Question 1

The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to

Accepted Answer

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

Question 2

Environment Canada was created in

Accepted Answer

A) 1971. 
B) 1961. 
C) 1981. 
D) 1991. 
E) 2001. 
A) 1971. 
B) 1961. 
C) 1981. 
D) 1991. 
E) 2001.

Question 3

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 subsidy is granted that generates an efficient quantity, then the quantity produced is

Accepted Answer

A) zero. 
B) Q₁. 
C) Q₂. 
D) Q₃. 
E) greater than Q₃. 
A) zero. 
B) Q₁. 
C) Q₂. 
D) Q₃. 
E) greater than Q₃.

Question 4

A private subsidy on a good

Accepted Answer

A) is similar to a tax because it decreases the production of the good being subsidized. 
B) increases demand for the good. 
C) punishes those who consume or produce the subsidized good. 
D) has no effect on the quantity of the good produced. 
E) increases production of that good. 
A) is similar to a tax because it decreases the production of the good being subsidized. 
B) increases demand for the good. 
C) punishes those who consume or produce the subsidized good. 
D) has no effect on the quantity of the good produced. 
E) increases production of that good.

Question 5

A battery acid producer pollutes the water upstream from the Polar Bear Club, a swimming club.If transactions costs are low, the quantity of pollution will be efficient

Accepted Answer

A) only if Ronald Coase is a member of the Polar Bear Club. 
B) only if Ronald Coase is not a member of the Polar Bear Club. 
C) only if water property rights are assigned to the producer. 
D) only if water property rights are assigned to the Polar Bear Club. 
E) if water property rights are assigned either to the producer or to the Polar Bear Club. 
A) only if Ronald Coase is a member of the Polar Bear Club. 
B) only if Ronald Coase is not a member of the Polar Bear Club. 
C) only if water property rights are assigned to the producer. 
D) only if water property rights are assigned to the Polar Bear Club. 
E) if water property rights are assigned either to the producer or to the Polar Bear Club.

Question 6

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.Society's external benefit from university graduates is $10,000 each.With no subsidy,

Accepted Answer

A) no students go to university. 
B) less than 10 million students go to university. 
C) 10 million students go to university. 
D) more than 10 million students go to university. 
E) the market is efficient. 
A) no students go to university. 
B) less than 10 million students go to university. 
C) 10 million students go to university. 
D) more than 10 million students go to university. 
E) the market is efficient.

Question 7

Use the table below to answer the following questions.
Table 16.2.2
Chemical Fertilizer Market
  
-Refer to Table 16.2.2.The Pigovian tax that achieves the efficient quantity of output is

Accepted Answer

A) $0. 
B) $10 a tonne. 
C) $20 a tonne. 
D) $30 a tonne. 
E) $40 a tonne. 
A) $0. 
B) $10 a tonne. 
C) $20 a tonne. 
D) $30 a tonne. 
E) $40 a tonne.

Question 8

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

Accepted Answer

A) Market forces determine both the demand for pollution permits and their supply. 
B) Public choice determines both the demand for pollution permits and their supply. 
C) Market forces determine the demand for pollution permits, and property rights determine their supply. 
D) Property rights determine the demand for pollution permits, and the government determines their supply. 
E) Market forces determine the demand for marketable permits, and the government determines their supply. 
A) Market forces determine both the demand for pollution permits and their supply. 
B) Public choice determines both the demand for pollution permits and their supply. 
C) Market forces determine the demand for pollution permits, and property rights determine their supply. 
D) Property rights determine the demand for pollution permits, and the government determines their supply. 
E) Market forces determine the demand for marketable permits, and the government determines their supply.

Question 9

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day, and allowing trading.This is an example of

Accepted Answer

A) cap-and-trade. 
B) emission charges. 
C) the Coase theorem. 
D) a pollution tax. 
E) a voucher. 
A) cap-and-trade. 
B) emission charges. 
C) the Coase theorem. 
D) a pollution tax. 
E) a voucher.

Question 10

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 price is

Accepted Answer

A) P₁. 
B) P₃. 
C) P₂. 
D) greater than P₄. 
E) P₄. 
A) P₁. 
B) P₃. 
C) P₂. 
D) greater than P₄. 
E) P₄.

Question 11

A private cost of production is a cost that is borne by the ________ of a good or service. A social cost of production is a cost that is ________.

Accepted Answer

A) consumer; borne by the producer and by everyone else on whom the cost falls 
B) consumer; not borne by the producer but borne by other people 
C) producer; not borne by the producer but borne by other people 
D) producer; borne by the producer and by everyone else on whom the cost falls 
E) producer; borne by the consumer 
A) consumer; borne by the producer and by everyone else on whom the cost falls 
B) consumer; not borne by the producer but borne by other people 
C) producer; not borne by the producer but borne by other people 
D) producer; borne by the producer and by everyone else on whom the cost falls 
E) producer; borne by the consumer

Question 12

A patent is an example of

Accepted Answer

A) a subsidy. 
B) a pollution permit. 
C) a voucher. 
D) a tax. 
E) a legal device for creating property rights. 
A) a subsidy. 
B) a pollution permit. 
C) a voucher. 
D) a tax. 
E) a legal device for creating property rights.

Question 13

Consider some type of industrial pollution that generates air pollution.This industry, if left unregulated, will produce

Accepted Answer

A) more than the efficient level because they will ignore the marginal external costs. 
B) the efficient level of output. 
C) less than the efficient level because they will ignore the marginal external costs. 
D) less than the efficient level because they will ignore the marginal external benefits. 
E) more than the efficient level because they will ignore the marginal external benefits. 
A) more than the efficient level because they will ignore the marginal external costs. 
B) the efficient level of output. 
C) less than the efficient level because they will ignore the marginal external costs. 
D) less than the efficient level because they will ignore the marginal external benefits. 
E) more than the efficient level because they will ignore the marginal external benefits.

Question 14

When the production of a good has an external cost, the

Accepted Answer

A) marginal social cost curve lies below the marginal private cost curve. 
B) marginal social benefit curve lies above the marginal private benefit curve. 
C) equilibrium quantity in an unregulated, competitive market has a marginal social cost greater than the marginal social benefit. 
D) equilibrium quantity in an unregulated, competitive market has a marginal social cost less than the marginal social benefit. 
E) good should not be produced. 
A) marginal social cost curve lies below the marginal private cost curve. 
B) marginal social benefit curve lies above the marginal private benefit curve. 
C) equilibrium quantity in an unregulated, competitive market has a marginal social cost greater than the marginal social benefit. 
D) equilibrium quantity in an unregulated, competitive market has a marginal social cost less than the marginal social benefit. 
E) good should not be produced.

Question 15

Use the table below to answer the following questions.
Table 16.2.1
  
-Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.If the government decides to correct the externality problem, it could

Accepted Answer

A) subsidize production by $20 per unit. 
B) subsidize production by $10 per unit. 
C) provide the good itself. 
D) tax production by $10 per unit. 
E) tax production by $20 per unit. 
A) subsidize production by $20 per unit. 
B) subsidize production by $10 per unit. 
C) provide the good itself. 
D) tax production by $10 per unit. 
E) tax production by $20 per unit.

Question 16

Which of the following illustrates the concept of external cost?

Accepted Answer

A) Bad weather reduces the size of the wheat crop. 
B) A reduction in the size of the wheat crop causes income of wheat farmers to fall. 
C) Smoking harms the health of the smoker. 
D) Smoking harms the health of nearby nonsmokers. 
E) Public health services reduce the transmission of disease. 
A) Bad weather reduces the size of the wheat crop. 
B) A reduction in the size of the wheat crop causes income of wheat farmers to fall. 
C) Smoking harms the health of the smoker. 
D) Smoking harms the health of nearby nonsmokers. 
E) Public health services reduce the transmission of disease.

Question 17

An externality is

Accepted Answer

A) the amount by which price exceeds marginal private cost. 
B) the amount by which price exceeds marginal social cost. 
C) the effect of government regulation on market price and output. 
D) someone who consumes a good without paying for it. 
E) a cost or benefit that arises from an activity but affects people not part of the original activity. 
A) the amount by which price exceeds marginal private cost. 
B) the amount by which price exceeds marginal social cost. 
C) the effect of government regulation on market price and output. 
D) someone who consumes a good without paying for it. 
E) a cost or benefit that arises from an activity but affects people not part of the original activity.

Question 18

Which one of the following is a means of coping with a negative externality?

Accepted Answer

A) emission subsidies 
B) patents 
C) vouchers 
D) Pigovian taxes 
E) copyrights 
A) emission subsidies 
B) patents 
C) vouchers 
D) Pigovian taxes 
E) copyrights

Question 19

If negative externalities exist, then in a market with no property rights,

Accepted Answer

A)  MSC = MSB. 
B)  MSC  MSB. 
D)  MSC = marginal external cost. 
E)  MC > MSC. 
A)  MSC = MSB. 
B)  MSC  MSB. 
D)  MSC = marginal external cost. 
E)  MC > MSC.

Question 20

Three ways governments can encourage production of goods with external benefits are

Accepted Answer

A) private subsidies, pollution permits, and intellectual property rights. 
B) private subsidies, pollution permits, and vouchers. 
C) intellectual property rights, pollution permits, and vouchers. 
D) taxes, emission charges, and pollution permits. 
E) private subsidies, vouchers, and intellectual property rights. 
A) private subsidies, pollution permits, and intellectual property rights. 
B) private subsidies, pollution permits, and vouchers. 
C) intellectual property rights, pollution permits, and vouchers. 
D) taxes, emission charges, and pollution permits. 
E) private subsidies, vouchers, and intellectual property rights.

The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to

Environment Canada was created in

A private subsidy on a good

A battery acid producer pollutes the water upstream from the Polar Bear Club, a swimming club.If transactions costs are low, the quantity of pollution will be efficient

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.Society's external benefit from university graduates is $10,000 each.With no subsidy,

Use the table below to answer the following questions. Table 16.2.2 Chemical Fertilizer Market -Refer to Table 16.2.2.The Pigovian tax that achieves the efficient quantity of output is

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day, and allowing trading.This is an example of

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 price is

A private cost of production is a cost that is borne by the of a good or service. A social cost of production is a cost that is .

A patent is an example of

Consider some type of industrial pollution that generates air pollution.This industry, if left unregulated, will produce

When the production of a good has an external cost, the

Which of the following illustrates the concept of external cost?

An externality is

Which one of the following is a means of coping with a negative externality?

If negative externalities exist, then in a market with no property rights,

Three ways governments can encourage production of goods with external benefits are

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 outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to

Environment Canada was created in

A private subsidy on a good

A battery acid producer pollutes the water upstream from the Polar Bear Club, a swimming club.If transactions costs are low, the quantity of pollution will be efficient

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.Society's external benefit from university graduates is $10,000 each.With no subsidy,

Use the table below to answer the following questions. Table 16.2.2 Chemical Fertilizer Market -Refer to Table 16.2.2.The Pigovian tax that achieves the efficient quantity of output is

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day, and allowing trading.This is an example of

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 price is

A private cost of production is a cost that is borne by the ________ of a good or service. A social cost of production is a cost that is ________.

A patent is an example of

Consider some type of industrial pollution that generates air pollution.This industry, if left unregulated, will produce

When the production of a good has an external cost, the

Which of the following illustrates the concept of external cost?

An externality is

Which one of the following is a means of coping with a negative externality?

If negative externalities exist, then in a market with no property rights,

Three ways governments can encourage production of goods with external benefits are

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 private cost of production is a cost that is borne by the of a good or service. A social cost of production is a cost that is .