  allows the producers to pollute more by increasing their costs. 
B)  results in less production because the producers' costs have risen. 
C)  eliminates pollution entirely by shifting the supply curve leftward. 
D)  allows the firms to pass along higher costs but doesn't cut pollution. 
E)  forbids the firms from passing along higher costs. 
A)  allows the producers to pollute more by increasing their costs. 
B)  results in less production because the producers' costs have risen. 
C)  eliminates pollution entirely by shifting the supply curve leftward. 
D)  allows the firms to pass along higher costs but doesn't cut pollution. 
E)  forbids the firms from passing along higher costs.

Question 15

Pollution is an example of a ________ externality.

Accepted Answer

A)  negative production 
B)  positive production 
C)  negative consumption 
D)  positive consumption 
E)  Coasian 
A)  negative production 
B)  positive production 
C)  negative consumption 
D)  positive consumption 
E)  Coasian

Question 16

"According to the Coase theorem,if Gabriel wants the local television station to cease having helicopters fly over his house at night,he will be more likely to be able to reach an agreement with the station if the property right to the airspace is clearly defined and the transaction costs of negotiating are high." Is this statement true or false? Explain your answer.

Accepted Answer

The statement is false.The first part of

Question 17

-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 18

The cost of producing an additional unit of a good or service that falls on people other than the producer is

Accepted Answer

A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  the marginal external cost. 
E)  the marginal social cost. 
A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  the marginal external cost. 
E)  the marginal social cost.

Question 19

If a polluting producer is forced to pay a pollution charge,what is the effect on the supply and demand curves for the product?

Accepted Answer

A)  The quantity supplied along the firm's supply curve increases. 
B)  The firm's demand curve shifts leftward. 
C)  The firm's supply curve shifts rightward. 
D)  The firm's supply curve shifts leftward. 
E)  Both the supply curve and the demand curve shift leftward. 
A)  The quantity supplied along the firm's supply curve increases. 
B)  The firm's demand curve shifts leftward. 
C)  The firm's supply curve shifts rightward. 
D)  The firm's supply curve shifts leftward. 
E)  Both the supply curve and the demand curve shift leftward.

Question 20

-The figure above shows the market for private elementary school education in Chicago.There is no external cost of private elementary education.If the marginal social benefit of private elementary education equaled the marginal social cost,the deadweight loss in Chicago's private education market would equal

Accepted Answer

A)  0. 
B)  $800,000. 
C)  $1,600,000. 
D)  more than $1,600,000. 
E)  more than $800,000 and less than $1,600,000. 
A)  0. 
B)  $800,000. 
C)  $1,600,000. 
D)  more than $1,600,000. 
E)  more than $800,000 and less than $1,600,000.

A tax on a polluting industry

When a person receives a flu vaccination,the ________ is the additional benefit the person receives from getting the shot.

The deadweight loss associated with producing a product that has an external cost occurs because

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

Private subsidies granted to producers affect

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

The marginal social cost of burning garbage in Houston is the sum of the marginal private cost and the marginal external cost." Is this assertion correct or incorrect?

-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 of units is inefficient because .

If a product has zero external costs,then

-The above figure shows the market for college education in the United States.With no government intervention,the unregulated market equilibrium is because education generates .

What do we mean by "property rights" and why are they important?

If the government taxes producers that create pollution,the government's policy

Pollution is an example of a ________ externality.

-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?

The cost of producing an additional unit of a good or service that falls on people other than the producer is

If a polluting producer is forced to pay a pollution charge,what is the effect on the supply and demand curves for the product?

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

A tax on a polluting industry

When a person receives a flu vaccination,the ________ is the additional benefit the person receives from getting the shot.

The deadweight loss associated with producing a product that has an external cost occurs because

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

Private subsidies granted to producers affect

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

The marginal social cost of burning garbage in Houston is the sum of the marginal private cost and the marginal external cost." Is this assertion correct or incorrect?

-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 of ________ units is inefficient because ________.

If a product has zero external costs,then

-The above figure shows the market for college education in the United States.With no government intervention,the unregulated market equilibrium is ________ because education generates ________.

What do we mean by "property rights" and why are they important?

If the government taxes producers that create pollution,the government's policy

Pollution is an example of a ________ externality.

-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?

The cost of producing an additional unit of a good or service that falls on people other than the producer is

If a polluting producer is forced to pay a pollution charge,what is the effect on the supply and demand curves for the product?

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

-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 of units is inefficient because .

-The above figure shows the market for college education in the United States.With no government intervention,the unregulated market equilibrium is because education generates .