Question 1

If a good has an external cost, then the marginal private cost curve

Accepted Answer

A) lies below then the marginal social cost curve. 
B) lies above the marginal social cost curve. 
C) lies below the horizontal axis. 
D) is the same as the marginal external cost curve. 
E) is undefined because the firms' costs are not equal to the social costs. 
A) lies below then the marginal social cost curve. 
B) lies above the marginal social cost curve. 
C) lies below the horizontal axis. 
D) is the same as the marginal external cost curve. 
E) is undefined because the firms' costs are not equal to the social costs.

Question 2

-The figure above shows the market for a good with an external benefit.When 6 units are produced, marginal social benefit equals ________ and marginal external benefit equals ________.

Accepted Answer

A) $200; $150 
B) $350; $200 
C) $200; $50 
D) $350; $150 
E) $150; $250 
A) $200; $150 
B) $350; $200 
C) $200; $50 
D) $350; $150 
E) $150; $250

Question 3

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students, the amount of the subsidy per student equals ________ and each student pays ________ per year.

Accepted Answer

A) $16,000; $13,000 
B) $7,000; $13,000 
C) $5,000; $13,000 
D) $11,000; $16,000 
E) $5,000; $11,000 
A) $16,000; $13,000 
B) $7,000; $13,000 
C) $5,000; $13,000 
D) $11,000; $16,000 
E) $5,000; $11,000

Question 4

The difference between private cost and social cost is that

Accepted Answer

A) social cost only considers the external cost borne by society. 
B) social cost only considers the cost borne by people other than the producer. 
C) private cost only considers the cost borne by producers of the good. 
D) social cost also includes any external benefit whereas private cost excludes all external benefits. 
E) there is no difference; the terms refer to the same cost. 
A) social cost only considers the external cost borne by society. 
B) social cost only considers the cost borne by people other than the producer. 
C) private cost only considers the cost borne by producers of the good. 
D) social cost also includes any external benefit whereas private cost excludes all external benefits. 
E) there is no difference; the terms refer to the same cost.

Question 5

-The figure above shows the market for private elementary school education in Chicago.There is no external cost of private elementary education.If the government does not intervene in this market, the equilibrium number of students being privately educated is ________ and the efficient quantity is ________.

Accepted Answer

A) 0 students; 400 students 
B) 400 students; 400 students 
C) 400 students; 600 students 
D) 600 students; 400 students 
E) 600 students; 600 students 
A) 0 students; 400 students 
B) 400 students; 400 students 
C) 400 students; 600 students 
D) 600 students; 400 students 
E) 600 students; 600 students

Question 6

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents, then the marginal external cost equals ________ per kilowatt.

Accepted Answer

A) ten cents 
B) nineteen cents 
C) four cents 
D) zero cents 
E) fourteen cents 
A) ten cents 
B) nineteen cents 
C) four cents 
D) zero cents 
E) fourteen cents

Question 7

When property rights are assigned and transactions costs are low,

Accepted Answer

A) all costs and benefits are taken into account by the transacting parties so the transaction is efficient. 
B) externalities will result in market failure. 
C) the marginal social benefit curve shifts leftward and the marginal social cost curve does not shift. 
D) the marginal social cost curve shifts rightward and the marginal social benefit curve does not shift. 
E) the marginal social cost curve shifts rightward and the marginal social benefit curve also shifts rightward. 
A) all costs and benefits are taken into account by the transacting parties so the transaction is efficient. 
B) externalities will result in market failure. 
C) the marginal social benefit curve shifts leftward and the marginal social cost curve does not shift. 
D) the marginal social cost curve shifts rightward and the marginal social benefit curve does not shift. 
E) the marginal social cost curve shifts rightward and the marginal social benefit curve also shifts rightward.

Question 8

When Keisha receives a flu vaccination, the additional benefit enjoyed by Keisha's friends is the

Accepted Answer

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

Question 9

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The difference between the marginal cost curve and the marginal social cost curve equals

Accepted Answer

A) marginal private cost. 
B) private cost. 
C) external cost. 
D) marginal external cost. 
E) Coasian cost. 
A) marginal private cost. 
B) private cost. 
C) external cost. 
D) marginal external cost. 
E) Coasian cost.

Question 10

The benefit the consumer of a good or service receives is the

Accepted Answer

A) social benefit. 
B) external benefit. 
C) private benefit. 
D) public benefit. 
E) consumption benefit. 
A) social benefit. 
B) external benefit. 
C) private benefit. 
D) public benefit. 
E) consumption benefit.

Question 11

When the government uses a private subsidy in a market with an external benefit, to reach the efficient quantity of production, the subsidy must be equal to the marginal

Accepted Answer

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

Question 12

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a subsidy to providers of immunizations to immunize the efficient number of people, the amount of the subsidy is ________ per person.

Accepted Answer

A) $25 
B) $50 
C) $35 
D) $15 
E) $40 
A) $25 
B) $50 
C) $35 
D) $15 
E) $40

Question 13

Which of the following is an example of an activity that creates an external cost?
I∙a smoker emitting second-hand smoke
Ii∙sulfur emitting from a smoke stack
Iii∙throwing garbage on the roadside

Accepted Answer

A) i only 
B) i and ii 
C) iii only 
D) ii and iii 
E) i, ii, and iii 
A) i only 
B) i and ii 
C) iii only 
D) ii and iii 
E) i, ii, and iii

Question 14

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.Suppose the marginal private cost of the 5th concert is $10,000.Then, for the 5th concert, the

Accepted Answer

A) marginal external cost equals $30,000. 
B) marginal social cost equals $30,000. 
C) marginal external cost equals the marginal private cost. 
D) marginal external cost equals $40,000. 
E) marginal external cost equals $10,000. 
A) marginal external cost equals $30,000. 
B) marginal social cost equals $30,000. 
C) marginal external cost equals the marginal private cost. 
D) marginal external cost equals $40,000. 
E) marginal external cost equals $10,000.

Question 15

When a person receives a flu vaccination, the ________ is the additional benefit the person receives from getting the shot.

Accepted Answer

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

Question 16

Issuing marketable permits to firms that produce a product with external costs will give the firms the incentive to

Accepted Answer

A) declare bankruptcy. 
B) buy and sell the permits amongst themselves. 
C) escape the problem completely. 
D) quit producing the output. 
E) increase the external cost because they no longer need to deal with the externality. 
A) declare bankruptcy. 
B) buy and sell the permits amongst themselves. 
C) escape the problem completely. 
D) quit producing the output. 
E) increase the external cost because they no longer need to deal with the externality.

Question 17

Explain the difference between a negative production externality and a negative consumption externality.

Accepted Answer

A negative production externality occurs

Question 18

Which of the following government actions is appropriate in a market with an external benefit?

Accepted Answer

A) taxes 
B) vouchers 
C) marketable permits 
D) setting a tax equal to the transactions costs 
E) price ceiling 
A) taxes 
B) vouchers 
C) marketable permits 
D) setting a tax equal to the transactions costs 
E) price ceiling

Question 19

-The figure above shows the market for annual influenza immunizations the United States.Area A is the

Accepted Answer

A) total deadweight loss when there is not the illustrated subsidy. 
B) remaining deadweight loss when there is the illustrated subsidy. 
C) gain in efficiency from the illustrated subsidy. 
D) loss in efficiency from the illustrated subsidy. 
E) consumer surplus with the illustrated subsidy. 
A) total deadweight loss when there is not the illustrated subsidy. 
B) remaining deadweight loss when there is the illustrated subsidy. 
C) gain in efficiency from the illustrated subsidy. 
D) loss in efficiency from the illustrated subsidy. 
E) consumer surplus with the illustrated subsidy.

Question 20

Pollution is an example of a ________ externality.

Accepted Answer

A) negative production 
B) positive production 
C) negative consumption 
D) positive consumption 
E) Coasian 
A) negative production 
B) positive production 
C) negative consumption 
D) positive consumption 
E) Coasian

If a good has an external cost, then the marginal private cost curve

-The figure above shows the market for a good with an external benefit.When 6 units are produced, marginal social benefit equals and marginal external benefit equals .

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students, the amount of the subsidy per student equals and each student pays per year.

The difference between private cost and social cost is that

-The figure above shows the market for private elementary school education in Chicago.There is no external cost of private elementary education.If the government does not intervene in this market, the equilibrium number of students being privately educated is and the efficient quantity is .

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents, then the marginal external cost equals ________ per kilowatt.

When property rights are assigned and transactions costs are low,

When Keisha receives a flu vaccination, the additional benefit enjoyed by Keisha's friends is the

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The difference between the marginal cost curve and the marginal social cost curve equals

The benefit the consumer of a good or service receives is the

When the government uses a private subsidy in a market with an external benefit, to reach the efficient quantity of production, the subsidy must be equal to the marginal

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a subsidy to providers of immunizations to immunize the efficient number of people, the amount of the subsidy is ________ per person.

Which of the following is an example of an activity that creates an external cost? I∙a smoker emitting second-hand smoke Ii∙sulfur emitting from a smoke stack Iii∙throwing garbage on the roadside

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.Suppose the marginal private cost of the 5th concert is $10,000.Then, for the 5th concert, the

When a person receives a flu vaccination, the ________ is the additional benefit the person receives from getting the shot.

Issuing marketable permits to firms that produce a product with external costs will give the firms the incentive to

Explain the difference between a negative production externality and a negative consumption externality.

Which of the following government actions is appropriate in a market with an external benefit?

-The figure above shows the market for annual influenza immunizations the United States.Area A is the

Pollution is an example of a ________ externality.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 10: Externalities

If a good has an external cost, then the marginal private cost curve

-The figure above shows the market for a good with an external benefit.When 6 units are produced, marginal social benefit equals ________ and marginal external benefit equals ________.

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students, the amount of the subsidy per student equals ________ and each student pays ________ per year.

The difference between private cost and social cost is that

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents, then the marginal external cost equals ________ per kilowatt.

When property rights are assigned and transactions costs are low,

When Keisha receives a flu vaccination, the additional benefit enjoyed by Keisha's friends is the

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The difference between the marginal cost curve and the marginal social cost curve equals

The benefit the consumer of a good or service receives is the

When the government uses a private subsidy in a market with an external benefit, to reach the efficient quantity of production, the subsidy must be equal to the marginal

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a subsidy to providers of immunizations to immunize the efficient number of people, the amount of the subsidy is ________ per person.

Which of the following is an example of an activity that creates an external cost? I∙a smoker emitting second-hand smoke Ii∙sulfur emitting from a smoke stack Iii∙throwing garbage on the roadside

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.Suppose the marginal private cost of the 5th concert is $10,000.Then, for the 5th concert, the

When a person receives a flu vaccination, the ________ is the additional benefit the person receives from getting the shot.

Issuing marketable permits to firms that produce a product with external costs will give the firms the incentive to

Explain the difference between a negative production externality and a negative consumption externality.

Which of the following government actions is appropriate in a market with an external benefit?

-The figure above shows the market for annual influenza immunizations the United States.Area A is the

Pollution is an example of a ________ externality.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

-The figure above shows the market for a good with an external benefit.When 6 units are produced, marginal social benefit equals and marginal external benefit equals .

-The figure above shows the market for college education in the United States.If the government provides a subsidy to colleges to enroll the efficient number of students, the amount of the subsidy per student equals and each student pays per year.