Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

Accepted Answer

A) too little of the good will be produced. 
B) too much of the good will be produced. 
C) a deadweight loss will occur that is equal to the area under the demand curve for the good. 
D) economic surplus is maximized. 
A) too little of the good will be produced. 
B) too much of the good will be produced. 
C) a deadweight loss will occur that is equal to the area under the demand curve for the good. 
D) economic surplus is maximized.

Question 3

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 D₁ 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 private and social 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 private and social benefits

Question 4

Figure 5-3
  
-Refer to Figure 5-3.The size of marginal external benefits can be determined by

Accepted Answer

A) the demand curve D₂. 
B) D₂ + D₁ at each output level 
C) D₂ - D₁ at each output level. 
D) the demand curve D₁. 
A) the demand curve D₂. 
B) D₂ + D₁ at each output level 
C) D₂ - D₁ at each output level. 
D) the demand curve D₁.

Question 5

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 product. 
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 product. 
D) assigning property rights to the producers of the product.

Question 6

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 7

The basic cause of deadweight losses from the existence of common resources and externalities is

Accepted Answer

A) a lack of clearly defined and enforceable property rights. 
B) the self-interested rationality of human beings. 
C) the use of a market system to deal with scarcity. 
D) the absence of government intervention. 
A) a lack of clearly defined and enforceable property rights. 
B) the self-interested rationality of human beings. 
C) the use of a market system to deal with scarcity. 
D) the absence of government intervention.

Question 8

Which of the following displays these two characteristics: rivalry and nonexcludability?

Accepted Answer

A) a public good 
B) a private good 
C) a quasi-public good 
D) a common resource 
A) a public good 
B) a private good 
C) a quasi-public good 
D) a common resource

Question 9

Which of the following exemplifies the tragedy of the commons?

Accepted Answer

A) Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. 
B) The Pleasant Hill community is growing so fast that the city's only post office is not able to keep pace with the population growth in the community. 
C) Canadian citizens receive free universal health care administered by provincial governments. 
D) The Malaysian tapir, distinguished for its unusual coloration, is a target for poachers who hunt it for its tough and leathery hide. 
A) Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. 
B) The Pleasant Hill community is growing so fast that the city's only post office is not able to keep pace with the population growth in the community. 
C) Canadian citizens receive free universal health care administered by provincial governments. 
D) The Malaysian tapir, distinguished for its unusual coloration, is a target for poachers who hunt it for its tough and leathery hide.

Question 10

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 D₂ represent?

Accepted Answer

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

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

Which of the following is an example of a common resource?

Accepted Answer

A) catfish in a private pond in Mississippi 
B) impounded dogs in a dog pound 
C) public health care services in the United States 
D) sea otters in the coastal waters of the Pacific Ocean 
A) catfish in a private pond in Mississippi 
B) impounded dogs in a dog pound 
C) public health care services in the United States 
D) sea otters in the coastal waters of the Pacific Ocean

Question 13

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Accepted Answer

A) an increase in the equilibrium market price. 
B) a decrease in the equilibrium quantity produced and consumed. 
C) a decrease in market supply of the good. 
D) an increase in demand for the good. 
A) an increase in the equilibrium market price. 
B) a decrease in the equilibrium quantity produced and consumed. 
C) a decrease in market supply of the good. 
D) an increase in demand for the good.

Question 14

Kenneth Chay and Michael Greenstone examined the impact of reductions in air pollution since the passage of the Clean Air Act of 1970.Which of the following statements summarizes their findings?

Accepted Answer

A) The marginal benefit of reductions in air pollution was less than the marginal cost. 
B) The marginal cost of reducing emissions of sulfur dioxide has increased over time as the marginal benefit of the reductions has increased. 
C) The benefits of reducing the six main air pollutants in the two years following the Act greatly exceeded the costs. 
D) In the two years following passage of the Act, fewer infants died than would have died if the Act had not been passed. 
A) The marginal benefit of reductions in air pollution was less than the marginal cost. 
B) The marginal cost of reducing emissions of sulfur dioxide has increased over time as the marginal benefit of the reductions has increased. 
C) The benefits of reducing the six main air pollutants in the two years following the Act greatly exceeded the costs. 
D) In the two years following passage of the Act, fewer infants died than would have died if the Act had not been passed.

Question 15

Which of the following is a source of market failure?

Accepted Answer

A) unforeseen circumstances which leads to the bankruptcy of many firms 
B) a lack of government intervention in a market 
C) incomplete property rights or inability to enforce property rights 
D) an inequitable income distribution 
A) unforeseen circumstances which leads to the bankruptcy of many firms 
B) a lack of government intervention in a market 
C) incomplete property rights or inability to enforce property rights 
D) an inequitable income distribution

Question 16

Which of the following would result in a positive externality?

Accepted Answer

A) A local government establishes a price ceiling on rental apartments. 
B) An electric utility burns coal that causes acid rain. 
C) Medical research results in a cure for malaria. 
D) McDonald's adds new fat-free items to its menu. 
A) A local government establishes a price ceiling on rental apartments. 
B) An electric utility burns coal that causes acid rain. 
C) Medical research results in a cure for malaria. 
D) McDonald's adds new fat-free items to its menu.

Question 17

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Accepted Answer

A) Does the intervention program reduce pollution to zero using the least costly method? 
B) Is the intervention program economically efficient? 
C) Does the intervention program make the amount of economic surplus as large as possible? 
D) Is the damage to the environment from government intervention as small as possible? 
A) Does the intervention program reduce pollution to zero using the least costly method? 
B) Is the intervention program economically efficient? 
C) Does the intervention program make the amount of economic surplus as large as possible? 
D) Is the damage to the environment from government intervention as small as possible?

Question 18

Which of the following is an example of a Pigovian tax?

Accepted Answer

A) payments by utilities to obtain tradable emission allowances 
B) a payroll tax 
C) payments for licenses to pollute 
D) a tax imposed on a utility that internalizes the cost of externalities caused by the utility 
A) payments by utilities to obtain tradable emission allowances 
B) a payroll tax 
C) payments for licenses to pollute 
D) a tax imposed on a utility that internalizes the cost of externalities caused by the utility

Question 19

Figure 5-3
  
-Refer to Figure 5-3.The private profit-maximizing output level is

Accepted Answer

A) Qm. 
B) Qn. 
C) Qₒ. 
D) Qₒ - Qm. 
A) Qm. 
B) Qn. 
C) Qₒ. 
D) Qₒ - Qm.

Question 20

Which of the following is an example of a common resource?

Accepted Answer

A) the Sumatran tiger population in the world 
B) rabbit fur 
C) the stock of knowledge in the public domain 
D) taxicab services 
A) the Sumatran tiger population in the world 
B) rabbit fur 
C) the stock of knowledge in the public domain 
D) taxicab services

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

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

Figure 5-3 -Refer to Figure 5-3.The size of marginal external benefits can be determined by

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

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

The basic cause of deadweight losses from the existence of common resources and externalities is

Which of the following displays these two characteristics: rivalry and nonexcludability?

Which of the following exemplifies the tragedy of the commons?

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 D₂ represent?

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.

Which of the following is an example of a common resource?

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Kenneth Chay and Michael Greenstone examined the impact of reductions in air pollution since the passage of the Clean Air Act of 1970.Which of the following statements summarizes their findings?

Which of the following is a source of market failure?

Which of the following would result in a positive externality?

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Which of the following is an example of a Pigovian tax?

Figure 5-3 -Refer to Figure 5-3.The private profit-maximizing output level is

Which of the following is an example of a common resource?

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

Exam 5: Externalities, Environmental Policy, and Public Goods

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

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

Figure 5-3 -Refer to Figure 5-3.The size of marginal external benefits can be determined by

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

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

The basic cause of deadweight losses from the existence of common resources and externalities is

Which of the following displays these two characteristics: rivalry and nonexcludability?

Which of the following exemplifies the tragedy of the commons?

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 D₂ represent?

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.

Which of the following is an example of a common resource?

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Kenneth Chay and Michael Greenstone examined the impact of reductions in air pollution since the passage of the Clean Air Act of 1970.Which of the following statements summarizes their findings?

Which of the following is a source of market failure?

Which of the following would result in a positive externality?

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Which of the following is an example of a Pigovian tax?

Figure 5-3 -Refer to Figure 5-3.The private profit-maximizing output level is

Which of the following is an example of a common resource?

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