Question 1

When the government uses a private subsidy in a market with an external benefit,to reach the efficient quantity of production,the subsidy must be equal to the marginal

Accepted Answer

A)  social benefit. 
B)  cost of production. 
C)  private benefit. 
D)  external benefit. 
E)  external cost. 
A)  social benefit. 
B)  cost of production. 
C)  private benefit. 
D)  external benefit. 
E)  external cost.

Question 2

-The figure above shows a tax imposed on a good with an external cost.The area of the rectangle abcd equals

Accepted Answer

A)  the MSB. 
B)  the total tax revenue collected by the government. 
C)  the amount of pollution tax per ton. 
D)  the MC. 
E)  the deadweight loss. 
A)  the MSB. 
B)  the total tax revenue collected by the government. 
C)  the amount of pollution tax per ton. 
D)  the MC. 
E)  the deadweight loss.

Question 3

The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are

Accepted Answer

A)  inefficient. 
B)  efficient. 
C)  inequitable. 
D)  illegal. 
E)  unnecessary. 
A)  inefficient. 
B)  efficient. 
C)  inequitable. 
D)  illegal. 
E)  unnecessary.

Question 4

-The figure shows the market for college education.If the market for education is competitive and with no government intervention,the equilibrium quantity of college students is ________ million and the efficient quantity of college students is ________ million.

Accepted Answer

A)  2; 4 
B)  8; 2 
C)  8; 4 
D)  4; 8 
E)  0; 10 
A)  2; 4 
B)  8; 2 
C)  8; 4 
D)  4; 8 
E)  0; 10

Question 5

-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 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 6

Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would

Accepted Answer

A)  produce the efficient amount. 
B)  produce more than the efficient amount. 
C)  produce some research, but less than the efficient amount. 
D)  produce zero research. 
E)  either produce more than or less than the efficient amount depending on whether the external benefit is on the production or consumption of the research. 
A)  produce the efficient amount. 
B)  produce more than the efficient amount. 
C)  produce some research, but less than the efficient amount. 
D)  produce zero research. 
E)  either produce more than or less than the efficient amount depending on whether the external benefit is on the production or consumption of the research.

Question 7

-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 8

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a ________ that equals the ________ of the pollution.

Accepted Answer

A)  pollution charge; marginal social cost 
B)  pollution charge; marginal external cost 
C)  pollution tax; marginal social cost 
D)  pollution tax; marginal external cost 
E)  pollution subsidy; marginal social cost 
A)  pollution charge; marginal social cost 
B)  pollution charge; marginal external cost 
C)  pollution tax; marginal social cost 
D)  pollution tax; marginal external cost 
E)  pollution subsidy; marginal social cost

Question 9

-The above figure shows the market for college education in the United States.With no government intervention,the market equilibrium is at a tuition of ________ and ________ million students per year.

Accepted Answer

A)  16,000; 14 
B)  $20,000; 10 
C)  $13,000; 10 
D)  $13,000; 17 
E)  $16,000; 10 
A)  16,000; 14 
B)  $20,000; 10 
C)  $13,000; 10 
D)  $13,000; 17 
E)  $16,000; 10

Question 10

If an external benefit is present,then the

Accepted Answer

A)  marginal private benefit curve lies above the marginal private cost curve. 
B)  marginal social benefit curve lies above the marginal private benefit curve. 
C)  marginal social cost curve lies above the marginal private benefit curve. 
D)  marginal social benefit is equal to the marginal social cost. 
E)  marginal social benefit curve is the same as the marginal private benefit curve. 
A)  marginal private benefit curve lies above the marginal private cost curve. 
B)  marginal social benefit curve lies above the marginal private benefit curve. 
C)  marginal social cost curve lies above the marginal private benefit curve. 
D)  marginal social benefit is equal to the marginal social cost. 
E)  marginal social benefit curve is the same as the marginal private benefit curve.

Question 11

A government subsidy paid to a firm
i.increases the demand for the good.
ii.has no effect on the supply of the good.
iii.leads to an increase in the equilibrium quantity.

Accepted Answer

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

Question 12

Which of the following is true?

Accepted Answer

A)  MSC = MC + Marginal external cost. 
B)  MC = Marginal external cost - MSC. 
C)  MC = Marginal external benefit + MSC. 
D)  MSC = Marginal external cost + marginal external benefit. 
E)  MSC = Marginal external cost - marginal external benefit. 
A)  MSC = MC + Marginal external cost. 
B)  MC = Marginal external cost - MSC. 
C)  MC = Marginal external benefit + MSC. 
D)  MSC = Marginal external cost + marginal external benefit. 
E)  MSC = Marginal external cost - marginal external benefit.

Question 13

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

Accepted Answer

A)  $1,600 
B)  $1,200 
C)  $1,000 
D)  $600 
E)  $400 
A)  $1,600 
B)  $1,200 
C)  $1,000 
D)  $600 
E)  $400

Question 14

If the government taxes an industry that creates pollution,the tax
i.decreases the pollution.
ii.increases the price of the product produced by the firms.
iii.decreases the quantity of the good produced.

Accepted Answer

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

Question 15

-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 16

If a government action is designed to achieve efficiency,then the action must have the market produce the amount of output so that the

Accepted Answer

A)  marginal private cost equals the marginal private benefit. 
B)  marginal social cost equals the marginal social benefit. 
C)  marginal external cost equals the marginal external benefit. 
D)  marginal private cost equals the tax. 
E)  marginal social benefit exceeds the marginal social cost by as much as possible. 
A)  marginal private cost equals the marginal private benefit. 
B)  marginal social cost equals the marginal social benefit. 
C)  marginal external cost equals the marginal external benefit. 
D)  marginal private cost equals the tax. 
E)  marginal social benefit exceeds the marginal social cost by as much as possible.

Question 17

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 18

-The figure above shows the market for a good with an external benefit.The efficient level of production is ________ units because ________.

Accepted Answer

A)  8; marginal benefit equals marginal cost 
B)  8; marginal cost is less than marginal social benefit 
C)  10; marginal cost equals marginal social benefit 
D)  10; marginal social benefit exceeds marginal benefit 
E)  8; marginal benefit equals the marginal external benefit 
A)  8; marginal benefit equals marginal cost 
B)  8; marginal cost is less than marginal social benefit 
C)  10; marginal cost equals marginal social benefit 
D)  10; marginal social benefit exceeds marginal benefit 
E)  8; marginal benefit equals the marginal external benefit

Question 19

When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the

Accepted Answer

A)  marginal social cost of production. 
B)  marginal external cost of production. 
C)  marginal private cost of production. 
D)  marginal private benefit of consumption. 
E)  marginal external benefit minus the marginal external cost. 
A)  marginal social cost of production. 
B)  marginal external cost of production. 
C)  marginal private cost of production. 
D)  marginal private benefit of consumption. 
E)  marginal external benefit minus the marginal external cost.

Question 20

When the benefits of producing a good or service spill over to other people,rather than just the buyer,the spillover is referred to as

Accepted Answer

A)  an external benefit. 
B)  an external cost. 
C)  a marginal cost. 
D)  an equilibrium social output. 
E)  a Coasian good. 
A)  an external benefit. 
B)  an external cost. 
C)  a marginal cost. 
D)  an equilibrium social output. 
E)  a Coasian good.

When the government uses a private subsidy in a market with an external benefit,to reach the efficient quantity of production,the subsidy must be equal to the marginal

-The figure above shows a tax imposed on a good with an external cost.The area of the rectangle abcd equals

The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are

-The figure shows the market for college education.If the market for education is competitive and with no government intervention,the equilibrium quantity of college students is million and the efficient quantity of college students is million.

-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 200 billion kilowatt hours are produced is

Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would

-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.

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a that equals the of the pollution.

-The above figure shows the market for college education in the United States.With no government intervention,the market equilibrium is at a tuition of and million students per year.

If an external benefit is present,then the

A government subsidy paid to a firm i.increases the demand for the good. ii.has no effect on the supply of the good. iii.leads to an increase in the equilibrium quantity.

Which of the following is true?

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

If the government taxes an industry that creates pollution,the tax i.decreases the pollution. ii.increases the price of the product produced by the firms. iii.decreases the quantity of the good produced.

-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.

If a government action is designed to achieve efficiency,then the action must have the market produce the amount of output so that the

Externalities

-The figure above shows the market for a good with an external benefit.The efficient level of production is units because .

When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the

When the benefits of producing a good or service spill over to other people,rather than just the buyer,the spillover is referred to as

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

When the government uses a private subsidy in a market with an external benefit,to reach the efficient quantity of production,the subsidy must be equal to the marginal

-The figure above shows a tax imposed on a good with an external cost.The area of the rectangle abcd equals

The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are

-The figure shows the market for college education.If the market for education is competitive and with no government intervention,the equilibrium quantity of college students is ________ million and the efficient quantity of college students is ________ million.

-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 200 billion kilowatt hours are produced is

Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would

-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.

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a ________ that equals the ________ of the pollution.

-The above figure shows the market for college education in the United States.With no government intervention,the market equilibrium is at a tuition of ________ and ________ million students per year.

If an external benefit is present,then the

A government subsidy paid to a firm i.increases the demand for the good. ii.has no effect on the supply of the good. iii.leads to an increase in the equilibrium quantity.

Which of the following is true?

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

If the government taxes an industry that creates pollution,the tax i.decreases the pollution. ii.increases the price of the product produced by the firms. iii.decreases the quantity of the good produced.

-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.

If a government action is designed to achieve efficiency,then the action must have the market produce the amount of output so that the

Externalities

-The figure above shows the market for a good with an external benefit.The efficient level of production is ________ units because ________.

When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the

When the benefits of producing a good or service spill over to other people,rather than just the buyer,the spillover is referred to as

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 shows the market for college education.If the market for education is competitive and with no government intervention,the equilibrium quantity of college students is million and the efficient quantity of college students is million.

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a that equals the of the pollution.

-The above figure shows the market for college education in the United States.With no government intervention,the market equilibrium is at a tuition of and million students per year.

-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.

-The figure above shows the market for a good with an external benefit.The efficient level of production is units because .