Question 1

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

Accepted Answer

A) intellectual property rights. 
B) subsidies. 
C) public production. 
D) pollution permits. 
E) patents. 
A) intellectual property rights. 
B) subsidies. 
C) public production. 
D) pollution permits. 
E) patents.

Question 2

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good

Accepted Answer

A) equals the marginal private cost. 
B) is zero. 
C) equals the marginal social cost. 
D) equals the marginal social benefit. 
E) is increasing. 
A) equals the marginal private cost. 
B) is zero. 
C) equals the marginal social cost. 
D) equals the marginal social benefit. 
E) is increasing.

Question 3

Use the figure below to answer the following questions.
   
Figure 16.2.1
-Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If a constant per unit tax is imposed that generates an efficient allocation of resources, then consumers pay a per unit price of

Accepted Answer

A) zero. 
B) P₁. 
C) P₂. 
D) P₃. 
E) P₄. 
A) zero. 
B) P₁. 
C) P₂. 
D) P₃. 
E) P₄.

Question 4

An externality is defined as

Accepted Answer

A) an additional cost imposed by the government on producers. 
B) an additional gain received by consumers from decisions made by the government. 
C) a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer. 
D) a marginal social cost. 
E) the additional amount consumers have to pay to consume an additional amount of a good or service. 
A) an additional cost imposed by the government on producers. 
B) an additional gain received by consumers from decisions made by the government. 
C) a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer. 
D) a marginal social cost. 
E) the additional amount consumers have to pay to consume an additional amount of a good or service.

Question 5

If the marginal private cost of producing one kilowatt of power in British Columbia equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt.

Accepted Answer

A) five cents 
B) nine cents 
C) four cents 
D) fourteen cents 
E) forty-five cents 
A) five cents 
B) nine cents 
C) four cents 
D) fourteen cents 
E) forty-five cents

Question 6

Use the figure below to answer the following questions.
   
Figure 16.3.1
-Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.To promote an efficient quantity the government could grant a subsidy equal to

Accepted Answer

A) zero. 
B) P₁. 
C) P₃ - P₁. 
D) P₄ - P₁. 
E) P₂ - P₁. 
A) zero. 
B) P₁. 
C) P₃ - P₁. 
D) P₄ - P₁. 
E) P₂ - P₁.

Question 7

Governments use subsidies

Accepted Answer

A) as a means of increasing government spending. 
B) when they want to increase taxes. 
C) to achieve an efficient outcome in a market with external costs. 
D) to achieve an efficient outcome in a market with external benefits. 
E) and pollution permits to achieve an efficient outcome in markets with external benefits. 
A) as a means of increasing government spending. 
B) when they want to increase taxes. 
C) to achieve an efficient outcome in a market with external costs. 
D) to achieve an efficient outcome in a market with external benefits. 
E) and pollution permits to achieve an efficient outcome in markets with external benefits.

Question 8

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases, then the marginal social cost curve is a positively-sloped straight line

Accepted Answer

A) parallel to and above the MC curve. 
B) parallel to and below the MC curve. 
C) starting at the origin, above the MC curve, and with a slope greater than the MC curve. 
D) starting at the origin, below the MC curve, and with a slope less than the MC curve. 
E) starting above the origin, with a slope less than the MC curve. 
A) parallel to and above the MC curve. 
B) parallel to and below the MC curve. 
C) starting at the origin, above the MC curve, and with a slope greater than the MC curve. 
D) starting at the origin, below the MC curve, and with a slope less than the MC curve. 
E) starting above the origin, with a slope less than the MC curve.

Question 9

Use the figure below to answer the following questions.
   
Figure 16.2.1
-Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then

Accepted Answer

A) the quantity produced is efficient but price is too low. 
B) the quantity produced is less than the efficient quantity. 
C) the quantity produced is greater than the efficient quantity. 
D) the quantity produced is efficient but the price is too high. 
E) the externality is eliminated. 
A) the quantity produced is efficient but price is too low. 
B) the quantity produced is less than the efficient quantity. 
C) the quantity produced is greater than the efficient quantity. 
D) the quantity produced is efficient but the price is too high. 
E) the externality is eliminated.

Question 10

A person driving while talking on a cellphone creates ________.A beautiful sunset creates ________.

Accepted Answer

A) a negative production externality; a positive consumption externality 
B) a negative production externality; no externality 
C) a negative consumption externality; a positive consumption externality 
D) a negative consumption externality; no externality 
E) a negative consumption externality; a positive production externality 
A) a negative production externality; a positive consumption externality 
B) a negative production externality; no externality 
C) a negative consumption externality; a positive consumption externality 
D) a negative consumption externality; no externality 
E) a negative consumption externality; a positive production externality

Question 11

The Coase theorem applies when transactions costs are

Accepted Answer

A) low and property rights exist. 
B) low and property rights do not exist. 
C) high and property rights exist. 
D) high and property rights do not exist. 
E) low and there are no externalities. 
A) low and property rights exist. 
B) low and property rights do not exist. 
C) high and property rights exist. 
D) high and property rights do not exist. 
E) low and there are no externalities.

Question 12

Use the figure below to answer the following questions.
   
Figure 16.2.2
-Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.What is the efficient quantity of good A?

Accepted Answer

A) 0 units 
B) 5 units 
C) 6 units 
D) 8 units 
E) impossible to determine without additional information 
A) 0 units 
B) 5 units 
C) 6 units 
D) 8 units 
E) impossible to determine without additional information

Question 13

Use the figure below to answer the following questions.
   
Figure 16.2.2
-Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

Accepted Answer

A) 0 units 
B) 5 units 
C) 6 units 
D) 8 units 
E) 9 units 
A) 0 units 
B) 5 units 
C) 6 units 
D) 8 units 
E) 9 units

Question 14

Use the figure below to answer the following questions.
   
Figure 16.3.1
-Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then the quantity produced is

Accepted Answer

A) zero. 
B) Q₁. 
C) Q₂. 
D) Q₃. 
E) between 0 and Q₁. 
A) zero. 
B) Q₁. 
C) Q₂. 
D) Q₃. 
E) between 0 and Q₁.

Question 15

Effective strategies for addressing the problem of negative externalities include

Accepted Answer

A) taxing the profit of polluting companies at twice the rate of non-polluting companies. 
B) imposing taxes on the activity that generates the pollution. 
C) stressing the use of renewable resources. 
D) imposing recycling laws. 
E) closing down a polluting industry. 
A) taxing the profit of polluting companies at twice the rate of non-polluting companies. 
B) imposing taxes on the activity that generates the pollution. 
C) stressing the use of renewable resources. 
D) imposing recycling laws. 
E) closing down a polluting industry.

Question 16

Use the figure below to answer the following questions.
   
Figure 16.3.3
-Refer to Figure 16.3.3.The figure shows the marginal private benefit and marginal social cost of a university education.If society's external benefit from university graduates is $10,000 each, then

Accepted Answer

A) a subsidy of $10,000 per student paid to the universities achieves efficiency. 
B) a tax of $10,000 per student imposed on the universities achieves efficiency. 
C) 10 million students per year is the efficient number students. 
D) a subsidy of $20,000 per student paid to the universities achieves efficiency. 
E) a tax of $5,000 per student paid by taxpayers achieves efficiency. 
A) a subsidy of $10,000 per student paid to the universities achieves efficiency. 
B) a tax of $10,000 per student imposed on the universities achieves efficiency. 
C) 10 million students per year is the efficient number students. 
D) a subsidy of $20,000 per student paid to the universities achieves efficiency. 
E) a tax of $5,000 per student paid by taxpayers achieves efficiency.

Question 17

A production technology that reduces or prevents pollution is

Accepted Answer

A) anti-pollution technology. 
B) Coase technology. 
C) abatement technology. 
D) cap-and-trade technology. 
E) inefficient. 
A) anti-pollution technology. 
B) Coase technology. 
C) abatement technology. 
D) cap-and-trade technology. 
E) inefficient.

Question 18

Choose the statement that is incorrect.

Accepted Answer

A) Between 2008 and 2012, carbon emissions in British Columbia remained constant. 
B) As of 2012, British Columbia applies a carbon tax of $30 per tonne of carbon emitted. 
C) British Columbia's carbon tax is revenue-neutral. 
D) Australia has a carbon tax. 
E) A high gas tax in the United Kingdom cuts carbon emissions by inducing people to drive smaller cars and to drive less. 
A) Between 2008 and 2012, carbon emissions in British Columbia remained constant. 
B) As of 2012, British Columbia applies a carbon tax of $30 per tonne of carbon emitted. 
C) British Columbia's carbon tax is revenue-neutral. 
D) Australia has a carbon tax. 
E) A high gas tax in the United Kingdom cuts carbon emissions by inducing people to drive smaller cars and to drive less.

Question 19

Use the figure below to answer the following questions.
   
Figure 16.3.1
-Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If a voucher is given to consumers that generates an efficient outcome, then consumers pay

Accepted Answer

A) zero. 
B)  P₁ per unit. 
C) P₂ per unit. 
D) P₃ per unit. 
E) P₄ per unit. 
A) zero. 
B)  P₁ per unit. 
C) P₂ per unit. 
D) P₃ per unit. 
E) P₄ per unit.

Question 20

Use the table below to answer the following questions.
Table 16.2.2
Chemical Fertilizer Market
  
-Refer to Table 16.2.2.The efficient output of fertilizer is

Accepted Answer

A) 1 tonne. 
B) 2 tonnes. 
C) 3 tonnes. 
D) 4 tonnes. 
E) 5 tonnes. 
A) 1 tonne. 
B) 2 tonnes. 
C) 3 tonnes. 
D) 4 tonnes. 
E) 5 tonnes.

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good

An externality is defined as

If the marginal private cost of producing one kilowatt of power in British Columbia equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt.

Use the figure below to answer the following questions. Figure 16.3.1 -Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.To promote an efficient quantity the government could grant a subsidy equal to

Governments use subsidies

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases, then the marginal social cost curve is a positively-sloped straight line

Use the figure below to answer the following questions. Figure 16.2.1 -Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then

A person driving while talking on a cellphone creates .A beautiful sunset creates .

The Coase theorem applies when transactions costs are

Use the figure below to answer the following questions. Figure 16.2.2 -Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.What is the efficient quantity of good A?

Use the figure below to answer the following questions. Figure 16.2.2 -Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

Use the figure below to answer the following questions. Figure 16.3.1 -Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then the quantity produced is

Effective strategies for addressing the problem of negative externalities include

Use the figure below to answer the following questions. Figure 16.3.3 -Refer to Figure 16.3.3.The figure shows the marginal private benefit and marginal social cost of a university education.If society's external benefit from university graduates is $10,000 each, then

A production technology that reduces or prevents pollution is

Choose the statement that is incorrect.

Use the figure below to answer the following questions. Figure 16.3.1 -Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If a voucher is given to consumers that generates an efficient outcome, then consumers pay

Use the table below to answer the following questions. Table 16.2.2 Chemical Fertilizer Market -Refer to Table 16.2.2.The efficient output of fertilizer is

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Goods and Common Resources

Markets for Factors of Production

Filters

Exam 16: Externalities

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good

An externality is defined as

If the marginal private cost of producing one kilowatt of power in British Columbia equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt.

Use the figure below to answer the following questions. Figure 16.3.1 -Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.To promote an efficient quantity the government could grant a subsidy equal to

Governments use subsidies

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases, then the marginal social cost curve is a positively-sloped straight line

Use the figure below to answer the following questions. Figure 16.2.1 -Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then

A person driving while talking on a cellphone creates ________.A beautiful sunset creates ________.

The Coase theorem applies when transactions costs are

Use the figure below to answer the following questions. Figure 16.2.2 -Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.What is the efficient quantity of good A?

Use the figure below to answer the following questions. Figure 16.2.2 -Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

Use the figure below to answer the following questions. Figure 16.3.1 -Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then the quantity produced is

Effective strategies for addressing the problem of negative externalities include

Use the figure below to answer the following questions. Figure 16.3.3 -Refer to Figure 16.3.3.The figure shows the marginal private benefit and marginal social cost of a university education.If society's external benefit from university graduates is $10,000 each, then

A production technology that reduces or prevents pollution is

Choose the statement that is incorrect.

Use the table below to answer the following questions. Table 16.2.2 Chemical Fertilizer Market -Refer to Table 16.2.2.The efficient output of fertilizer is

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Goods and Common Resources

Markets for Factors of Production

Filters

A person driving while talking on a cellphone creates .A beautiful sunset creates .