Question 1

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 B

Question 2

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal

Accepted Answer

A) external cost. 
B) private cost. 
C) social cost. 
D) social benefit. 
E) None of the above answers is correct. 
A) external cost. 
B) private cost. 
C) social cost. 
D) social benefit. 
E) None of the above answers is correct. A

Question 3

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. When the market is in 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 E

Question 4

"If production of a good creates an external cost, then, when production is such that the marginal private costs are equal to the marginal private benefits, the market outcome will be inefficient." Explain whether this assertion is correct or incorrect.

Accepted Answer

The assertion is correct. Efficiency req

Question 5

An example of someone bearing the burden of a negative consumption externality would be

Accepted Answer

A) Taylor living downwind from a feedlot. 
B) LaShawn grows beautiful roses in her garden. 
C) Jess's roommate smokes and she doesn't. 
D) All of these are examples of someone bearing the burden of a negative consumption externality. 
E) None of these are examples of someone bearing the burden of a negative consumption externality. 
A) Taylor living downwind from a feedlot. 
B) LaShawn grows beautiful roses in her garden. 
C) Jess's roommate smokes and she doesn't. 
D) All of these are examples of someone bearing the burden of a negative consumption externality. 
E) None of these are examples of someone bearing the burden of a negative consumption externality.

Question 6

When Ronald takes another economics class, other people in society benefit. The benefit to these other people is called the marginal ________ benefit of the class.

Accepted Answer

A) social 
B) private 
C) external 
D) Coasian 
E) extra 
A) social 
B) private 
C) external 
D) Coasian 
E) extra

Question 7

Transactions costs are the

Accepted Answer

A) costs of using the Coase theorem. 
B) opportunity costs of conducting a transaction. 
C) external marginal costs of the externality. 
D) reason why taxes cannot affect the inefficiency resulting from an external cost. 
E) external costs when a firm pollutes. 
A) costs of using the Coase theorem. 
B) opportunity costs of conducting a transaction. 
C) external marginal costs of the externality. 
D) reason why taxes cannot affect the inefficiency resulting from an external cost. 
E) external costs when a firm pollutes.

Question 8

What is the Coase theorem?
 What conditions need to be present for this theorem to work?

Accepted Answer

The Coase theorem states that if propert

Question 9

Which of the following is an example of an external benefit?

Accepted Answer

A) a ton of coal burned in a power plant to produce electricity 
B) a car accident that crowds a major Los Angeles freeway 
C) the production of a slice of pizza 
D) the cleanup of a large lake 
E) the consumption of a can of Mountain Dew 
A) a ton of coal burned in a power plant to produce electricity 
B) a car accident that crowds a major Los Angeles freeway 
C) the production of a slice of pizza 
D) the cleanup of a large lake 
E) the consumption of a can of Mountain Dew

Question 10

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

Accepted Answer

A) the price and marginal private benefit 
B) the economically efficient output 
C) the price and the marginal social benefit 
D) the size of the deadweight loss 
E) the size of the external benefit and the price 
A) the price and marginal private benefit 
B) the economically efficient output 
C) the price and the marginal social benefit 
D) the size of the deadweight loss 
E) the size of the external benefit and the price

Question 11

-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 12

If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000, she will attend college if the cost of attendance is no more than

Accepted Answer

A) $55,000. 
B) $45,000. 
C) $40,000. 
D) $25,000. 
E) $15,000. 
A) $55,000. 
B) $45,000. 
C) $40,000. 
D) $25,000. 
E) $15,000.

Question 13

-The figure above shows the market for college education in the United States. The marginal external benefit associated with educating 14 million students is ________ per student per year.

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 14

When using pollution charges to improve efficiency in a market with an external cost, regulators attempt to set the pollution charge equal to the

Accepted Answer

A) marginal social cost of production. 
B) marginal external cost of production. 
C) marginal private cost of production. 
D) marginal private benefit of consumption. 
E) marginal external benefit minus the marginal external cost. 
A) marginal social cost of production. 
B) marginal external cost of production. 
C) marginal private cost of production. 
D) marginal private benefit of consumption. 
E) marginal external benefit minus the marginal external cost.

Question 15

The marginal external cost and marginal private cost

Accepted Answer

A) are all borne by the seller. 
B) are opportunity costs. 
C) when added, equal the sum of the marginal private benefit plus the marginal social benefit at equilibrium. 
D) are regulated by the government. 
E) must always be equal in equilibrium. 
A) are all borne by the seller. 
B) are opportunity costs. 
C) when added, equal the sum of the marginal private benefit plus the marginal social benefit at equilibrium. 
D) are regulated by the government. 
E) must always be equal in equilibrium.

Question 16

Three methods the government can use to cope with the external cost from pollution are

Accepted Answer

A) pollution taxes, subsidies, and outright bans. 
B) pollution taxes, regulations, and subsidies. 
C) marketable permits, pollution subsidies, and pollution taxes. 
D) pollution charges, marketable permits, and pollution limits. 
E) vouchers, pollution subsidies, and pollution taxes. 
A) pollution taxes, subsidies, and outright bans. 
B) pollution taxes, regulations, and subsidies. 
C) marketable permits, pollution subsidies, and pollution taxes. 
D) pollution charges, marketable permits, and pollution limits. 
E) vouchers, pollution subsidies, and pollution taxes.

Question 17

A marginal external cost of a product is equal to

Accepted Answer

A) what the producer has to pay to hire resources to produce another unit. 
B) the cost someone other than the producer incurs when another unit is produced. 
C) the cost the producer incurs to produce another unit. 
D) what the consumer must pay when he or she buys the good or service. 
E) None of these answers describes a marginal external cost. 
A) what the producer has to pay to hire resources to produce another unit. 
B) the cost someone other than the producer incurs when another unit is produced. 
C) the cost the producer incurs to produce another unit. 
D) what the consumer must pay when he or she buys the good or service. 
E) None of these answers describes a marginal external cost.

Question 18

The production of electricity creates pollution. When deciding how much electricity to buy, customers ________ the cost of pollution. When deciding how much electricity to buy, producers ________ the cost of pollution.

Accepted Answer

A) take into account; take into account 
B) do not take into account; do not take into account 
C) take into account; do not take into account 
D) do not take into account; take into account 
E) None of the above answers is correct. 
A) take into account; take into account 
B) do not take into account; do not take into account 
C) take into account; do not take into account 
D) do not take into account; take into account 
E) None of the above answers is correct.

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

-Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. If the government sets a pollution limit that achieves efficiency, how many tons of leather are produced?

Accepted Answer

A) 0 tons 
B) 200 tons 
C) 300 tons 
D) more than 300 tons 
E) more than 0 tons and less than 200 tons 
A) 0 tons 
B) 200 tons 
C) 300 tons 
D) more than 300 tons 
E) more than 0 tons and less than 200 tons

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

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal

"If production of a good creates an external cost, then, when production is such that the marginal private costs are equal to the marginal private benefits, the market outcome will be inefficient." Explain whether this assertion is correct or incorrect.

An example of someone bearing the burden of a negative consumption externality would be

When Ronald takes another economics class, other people in society benefit. The benefit to these other people is called the marginal ________ benefit of the class.

Transactions costs are the

What is the Coase theorem? What conditions need to be present for this theorem to work?

Which of the following is an example of an external benefit?

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

-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 benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000, she will attend college if the cost of attendance is no more than

-The figure above shows the market for college education in the United States. The marginal external benefit associated with educating 14 million students is ________ per student per year.

When using pollution charges to improve efficiency in a market with an external cost, regulators attempt to set the pollution charge equal to the

The marginal external cost and marginal private cost

Three methods the government can use to cope with the external cost from pollution are

A marginal external cost of a product is equal to

The production of electricity creates pollution. When deciding how much electricity to buy, customers the cost of pollution. When deciding how much electricity to buy, producers the cost of pollution.

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

-Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. If the government sets a pollution limit that achieves efficiency, how many tons of leather are produced?

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 9: Externalities: Pollution, Education, and Health Care

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

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal

"If production of a good creates an external cost, then, when production is such that the marginal private costs are equal to the marginal private benefits, the market outcome will be inefficient." Explain whether this assertion is correct or incorrect.

An example of someone bearing the burden of a negative consumption externality would be

When Ronald takes another economics class, other people in society benefit. The benefit to these other people is called the marginal ________ benefit of the class.

Transactions costs are the

What is the Coase theorem? What conditions need to be present for this theorem to work?

Which of the following is an example of an external benefit?

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000, she will attend college if the cost of attendance is no more than

-The figure above shows the market for college education in the United States. The marginal external benefit associated with educating 14 million students is ________ per student per year.

When using pollution charges to improve efficiency in a market with an external cost, regulators attempt to set the pollution charge equal to the

The marginal external cost and marginal private cost

Three methods the government can use to cope with the external cost from pollution are

A marginal external cost of a product is equal to

The production of electricity creates pollution. When deciding how much electricity to buy, customers ________ the cost of pollution. When deciding how much electricity to buy, producers ________ the cost of pollution.

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

-Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. If the government sets a pollution limit that achieves efficiency, how many tons of leather are produced?

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

The production of electricity creates pollution. When deciding how much electricity to buy, customers the cost of pollution. When deciding how much electricity to buy, producers the cost of pollution.