Question 1

A public good is a good that is both rival and excludable.

Accepted Answer

A) True 
 B)False

Question 2

A public good is

Accepted Answer

A) a good that is rival and excludable. 
B) a good that is nonrival and nonexcludable. 
C) a good that is nonrival and excludable. 
D) a good that is rival and nonexcludable. 
A) a good that is rival and excludable. 
B) a good that is nonrival and nonexcludable. 
C) a good that is nonrival and excludable. 
D) a good that is rival and nonexcludable.

Question 3

The social cost of cutting trees for firewood in a government forest is

Accepted Answer

A) the increased likelihood of flooding as more trees are cut. 
B) the increased likelihood of flooding as more trees are cut plus the private cost of cutting the trees. 
C) opportunity cost to the individual of cutting the wood. 
D) the marginal costs of cutting the last tree. 
A) the increased likelihood of flooding as more trees are cut. 
B) the increased likelihood of flooding as more trees are cut plus the private cost of cutting the trees. 
C) opportunity cost to the individual of cutting the wood. 
D) the marginal costs of cutting the last tree.

Question 4

Classifying a good as excludable means

Accepted Answer

A) that someone can be barred from consuming the good based on race, creed, or some other irrelevant characteristic. 
B) that anyone who does not pay for the good cannot consume it. 
C) that consumption of the good causes no externalities. 
D) that a producer with patent or copyright protection can exclude any other producer from selling his product. 
A) that someone can be barred from consuming the good based on race, creed, or some other irrelevant characteristic. 
B) that anyone who does not pay for the good cannot consume it. 
C) that consumption of the good causes no externalities. 
D) that a producer with patent or copyright protection can exclude any other producer from selling his product.

Question 5

Which of the following describes how a negative externality affects a competitive market?

Accepted Answer

A) The externality causes a difference between the private cost of production and the social cost. 
B) The externality causes a difference between the private cost of production and the private benefit from consumption. 
C) The externality causes consumer surplus to exceed producer surplus. 
D) The externality causes a difference between the private cost of production and the equilibrium price. 
A) The externality causes a difference between the private cost of production and the social cost. 
B) The externality causes a difference between the private cost of production and the private benefit from consumption. 
C) The externality causes consumer surplus to exceed producer surplus. 
D) The externality causes a difference between the private cost of production and the equilibrium price.

Question 6

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Accepted Answer

Internalizing an externality refers to t

Question 7

If the marginal social benefit of consuming a good or a service exceeds the marginal private benefit

Accepted Answer

A) a negative externality exists. 
B) the market achieves economic efficiency. 
C) a positive externality exists. 
D) the sum of consumer surplus and producer surplus is maximized. 
A) a negative externality exists. 
B) the market achieves economic efficiency. 
C) a positive externality exists. 
D) the sum of consumer surplus and producer surplus is maximized.

Question 8

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

Accepted Answer

A) equal to the marginal external cost at the economically efficient level of pollution. 
B) equal to the marginal private cost of production at the economically efficient level of pollution. 
C) equal to the amount of the deadweight loss created in the absence of a pollution tax. 
D) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product. 
A) equal to the marginal external cost at the economically efficient level of pollution. 
B) equal to the marginal private cost of production at the economically efficient level of pollution. 
C) equal to the amount of the deadweight loss created in the absence of a pollution tax. 
D) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.

Question 9

For the Coase theorem to work there must be clear assignment of property rights.

Accepted Answer

A) True 
 B)False

Question 10

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

Accepted Answer

The tragedy of the commons refers to sit

Question 11

Figure 5-15
   
Figure 5-15 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5-15.Identify the area that shows the deadweight loss from overfishing.

Accepted Answer

A) egh 
B) ekh 
C) efh 
D) eghk 
A) egh 
B) ekh 
C) efh 
D) eghk

Question 12

Figure 5-5
   
Figure 5-5 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 5-5.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does D₂ represent?

Accepted Answer

A) the demand curve reflecting external benefits 
B) the demand curve reflecting social benefits 
C) the demand curve reflecting private benefits 
D) the demand curve reflecting the sum of social and external benefits 
A) the demand curve reflecting external benefits 
B) the demand curve reflecting social benefits 
C) the demand curve reflecting private benefits 
D) the demand curve reflecting the sum of social and external benefits

Question 13

Figure 5-13
   
Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.If the government wanted to bring about the efficient level of gasoline production by imposing a tax, the amount of the gasoline tax would be ________ per gallon.

Accepted Answer

A) $0.75 
B) $1.25 
C) $1.75 
D) $2.00 
A) $0.75 
B) $1.25 
C) $1.75 
D) $2.00

Question 14

Figure 5-13
   
Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.If the government wanted to bring about the efficient level of gasoline production by imposing a tax, the actual price of gasoline paid by consumers after the tax is implemented is ________ per gallon.

Accepted Answer

A) $3.00 
B) $3.75 
C) $4.25 
D) $5.00 
A) $3.00 
B) $3.75 
C) $4.25 
D) $5.00

Question 15

One difference between the demand for a private good and that for a public good is that

Accepted Answer

A) with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
B) with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
C) with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. 
D) the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the public good. 
A) with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
B) with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
C) with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. 
D) the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the public good.

Question 16

If the social cost of producing a good or service exceeds the private cost

Accepted Answer

A) a positive externality exists. 
B) the sum of consumer surplus and producer surplus is maximized. 
C) the market achieves economic efficiency. 
D) a negative externality exists. 
A) a positive externality exists. 
B) the sum of consumer surplus and producer surplus is maximized. 
C) the market achieves economic efficiency. 
D) a negative externality exists.

Question 17

All of the following are examples of public goods except

Accepted Answer

A) broadcast television with commercials. 
B) clean water systems. 
C) stock of knowledge in the public domain. 
D) crime prevention. 
A) broadcast television with commercials. 
B) clean water systems. 
C) stock of knowledge in the public domain. 
D) crime prevention.

Question 18

Which of the following must be present to reach a private solution to an externality problem?

Accepted Answer

A) A majority of the parties affected by the externality must agree to a solution. 
B) The transactions costs to negotiate a solution must be relatively low. 
C) The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution. 
D) The government must approve the solution for it to be a legal solution. 
A) A majority of the parties affected by the externality must agree to a solution. 
B) The transactions costs to negotiate a solution must be relatively low. 
C) The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution. 
D) The government must approve the solution for it to be a legal solution.

Question 19

Figure 5-6
   
Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities.
-Refer to Figure 5-6.What does D₁ represent?

Accepted Answer

A) the demand curve reflecting social benefits 
B) the positive externalities curve 
C) the demand curve reflecting private benefits 
D) the social welfare curve 
A) the demand curve reflecting social benefits 
B) the positive externalities curve 
C) the demand curve reflecting private benefits 
D) the social welfare curve

Question 20

What are transactions costs? Why do transactions costs create difficulties in finding a private solution to the problem of pollution?

Accepted Answer

Transactions costs refer to the costs in

A public good is a good that is both rival and excludable.

A public good is

The social cost of cutting trees for firewood in a government forest is

Classifying a good as excludable means

Which of the following describes how a negative externality affects a competitive market?

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

If the marginal social benefit of consuming a good or a service exceeds the marginal private benefit

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

For the Coase theorem to work there must be clear assignment of property rights.

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

Figure 5-15 Figure 5-15 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂. -Refer to Figure 5-15.Identify the area that shows the deadweight loss from overfishing.

One difference between the demand for a private good and that for a public good is that

If the social cost of producing a good or service exceeds the private cost

All of the following are examples of public goods except

Which of the following must be present to reach a private solution to an externality problem?

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₁ represent?

What are transactions costs? Why do transactions costs create difficulties in finding a private solution to the problem of pollution?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 5: Externalities, Environmental Policy, and Public Goods

A public good is a good that is both rival and excludable.

A public good is

The social cost of cutting trees for firewood in a government forest is

Classifying a good as excludable means

Which of the following describes how a negative externality affects a competitive market?

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

If the marginal social benefit of consuming a good or a service exceeds the marginal private benefit

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

For the Coase theorem to work there must be clear assignment of property rights.

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

One difference between the demand for a private good and that for a public good is that

If the social cost of producing a good or service exceeds the private cost

All of the following are examples of public goods except

Which of the following must be present to reach a private solution to an externality problem?

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₁ represent?

What are transactions costs? Why do transactions costs create difficulties in finding a private solution to the problem of pollution?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters