Question 1

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced, what must be done?

Accepted Answer

A) The size of marginal external benefit must be accurately determined. 
B) The government must produce the product. 
C) Private production and private consumption must both be directly subsidized. 
D) The quantity demanded must be decreased to the efficient amount. 
E) Private production without the subsidy must be prohibited. 
A) The size of marginal external benefit must be accurately determined. 
B) The government must produce the product. 
C) Private production and private consumption must both be directly subsidized. 
D) The quantity demanded must be decreased to the efficient amount. 
E) Private production without the subsidy must be prohibited.

Question 2

-Use the figure above to answer this question.Explain what the marginal social cost curve and the marginal external cost mean.In the figure, if the market is competitive and unregulated, what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

Accepted Answer

@#IMG-DLM& The marginal social cost curve shows th

Question 3

Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution.If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, then

Accepted Answer

A) Firm B sells its permits to Firm A for a price above $6,000. 
B) Firm A sells its permits to Firm B for a price below $6,000. 
C) Firm A sells its permits to Firm B for a price above $6,000. 
D) Firm B sells its permits to Firm A for a price below $6,000. 
E) neither Firm A nor Firm B sells permits because neither has extra permits. 
A) Firm B sells its permits to Firm A for a price above $6,000. 
B) Firm A sells its permits to Firm B for a price below $6,000. 
C) Firm A sells its permits to Firm B for a price above $6,000. 
D) Firm B sells its permits to Firm A for a price below $6,000. 
E) neither Firm A nor Firm B sells permits because neither has extra permits.

Question 4

-The figure above shows the marginal social cost of generating electricity and the marginal private cost.For 4 billion kilowatts, what is the marginal external cost?

Accepted Answer

A) $0.12 
B) $0.08 
C) $0.04 
D) $0.00 
E) $0.20 
A) $0.12 
B) $0.08 
C) $0.04 
D) $0.00 
E) $0.20

Question 5

-The figure above shows the market for college education in the United States.The efficient quantity of college education is ________ students per year.

Accepted Answer

A) 10 million 
B) 12 million 
C) 17 million 
D) 18 million 
E) 14 million 
A) 10 million 
B) 12 million 
C) 17 million 
D) 18 million 
E) 14 million

Question 6

Education has an external benefit.So to achieve the efficient level of education, an education voucher must equal the difference between the

Accepted Answer

A) marginal (private)cost and the marginal social benefit. 
B) marginal (private)benefit and the marginal social benefit. 
C) marginal social benefit and the marginal (private)cost. 
D) dollar price and marginal (private)cost. 
E) marginal (private)cost and the marginal social cost. 
A) marginal (private)cost and the marginal social benefit. 
B) marginal (private)benefit and the marginal social benefit. 
C) marginal social benefit and the marginal (private)cost. 
D) dollar price and marginal (private)cost. 
E) marginal (private)cost and the marginal social cost.

Question 7

What do we mean by "property rights" and why are they important?

Accepted Answer

Property rights are legally established

Question 8

-The figure above shows the market for college education in the United States.If the government has a goal of enrolling the efficient number of students each year, the government should provide a voucher to students equaling ________.

Accepted Answer

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

Question 9

Which of the following is true?

Accepted Answer

A) MSB = MB + Marginal external benefit. 
B) MB = Marginal external benefit - MSB. 
C) MB = Marginal external benefit + 
A) MSB = MB + Marginal external benefit. 
B) MB = Marginal external benefit - MSB. 
C) MB = Marginal external benefit +

Question 10

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

Accepted Answer

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

Question 11

For a product with external benefits that is produced in a competitive, unregulated market, how can the resulting market output be described?

Accepted Answer

A) underproduction compared to the efficient level 
B) overproduction compared to the efficient level 
C) production equals the efficient level 
D) underproduction or overproduction are both possible depending on whether the external benefit is to consumption or production 
E) None of the above is correct. 
A) underproduction compared to the efficient level 
B) overproduction compared to the efficient level 
C) production equals the efficient level 
D) underproduction or overproduction are both possible depending on whether the external benefit is to consumption or production 
E) None of the above is correct.

Question 12

When government levies pollution taxes on sellers to eliminate the inefficiency from the cost of pollution, the result is

Accepted Answer

A) a lower price. 
B) a smaller quantity produced. 
C) a smaller cost of production. 
D) a rightward shift of the supply curve. 
E) leftward shifts of the supply and demand curves. 
A) a lower price. 
B) a smaller quantity produced. 
C) a smaller cost of production. 
D) a rightward shift of the supply curve. 
E) leftward shifts of the supply and demand curves.

Question 13

Cost effective technologies to reduce pollution are most likely to result from

Accepted Answer

A) marketable pollution permits. 
B) pollution charges. 
C) taxes. 
D) pollution limits. 
E) quotas. 
A) marketable pollution permits. 
B) pollution charges. 
C) taxes. 
D) pollution limits. 
E) quotas.

Question 14

Suppose unregulated production of pesticides results in an equilibrium price and quantity of $400 and 1,000 tons per day, respectively, and a marginal external cost of $10 a ton.
a∙If the government were to eliminate the external cost by using pollution charges, what should the pollution charge be set at?
b∙If the government were to eliminate the external cost by using taxes, what should the tax equal?
c∙Would the government actions described above affect the quantity of pesticides produced? If yes, how? If no, why not?

Accepted Answer

a∙$10 a ton
b∙$10 a ton
c∙Yes,

Question 15

Evidence of external costs in the production of a product is present if

Accepted Answer

A) the price of the product is higher than it should be. 
B) the production cost increases because of an increase in the minimum wage. 
C) non-buyers and/or non-producers of the product experience a loss for which they are not compensated. 
D) buyers refuse to purchase the product. 
E) producers pay all of the costs of producing the good or service. 
A) the price of the product is higher than it should be. 
B) the production cost increases because of an increase in the minimum wage. 
C) non-buyers and/or non-producers of the product experience a loss for which they are not compensated. 
D) buyers refuse to purchase the product. 
E) producers pay all of the costs of producing the good or service.

Question 16

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 200 billion kilowatt hours are produced is

Accepted Answer

A) 0¢ per kilowatt. 
B) 10¢ per kilowatt. 
C) 20¢ per kilowatt. 
D) 15¢ per kilowatt. 
E) 5¢ per kilowatt. 
A) 0¢ per kilowatt. 
B) 10¢ per kilowatt. 
C) 20¢ per kilowatt. 
D) 15¢ per kilowatt. 
E) 5¢ per kilowatt.

Question 17

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-Using the figure above, suppose a subsidy of $15,000 per student is provided to private colleges.Then, the market equilibrium occurs at a tuition of ________ a year and ________ million students.

Accepted Answer

A) $10,000; 15 
B) $25,000; 15 
C) $15,000; 15 
D) $15,000; 7.5 
E) $20,000; 20 
A) $10,000; 15 
B) $25,000; 15 
C) $15,000; 15 
D) $15,000; 7.5 
E) $20,000; 20

Question 18

One reason why property rights help achieve an efficient level of pollution is because property rights

Accepted Answer

A) force the marginal private cost to equal the marginal social cost. 
B) force the marginal social cost to zero. 
C) force the marginal external cost to a lower level than marginal private cost. 
D) eliminate marginal private costs. 
E) change the marginal external cost so that they are equal to the marginal social benefit. 
A) force the marginal private cost to equal the marginal social cost. 
B) force the marginal social cost to zero. 
C) force the marginal external cost to a lower level than marginal private cost. 
D) eliminate marginal private costs. 
E) change the marginal external cost so that they are equal to the marginal social benefit.

Question 19

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

Accepted Answer

The statement is false.Externa

Question 20

If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output, which of the following occurs?
I∙the supply curve shifts leftward
Ii∙the price increases
Iii∙the quantity produced decreases

Accepted Answer

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

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced, what must be done?

Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution.If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, then

-The figure above shows the marginal social cost of generating electricity and the marginal private cost.For 4 billion kilowatts, what is the marginal external cost?

-The figure above shows the market for college education in the United States.The efficient quantity of college education is ________ students per year.

Education has an external benefit.So to achieve the efficient level of education, an education voucher must equal the difference between the

What do we mean by "property rights" and why are they important?

-The figure above shows the market for college education in the United States.If the government has a goal of enrolling the efficient number of students each year, the government should provide a voucher to students equaling ________.

Which of the following is true?

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

For a product with external benefits that is produced in a competitive, unregulated market, how can the resulting market output be described?

When government levies pollution taxes on sellers to eliminate the inefficiency from the cost of pollution, the result is

Cost effective technologies to reduce pollution are most likely to result from

Evidence of external costs in the production of a product is present if

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 200 billion kilowatt hours are produced is

One reason why property rights help achieve an efficient level of pollution is because property rights

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output, which of the following occurs? I∙the supply curve shifts leftward Ii∙the price increases Iii∙the quantity produced decreases

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

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced, what must be done?

Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution.If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, then

-The figure above shows the marginal social cost of generating electricity and the marginal private cost.For 4 billion kilowatts, what is the marginal external cost?

-The figure above shows the market for college education in the United States.The efficient quantity of college education is ________ students per year.

Education has an external benefit.So to achieve the efficient level of education, an education voucher must equal the difference between the

What do we mean by "property rights" and why are they important?

-The figure above shows the market for college education in the United States.If the government has a goal of enrolling the efficient number of students each year, the government should provide a voucher to students equaling ________.

Which of the following is true?

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

For a product with external benefits that is produced in a competitive, unregulated market, how can the resulting market output be described?

When government levies pollution taxes on sellers to eliminate the inefficiency from the cost of pollution, the result is

Cost effective technologies to reduce pollution are most likely to result from

Evidence of external costs in the production of a product is present if

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 200 billion kilowatt hours are produced is

One reason why property rights help achieve an efficient level of pollution is because property rights

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output, which of the following occurs? I∙the supply curve shifts leftward Ii∙the price increases Iii∙the quantity produced decreases

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