Question 1

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

Accepted Answer

A) insufficient legal power to enforce the controls 
B) obtaining enough data to determine how much the tax or pollution charge will be 
C) in some situations, there is no known way to control the external costs 
D) political lobbying and voter disagreement 
E) The Coase theorem points out that taxes and pollution charges work only in the short run and not in the long run. 
A) insufficient legal power to enforce the controls 
B) obtaining enough data to determine how much the tax or pollution charge will be 
C) in some situations, there is no known way to control the external costs 
D) political lobbying and voter disagreement 
E) The Coase theorem points out that taxes and pollution charges work only in the short run and not in the long run.

Question 2

Suppose two neighborhoods with 10 homes each in Buffalo, New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000, the external cost of the dump is

Accepted Answer

A) $400,000. 
B) $1,300,000. 
C) $900,000. 
D) $500,000. 
E) $90,000. 
A) $400,000. 
B) $1,300,000. 
C) $900,000. 
D) $500,000. 
E) $90,000.

Question 3

The benefit that Joan gets from eating cherries is an example of

Accepted Answer

A) when the external benefit equals the private benefit. 
B) a private benefit. 
C) an external benefit. 
D) an external cost. 
E) the marginal social cost of eating cherries. 
A) when the external benefit equals the private benefit. 
B) a private benefit. 
C) an external benefit. 
D) an external cost. 
E) the marginal social cost of eating cherries.

Question 4

If a product has zero external costs, then

Accepted Answer

A) marginal social cost equals marginal private cost. 
B) marginal social cost is greater than marginal private cost. 
C) marginal social cost is less than marginal private cost. 
D) marginal social cost equals zero. 
E) We need more information to determine the relationship between marginal private cost and marginal social cost. 
A) marginal social cost equals marginal private cost. 
B) marginal social cost is greater than marginal private cost. 
C) marginal social cost is less than marginal private cost. 
D) marginal social cost equals zero. 
E) We need more information to determine the relationship between marginal private cost and marginal social cost.

Question 5

A government subsidy paid to a firm
I∙increases the demand for the good.
Ii∙has no effect on the supply of the good.
Iii∙leads to an increase in the equilibrium quantity.

Accepted Answer

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

Question 6

-The figure above shows the costs and benefits associated with producing paper.What is the efficient level of output?

Accepted Answer

A) 0 
B) 4 tons 
C) 6 tons 
D) More than 6 tons 
E) None of the above answers is correct. 
A) 0 
B) 4 tons 
C) 6 tons 
D) More than 6 tons 
E) None of the above answers is correct.

Question 7

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

Accepted Answer

A) always equals the benefit the consumer derives from that good or service. 
B) equals the cost borne by people other than the producer. 
C) is the marginal private cost. 
D) is the external cost. 
E) is the marginal social cost. 
A) always equals the benefit the consumer derives from that good or service. 
B) equals the cost borne by people other than the producer. 
C) is the marginal private cost. 
D) is the external cost. 
E) is the marginal social cost.

Question 8

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

Accepted Answer

A) $1,600 
B) $1,200 
C) $1,000 
D) $600 
E) $400 
A) $1,600 
B) $1,200 
C) $1,000 
D) $600 
E) $400

Question 9

-The figure above shows the market for annual influenza immunizations the United States.If the government does not intervene in this market, deadweight loss equals ________.

Accepted Answer

A) $350 million 
B) $250 million 
C) $500 million 
D) $600 million 
E) $37.5 million 
A) $350 million 
B) $250 million 
C) $500 million 
D) $600 million 
E) $37.5 million

Question 10

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).
-The figure above shows that at the unregulated market equilibrium, marginal social benefit ________ marginal cost, and the number of students enrolled is ________.

Accepted Answer

A) exceeds; above the efficient quantity 
B) exceeds; below the efficient quantity 
C) is below; above the efficient quantity 
D) is below; below the efficient quantity 
E) equals; efficient 
A) exceeds; above the efficient quantity 
B) exceeds; below the efficient quantity 
C) is below; above the efficient quantity 
D) is below; below the efficient quantity 
E) equals; efficient

Question 11

Jacob pays $5,000 to paint his house because pollution from a nearby factory damaged the paint.To the factory, the $5,000 cost is

Accepted Answer

A) a private cost and not an external cost. 
B) an external cost and not a private cost. 
C) both a private cost and an external cost. 
D) neither a private cost nor an external cost. 
E) a private benefit because viewers will benefit from watching the extra hour of the show. 
A) a private cost and not an external cost. 
B) an external cost and not a private cost. 
C) both a private cost and an external cost. 
D) neither a private cost nor an external cost. 
E) a private benefit because viewers will benefit from watching the extra hour of the show.

Question 12

The additional benefit that Marvin gets from being vaccinated against the flu is known as the

Accepted Answer

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

Question 13

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).
-In the figure above, suppose the government provides vouchers worth $15,000 per student per year.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 14

If a polluting producer is forced to pay a pollution charge, what is the effect on the supply and demand curves for the product?

Accepted Answer

A) The quantity supplied along the firm's supply curve increases. 
B) The firm's demand curve shifts leftward. 
C) The firm's supply curve shifts rightward. 
D) The firm's supply curve shifts leftward. 
E) Both the supply curve and the demand curve shift leftward. 
A) The quantity supplied along the firm's supply curve increases. 
B) The firm's demand curve shifts leftward. 
C) The firm's supply curve shifts rightward. 
D) The firm's supply curve shifts leftward. 
E) Both the supply curve and the demand curve shift leftward.

Question 15

In the figure above, if a pollution tax is imposed that is equal to the marginal external cost of pollution, then at the equilibrium, marginal social cost would ________ marginal benefit, and the quantity of chemical produced would be ________.

Accepted Answer

A) exceed; above the efficient quantity 
B) exceed; below the efficient quantity 
C) be below; above the efficient quantity 
D) be below; below the efficient quantity 
E) equal; efficient 
A) exceed; above the efficient quantity 
B) exceed; below the efficient quantity 
C) be below; above the efficient quantity 
D) be below; below the efficient quantity 
E) equal; efficient

Question 16

-The figure shows the market for college education.The efficient number of students is

Accepted Answer

A) less than 4 million. 
B) more than 4 million and less than 8 million. 
C) 4 million. 
D) 8 million. 
E) more than 8 million. 
A) less than 4 million. 
B) more than 4 million and less than 8 million. 
C) 4 million. 
D) 8 million. 
E) more than 8 million.

Question 17

Explain the difference between marginal social benefit and marginal external benefit.

Accepted Answer

Marginal social benefit equals the margi

Question 18

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

Accepted Answer

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

Question 19

Why does an external cost lead to inefficient overproduction?

Accepted Answer

If there is an external cost, then the m

Question 20

A subsidy is

Accepted Answer

A) the revenue received from the government to produce a good or service by a public authority. 
B) a voucher received by the government from producers of goods and services. 
C) a payment that the government makes to private producers of goods and services. 
D) a tax imposed on the producers of certain goods or services. 
E) a tax imposed on the consumers of certain goods or services. 
A) the revenue received from the government to produce a good or service by a public authority. 
B) a voucher received by the government from producers of goods and services. 
C) a payment that the government makes to private producers of goods and services. 
D) a tax imposed on the producers of certain goods or services. 
E) a tax imposed on the consumers of certain goods or services.

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

Suppose two neighborhoods with 10 homes each in Buffalo, New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000, the external cost of the dump is

The benefit that Joan gets from eating cherries is an example of

If a product has zero external costs, then

A government subsidy paid to a firm I∙increases the demand for the good. Ii∙has no effect on the supply of the good. Iii∙leads to an increase in the equilibrium quantity.

-The figure above shows the costs and benefits associated with producing paper.What is the efficient level of output?

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

-The figure above shows the market for annual influenza immunizations the United States.If the government does not intervene in this market, deadweight loss equals ________.

Jacob pays $5,000 to paint his house because pollution from a nearby factory damaged the paint.To the factory, the $5,000 cost is

The additional benefit that Marvin gets from being vaccinated against the flu is known as the

If a polluting producer is forced to pay a pollution charge, what is the effect on the supply and demand curves for the product?

In the figure above, if a pollution tax is imposed that is equal to the marginal external cost of pollution, then at the equilibrium, marginal social cost would marginal benefit, and the quantity of chemical produced would be .

-The figure shows the market for college education.The efficient number of students is

Explain the difference between marginal social benefit and marginal external benefit.

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

Why does an external cost lead to inefficient overproduction?

A subsidy is

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

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

Suppose two neighborhoods with 10 homes each in Buffalo, New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000, the external cost of the dump is

The benefit that Joan gets from eating cherries is an example of

If a product has zero external costs, then

A government subsidy paid to a firm I∙increases the demand for the good. Ii∙has no effect on the supply of the good. Iii∙leads to an increase in the equilibrium quantity.

-The figure above shows the costs and benefits associated with producing paper.What is the efficient level of output?

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

-The figure above shows the market for annual influenza immunizations the United States.If the government does not intervene in this market, deadweight loss equals ________.

Jacob pays $5,000 to paint his house because pollution from a nearby factory damaged the paint.To the factory, the $5,000 cost is

The additional benefit that Marvin gets from being vaccinated against the flu is known as the

If a polluting producer is forced to pay a pollution charge, what is the effect on the supply and demand curves for the product?

In the figure above, if a pollution tax is imposed that is equal to the marginal external cost of pollution, then at the equilibrium, marginal social cost would ________ marginal benefit, and the quantity of chemical produced would be ________.

-The figure shows the market for college education.The efficient number of students is

Explain the difference between marginal social benefit and marginal external benefit.

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

Why does an external cost lead to inefficient overproduction?

A subsidy is

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

In the figure above, if a pollution tax is imposed that is equal to the marginal external cost of pollution, then at the equilibrium, marginal social cost would marginal benefit, and the quantity of chemical produced would be .