Question 1

If there is pollution in producing a product, then the market equilibrium price

Accepted Answer

A)  is too high and equilibrium quantity is too low. 
B) and equilibrium quantity are too low. 
C) and equilibrium quantity are too high. 
D) is too low and equilibrium quantity is too high. 
A)  is too high and equilibrium quantity is too low. 
B) and equilibrium quantity are too low. 
C) and equilibrium quantity are too high. 
D) is too low and equilibrium quantity is too high.

Question 2

If you burn your trash in the backyard in spite of regulations against it, then you are

Accepted Answer

A) acting economically irrationally and creating a social cost. 
B) avoiding the private costs associated with disposing your trash some other way and creating a social cost. 
C) acting rationally and creating a positive externality. 
D) saving landfill space and creating a social benefit. 
A) acting economically irrationally and creating a social cost. 
B) avoiding the private costs associated with disposing your trash some other way and creating a social cost. 
C) acting rationally and creating a positive externality. 
D) saving landfill space and creating a social benefit.

Question 3

Pollution is an example of a

Accepted Answer

A) public good. 
B) positive externality. 
C) private cost. 
D) negative externality. 
A) public good. 
B) positive externality. 
C) private cost. 
D) negative externality.

Question 4

When there is a negative externality, the marginal private cost of production ________ the marginal social cost of production.

Accepted Answer

A) is greater than 
B) is equal to 
C) eliminates 
D) is less than 
A) is greater than 
B) is equal to 
C) eliminates 
D) is less than

Question 5

An externality refers to economic events outside a market.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The marginal social cost of a good or service is the cost borne by the producer.

Accepted Answer

A) True 
 B)False

Question 8

The efficient output level of a public good occurs where the

Accepted Answer

A) greatest number of free riders occurs. 
B) marginal cost of producing the last unit is equal to the marginal benefit realized by consumers. 
C) total cost of production is affordable. 
D) marginal cost of production is minimized. 
A) greatest number of free riders occurs. 
B) marginal cost of producing the last unit is equal to the marginal benefit realized by consumers. 
C) total cost of production is affordable. 
D) marginal cost of production is minimized.

Question 9

The market demand for a public good can be determined by

Accepted Answer

A) adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B) adding up how much each citizen expects to consume at each possible price. 
C) adding up how much each consumer is willing to pay for each unit of the public good. 
D) estimating the value of the benefit that each unit provides and multiplying that by the number of consumers. 
A) adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B) adding up how much each citizen expects to consume at each possible price. 
C) adding up how much each consumer is willing to pay for each unit of the public good. 
D) estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.

Question 10

Which of the following is an example of the U.S.government's use of a "command-and-control" approach to reducing pollution?

Accepted Answer

A) In 1990 Congress approved measures designed to reduce sulfur dioxide emissions to 8.5 million tons annually by 2010. 
B) The U.S. government imposed a tax on electric utilities to reduce damages from acid rain. 
C) The government issued electric utilities tradable emission allowances in order to reduce emissions of nitrogen oxide. 
D) In the 1980s the U.S. government required the installation of catalytic converters to reduce emissions from all new automobiles. 
A) In 1990 Congress approved measures designed to reduce sulfur dioxide emissions to 8.5 million tons annually by 2010. 
B) The U.S. government imposed a tax on electric utilities to reduce damages from acid rain. 
C) The government issued electric utilities tradable emission allowances in order to reduce emissions of nitrogen oxide. 
D) In the 1980s the U.S. government required the installation of catalytic converters to reduce emissions from all new automobiles.

Question 11

The supply curve of a public good shows

Accepted Answer

A) the total quantities that all producers are willing and able to supply at each price. 
B) the maximum amount suppliers require to produce each quantity of the good. 
C) the total cost of producing each unit of the good. 
D) the marginal cost of producing each unit of the good. 
A) the total quantities that all producers are willing and able to supply at each price. 
B) the maximum amount suppliers require to produce each quantity of the good. 
C) the total cost of producing each unit of the good. 
D) the marginal cost of producing each unit of the good.

Question 12

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually, the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.The reason the grass was depleted was

Accepted Answer

A) the area of pasture was nonexcludable and the consumption of the grass was rival. 
B) self-interest motives led livestock owners to raise too many cows and sheep. 
C) due to a policy of neglect on the part of the English government. 
D) it did not get enough rainfall. 
A) the area of pasture was nonexcludable and the consumption of the grass was rival. 
B) self-interest motives led livestock owners to raise too many cows and sheep. 
C) due to a policy of neglect on the part of the English government. 
D) it did not get enough rainfall.

Question 13

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter.If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction

Accepted Answer

A) would be significantly less than if the owners of the smelter were legally liable for damages. 
B) would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. 
C) would be the same as if it would be if the owners of the smelter were legally liable. 
D) would be too small; the government would have to intervene to bring about an efficient outcome. 
A) would be significantly less than if the owners of the smelter were legally liable for damages. 
B) would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. 
C) would be the same as if it would be if the owners of the smelter were legally liable. 
D) would be too small; the government would have to intervene to bring about an efficient outcome.

Question 14

When there is an externality in a market

Accepted Answer

A) the externality will move the market to an economically efficient equilibrium. 
B) the externality will cause the market price to be less than or greater than the equilibrium price. 
C) the government should use price controls to enable the market to reach equilibrium. 
D) government intervention may increase economic efficiency. 
A) the externality will move the market to an economically efficient equilibrium. 
B) the externality will cause the market price to be less than or greater than the equilibrium price. 
C) the government should use price controls to enable the market to reach equilibrium. 
D) government intervention may increase economic efficiency.

Question 15

A product is considered to be nonexcludable if

Accepted Answer

A) you can keep those who did not pay for the item from enjoying its benefits. 
B) you cannot keep those who did not pay for the item from enjoying its benefits. 
C) your consumption of the product reduces the quantity available for others to consume. 
D) it is jointly owned by all members of a community. 
A) you can keep those who did not pay for the item from enjoying its benefits. 
B) you cannot keep those who did not pay for the item from enjoying its benefits. 
C) your consumption of the product reduces the quantity available for others to consume. 
D) it is jointly owned by all members of a community.

Question 16

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 rival 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 rival 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 17

Which of the following conditions holds in an economically efficient competitive market equilibrium?

Accepted Answer

A) The deadweight loss is positive but at a minimum. 
B) Producer and consumer surplus are exactly equal in size. 
C) There are no positive and no negative external effects from consumption and production. 
D) The marginal benefit of the last unit produced and consumed is maximized. 
A) The deadweight loss is positive but at a minimum. 
B) Producer and consumer surplus are exactly equal in size. 
C) There are no positive and no negative external effects from consumption and production. 
D) The marginal benefit of the last unit produced and consumed is maximized.

Question 18

Figure 5-13
   
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The amount of the gasoline tax is ________ 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 19

An external cost is created when you

Accepted Answer

A) graduate from college. 
B) buy flowers for your mother on Mother's Day. 
C) litter on the side of the road. 
D) buy a sandwich for lunch. 
A) graduate from college. 
B) buy flowers for your mother on Mother's Day. 
C) litter on the side of the road. 
D) buy a sandwich for lunch.

Question 20

Figure 5-13
   
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The efficient equilibrium quantity of gasoline is ________ million gallons per month.

Accepted Answer

A) 20 
B) 32 
C) 48 
D) 56 
A) 20 
B) 32 
C) 48 
D) 56

If there is pollution in producing a product, then the market equilibrium price

If you burn your trash in the backyard in spite of regulations against it, then you are

Pollution is an example of a

When there is a negative externality, the marginal private cost of production ________ the marginal social cost of production.

An externality refers to economic events outside a market.

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

The marginal social cost of a good or service is the cost borne by the producer.

The efficient output level of a public good occurs where the

The market demand for a public good can be determined by

Which of the following is an example of the U.S.government's use of a "command-and-control" approach to reducing pollution?

The supply curve of a public good shows

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter.If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction

When there is an externality in a market

A product is considered to be nonexcludable if

Common resources differ from public goods in that

Which of the following conditions holds in an economically efficient competitive market equilibrium?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

An external cost is created when you

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium quantity of gasoline is ________ million gallons per month.

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 More Realistic Setting

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

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Exam 5: Externalities, Environmental Policy, and Public Goods

If there is pollution in producing a product, then the market equilibrium price

If you burn your trash in the backyard in spite of regulations against it, then you are

Pollution is an example of a

When there is a negative externality, the marginal private cost of production ________ the marginal social cost of production.

An externality refers to economic events outside a market.

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

The marginal social cost of a good or service is the cost borne by the producer.

The efficient output level of a public good occurs where the

The market demand for a public good can be determined by

Which of the following is an example of the U.S.government's use of a "command-and-control" approach to reducing pollution?

The supply curve of a public good shows

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter.If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction

When there is an externality in a market

A product is considered to be nonexcludable if

Common resources differ from public goods in that

Which of the following conditions holds in an economically efficient competitive market equilibrium?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

An external cost is created when you

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium quantity of gasoline is ________ million gallons per month.

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 More Realistic Setting

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