Question 1

A market supply curve reflects the

Accepted Answer

A) external costs of producing a good or service. 
B) external benefits of producing a good or service. 
C) social costs of producing a good or service. 
D) private costs of producing a good or service. 
A) external costs of producing a good or service. 
B) external benefits of producing a good or service. 
C) social costs of producing a good or service. 
D) private costs of producing a good or service.

Question 2

Governments can increase the consumption of a product that creates positive externalities by

Accepted Answer

A) subsidizing the production of the product so that the supply is increased and market price is reduced. 
B) taxing the production and consumption of the product. 
C) convincing everyone to consume the good. 
D) assigning property rights to the producers of the product. 
A) subsidizing the production of the product so that the supply is increased and market price is reduced. 
B) taxing the production and consumption of the product. 
C) convincing everyone to consume the good. 
D) assigning property rights to the producers of the product.

Question 3

As a result of the gasoline tax in BC, ________ would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would ________.

Accepted Answer

A) consumers; widen 
B) producers; widen 
C) producers; narrow 
D) consumers; narrow 
A) consumers; widen 
B) producers; widen 
C) producers; narrow 
D) consumers; narrow

Question 4

The Montreal Protocol and later agreements are expected to result in 60 million fewer cases of skin cancer in 2020 due to lower chlorofluorocarbon (CFC)levels in the atmosphere, than would have been the case without these agreements.Why was agreement on the Montreal Protocol possible in 1987 while agreement on reducing the level of carbon dioxide has been all but impossible?

Accepted Answer

A) The cost of pollution abatement today is much higher than it was in the 1980s. Thus, it would be far more costly to achieve the same level of pollution reduction now than it was in 1987. 
B) The costs of reducing CFC emissions to efficient levels was lower than the cost of reducing carbon dioxide emissions to efficient levels. 
C) Carbon dioxide levels are not very high in most Canadian cities. 
D) It is better to tackle one problem rather than two. 
A) The cost of pollution abatement today is much higher than it was in the 1980s. Thus, it would be far more costly to achieve the same level of pollution reduction now than it was in 1987. 
B) The costs of reducing CFC emissions to efficient levels was lower than the cost of reducing carbon dioxide emissions to efficient levels. 
C) Carbon dioxide levels are not very high in most Canadian cities. 
D) It is better to tackle one problem rather than two.

Question 5

Consider the following methods of pollution reduction:
a)the government sets a target for maximum emissions
b)the government mandates the installation of specific pollution abatement equipment
c)the government imposes a per unit tax on the good that creates pollution
d)the government gives firms a tax rebate for every unit of pollution abated
Which of the above is an example of a command and control approach to reducing pollution?

Accepted Answer

A) a only 
B) b only 
C) a and b only 
D) a, b, and d only 
E) a, b, c, and d 
A) a only 
B) b only 
C) a and b only 
D) a, b, and d only 
E) a, b, c, and d

Question 6

What are property rights?

Accepted Answer

A) the title to ownership of any physical asset 
B) a legal document verifying ownership of intangible assets 
C) the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it 
D) the right of the government to appropriate private assets for the good of society 
A) the title to ownership of any physical asset 
B) a legal document verifying ownership of intangible assets 
C) the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it 
D) the right of the government to appropriate private assets for the good of society

Question 7

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

Accepted Answer

A) the private benefit of harvesting tuna is higher than the social benefit of harvesting it. 
B) the private benefit of harvesting tuna is lower than the social benefit of harvesting it. 
C) the social cost of harvesting the fish is lower than the private cost. 
D) the private cost of harvesting the fish is lower than the social cost. 
A) the private benefit of harvesting tuna is higher than the social benefit of harvesting it. 
B) the private benefit of harvesting tuna is lower than the social benefit of harvesting it. 
C) the social cost of harvesting the fish is lower than the private cost. 
D) the private cost of harvesting the fish is lower than the social cost.

Question 8

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

Accepted Answer

Private cost of production is the cost b

Question 9

What is an externality?

Accepted Answer

An externality is a benefit or

Question 10

Figure 5.5
   
Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5.5 illustrates the situation in the toilet paper market.
-Refer to Figure 5.5.Let's suppose the government imposes a tax of $50 per ton of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

Accepted Answer

A) It rises by $50. 
B) It rises by more than $50. 
C) It rises by less than $50. 
D) It remains the same because the tax is imposed on producers who create the externality. 
A) It rises by $50. 
B) It rises by more than $50. 
C) It rises by less than $50. 
D) It remains the same because the tax is imposed on producers who create the externality.

Question 11

An externality refers to economic events outside a market.

Accepted Answer

A) True 
 B)False

Question 12

James Meade, who won the Nobel Prize in Economics in 1977, argued that positive externalities resulted from

Accepted Answer

A) reducing emissions of sulfur dioxide. 
B) producing automobiles and automobile tires. 
C) home owners in the Northeast moving to the South and Southwest United States. 
D) apple growing and beekeeping. 
A) reducing emissions of sulfur dioxide. 
B) producing automobiles and automobile tires. 
C) home owners in the Northeast moving to the South and Southwest United States. 
D) apple growing and beekeeping.

Question 13

Which of the following is an example of a positive externality?

Accepted Answer

A) banning the sale of candy in elementary schools 
B) planting trees along a sidewalk which add beauty and creates shade 
C) forbidding the use of cell phones in public 
D) prohibit street parking in all residential neighborhoods 
A) banning the sale of candy in elementary schools 
B) planting trees along a sidewalk which add beauty and creates shade 
C) forbidding the use of cell phones in public 
D) prohibit street parking in all residential neighborhoods

Question 14

Common resources differ from public goods in that

Accepted Answer

A) common resources are non-excludable while public goods are excludable to those who do not pay for the good. 
B)  unlike public goods, common resources are rivalrous in consumption. 
C) common resources are collectively owned by a group of people while public goods are government owned. 
D) common resources are resources that cannot be renewed but the production of public goods can be increased any time. 
A) common resources are non-excludable while public goods are excludable to those who do not pay for the good. 
B)  unlike public goods, common resources are rivalrous in consumption. 
C) common resources are collectively owned by a group of people while public goods are government owned. 
D) common resources are resources that cannot be renewed but the production of public goods can be increased any time.

Question 15

Figure 5.4
  
-Refer to Figure 5.4.What is the incremental cost of increasing the quantity of pollution reduction from QB to QE units?

Accepted Answer

A) PE 
B) the value of the area QBBEQE 
C) PE × QE 
D) the value of the area BEF 
A) PE 
B) the value of the area QBBEQE 
C) PE × QE 
D) the value of the area BEF

Question 16

Figure 5.1
   
Figure 5-1 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5.1.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₁ represent?

Accepted Answer

A) the market supply curve reflecting external cost 
B) the market supply curve reflecting implicit cost 
C) the market supply curve reflecting social cost 
D) the market supply curve reflecting private cost 
A) the market supply curve reflecting external cost 
B) the market supply curve reflecting implicit cost 
C) the market supply curve reflecting social cost 
D) the market supply curve reflecting private cost

Question 17

A positive externality causes

Accepted Answer

A) the marginal social benefit to be equal to the marginal private cost of the last unit produced. 
B) the marginal social benefit to be less than the marginal private cost of the last unit produced. 
C) the marginal social benefit to exceed the marginal private cost of the last unit produced. 
D) the marginal private benefit to exceed the marginal social cost of the last unit produced. 
A) the marginal social benefit to be equal to the marginal private cost of the last unit produced. 
B) the marginal social benefit to be less than the marginal private cost of the last unit produced. 
C) the marginal social benefit to exceed the marginal private cost of the last unit produced. 
D) the marginal private benefit to exceed the marginal social cost of the last unit produced.

Question 18

In the city of Alvarez, with the exception of guide dogs for blind people, all dogs are banned from its three public parks, regardless of whether the animals are leashed.Many residents are pushing for a change in policy.Canine lover Sara Northridge observed, "There are 800 or more homes here.There are three parks within 10 minutes, and almost everyone has a dog, but we can't take our dogs there." Others fear that allowing dogs would detract from their enjoyment of the parks.Tim Cortis retorted, "We're not preventing dog lovers from enjoying the park, just come without your dog." Which of the following is a way of dealing with the problem by assigning property rights to a particular group?

Accepted Answer

A) impose a two-tier entry fee system - a lower fee for non dog owners and a higher fee for dog owners 
B) impose a fee only for dog-owners to use the public parks; non dog owners do not pay a fee 
C) dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park 
D) allow dog owners to bring their dogs to the park but insist that they keep watch over their dogs 
A) impose a two-tier entry fee system - a lower fee for non dog owners and a higher fee for dog owners 
B) impose a fee only for dog-owners to use the public parks; non dog owners do not pay a fee 
C) dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park 
D) allow dog owners to bring their dogs to the park but insist that they keep watch over their dogs

Question 19

Global warming refers to the effect of global pollutants such as carbon dioxide on climates on the earth.Climate-induced changes in temperatures affect, among other things, agriculture.Which of the following is a reason why policymakers are still debating if this problem should be addressed and how it should be addressed?

Accepted Answer

A) Scientists agree about the damage caused by carbon emissions but disagree about the methods of reducing emissions. 
B) The marginal cost of reducing carbon emissions is known with certainly but the marginal benefit from reduction is not known with certainty. 
C) The marginal cost of reducing carbon emissions is not known with certainly but the marginal benefit from reduction is known with certainty. 
D) There is much disagreement about all aspects of the problem: how much carbon emissions contribute to damage from climate change which in turn affects the benefits from reduction, and what methods to use which in turn determines the cost of reduction. 
A) Scientists agree about the damage caused by carbon emissions but disagree about the methods of reducing emissions. 
B) The marginal cost of reducing carbon emissions is known with certainly but the marginal benefit from reduction is not known with certainty. 
C) The marginal cost of reducing carbon emissions is not known with certainly but the marginal benefit from reduction is known with certainty. 
D) There is much disagreement about all aspects of the problem: how much carbon emissions contribute to damage from climate change which in turn affects the benefits from reduction, and what methods to use which in turn determines the cost of reduction.

Question 20

Figure 5.1
   
Figure 5-1 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5.1.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₂ represent?

Accepted Answer

A) the market supply curve reflecting private cost 
B) the market supply curve reflecting social cost 
C) the market supply curve reflecting external cost 
D) the market supply curve reflecting implicit cost 
A) the market supply curve reflecting private cost 
B) the market supply curve reflecting social cost 
C) the market supply curve reflecting external cost 
D) the market supply curve reflecting implicit cost

A market supply curve reflects the

Governments can increase the consumption of a product that creates positive externalities by

As a result of the gasoline tax in BC, would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would .

What are property rights?

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

What is an externality?

An externality refers to economic events outside a market.

James Meade, who won the Nobel Prize in Economics in 1977, argued that positive externalities resulted from

Which of the following is an example of a positive externality?

Common resources differ from public goods in that

Figure 5.4 -Refer to Figure 5.4.What is the incremental cost of increasing the quantity of pollution reduction from QB to QE units?

A positive externality causes

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 5: Externalities, Environmental Policy, and Public Goods

A market supply curve reflects the

Governments can increase the consumption of a product that creates positive externalities by

As a result of the gasoline tax in BC, ________ would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would ________.

What are property rights?

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

What is an externality?

An externality refers to economic events outside a market.

James Meade, who won the Nobel Prize in Economics in 1977, argued that positive externalities resulted from

Which of the following is an example of a positive externality?

Common resources differ from public goods in that

Figure 5.4 -Refer to Figure 5.4.What is the incremental cost of increasing the quantity of pollution reduction from QB to QE units?

A positive externality causes

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

As a result of the gasoline tax in BC, would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would .