Question 1

One way to overcome the problem of the commons is to

Accepted Answer

A)  assign property rights so that someone owns the resource. 
B)  take away property rights so that no one owns the resource. 
C)  leave the market alone because the market will reach an equilibrium in which the efficient amount of the resource is used. 
D)  None of the above answers is correct. 
A)  assign property rights so that someone owns the resource. 
B)  take away property rights so that no one owns the resource. 
C)  leave the market alone because the market will reach an equilibrium in which the efficient amount of the resource is used. 
D)  None of the above answers is correct.

Question 2

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide.
-In the figure above, if no one owns the lake, the market does what?

Accepted Answer

A)  overproduces 120 tons of pesticide 
B)  underproduces 120 tons of pesticide 
C)  overproduces 60 tons of pesticide 
D)  produces the efficient quantity of pesticide 
A)  overproduces 120 tons of pesticide 
B)  underproduces 120 tons of pesticide 
C)  overproduces 60 tons of pesticide 
D)  produces the efficient quantity of pesticide

Question 3

When production of a good results in an external cost, the unregulated competitive market equilibrium is inefficient because ________.

Accepted Answer

A) MSC = MC B) MSC = MSB C) MSC > MSB D) MSC < MSB A) MSC = MC B) MSC = MSB C) MSC > MSB D) MSC < MSB

Question 4

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in overproduction.

Accepted Answer

A) True 
 B)False

Question 5

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the quantity produced if the market for paper is unregulated?

Accepted Answer

A)  10 tons per week 
B)  60 tons per week 
C)  40 tons per week 
D)  30 tons per week 
A)  10 tons per week 
B)  60 tons per week 
C)  40 tons per week 
D)  30 tons per week

Question 6

A polluted river has 20 homes on it that rent for $1,000 each per month. Homes on a similar river that is not polluted rent for $2,000 each per month. The river is polluted because there are two factories on the river that dump polluted water in the river. Each factory could install a filter that would cost $5,000 each and would reduce the pollution in the water to a negligible level. The external cost in this problem is

Accepted Answer

A)  $20,000. 
B)  $5,000. 
C)  $10,000. 
D)  $30,000. 
A)  $20,000. 
B)  $5,000. 
C)  $10,000. 
D)  $30,000.

Question 7

-In the figure above, if an excise tax is imposed that generates an efficient allocation of resources, then the amount of output will be

Accepted Answer

A)  zero. 
B)  50 units. 
C)  150 units. 
D)  250 units. 
A)  zero. 
B)  50 units. 
C)  150 units. 
D)  250 units.

Question 8

If the government creates a system of pollution permits, firms with low marginal costs of reducing pollution will

Accepted Answer

A)  buy permits from other firms. 
B)  sell permits to other firms. 
C)  hold on to the permits they have been issued and not attempt to buy more. 
D)  not be issued permits. 
A)  buy permits from other firms. 
B)  sell permits to other firms. 
C)  hold on to the permits they have been issued and not attempt to buy more. 
D)  not be issued permits.

Question 9

-The efficient quantity of gasoline to sell in Motorland is

Accepted Answer

A)  1.7 million gallons per month. 
B)  1.8 million gallons per month. 
C)  1.6 million gallons per month. 
D)  1.9 million gallons per month. 
A)  1.7 million gallons per month. 
B)  1.8 million gallons per month. 
C)  1.6 million gallons per month. 
D)  1.9 million gallons per month.

Question 10

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. In a private market with no government intervention, the equilibrium will be

Accepted Answer

A)  overprovision of the HPV vaccine and a deadweight loss. 
B)  overprovision of the HPV vaccine but no deadweight loss. 
C)  underprovision of the HPV vaccine but no deadweight loss. 
D)  underprovision of the HPV vaccine and a deadweight loss. 
A)  overprovision of the HPV vaccine and a deadweight loss. 
B)  overprovision of the HPV vaccine but no deadweight loss. 
C)  underprovision of the HPV vaccine but no deadweight loss. 
D)  underprovision of the HPV vaccine and a deadweight loss.

Question 11

-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 taxes, what should the tax equal?
b) Would the government action described above affect the quantity of pesticides produced? If yes, how? If no, why not?

Accepted Answer

a) $10 a ton
b) Yes, with the

Question 12

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the

Accepted Answer

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

Question 13

When external costs are present,

Accepted Answer

A)  competitive, unregulated markets are efficient. 
B)  transaction costs will be high. 
C)  a tax might be able to create efficiency. 
D)  property rights have already been established. 
A)  competitive, unregulated markets are efficient. 
B)  transaction costs will be high. 
C)  a tax might be able to create efficiency. 
D)  property rights have already been established.

Question 14

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. The marginal private cost when output equals 2 tons of paper per week equals

Accepted Answer

A)  $50 per ton 
B)  $100 per ton. 
C)  $150 per ton. 
D)  None of the above answers is correct. 
A)  $50 per ton 
B)  $100 per ton. 
C)  $150 per ton. 
D)  None of the above answers is correct.

Question 15

The Coase Theorem is the proposition that private economic transactions are efficient if the number of involved parties is small, if property rights ________, and transactions costs are ________.

Accepted Answer

A)  exist; high 
B)  exist; low 
C)  do not exist; high 
D)  do not exist; low 
A)  exist; high 
B)  exist; low 
C)  do not exist; high 
D)  do not exist; low

Question 16

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

Accepted Answer

Marginal social benefit equals the margi

Question 17

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is

Accepted Answer

A)  12 million. 
B)  20 million. 
C)  16 million. 
D)  24 million. 
A)  12 million. 
B)  20 million. 
C)  16 million. 
D)  24 million.

Question 18

"The problem with a common resource is that no one gets to use the resource." Comment on the preceding assertion.

Accepted Answer

The assertion is totally False; the prob

Question 19

-In the figure above, if the market is unregulated, then at the equilibrium output level, the marginal social cost of production

Accepted Answer

A)  is less than the marginal benefit to consumers. 
B)  exceeds the marginal benefit to consumers. 
C)  equals the marginal benefit to consumers. 
D)  equals the marginal private cost of production. 
A)  is less than the marginal benefit to consumers. 
B)  exceeds the marginal benefit to consumers. 
C)  equals the marginal benefit to consumers. 
D)  equals the marginal private cost of production.

Question 20

An external cost is a cost of producing a good or service that is

Accepted Answer

A)  not paid by the producers. 
B)  paid by the producers. 
C)  paid by the government. 
D)  paid by the consumer and the government. 
A)  not paid by the producers. 
B)  paid by the producers. 
C)  paid by the government. 
D)  paid by the consumer and the government.

One way to overcome the problem of the commons is to

When production of a good results in an external cost, the unregulated competitive market equilibrium is inefficient because ________.

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in overproduction.

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the quantity produced if the market for paper is unregulated?

-In the figure above, if an excise tax is imposed that generates an efficient allocation of resources, then the amount of output will be

If the government creates a system of pollution permits, firms with low marginal costs of reducing pollution will

-The efficient quantity of gasoline to sell in Motorland is

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. In a private market with no government intervention, the equilibrium will be

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the

When external costs are present,

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. The marginal private cost when output equals 2 tons of paper per week equals

The Coase Theorem is the proposition that private economic transactions are efficient if the number of involved parties is small, if property rights , and transactions costs are .

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

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is

"The problem with a common resource is that no one gets to use the resource." Comment on the preceding assertion.

-In the figure above, if the market is unregulated, then at the equilibrium output level, the marginal social cost of production

An external cost is a cost of producing a good or service that is

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 17: Externalities

One way to overcome the problem of the commons is to

When production of a good results in an external cost, the unregulated competitive market equilibrium is inefficient because ________.

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in overproduction.

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the quantity produced if the market for paper is unregulated?

-In the figure above, if an excise tax is imposed that generates an efficient allocation of resources, then the amount of output will be

If the government creates a system of pollution permits, firms with low marginal costs of reducing pollution will

-The efficient quantity of gasoline to sell in Motorland is

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. In a private market with no government intervention, the equilibrium will be

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the

When external costs are present,

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. The marginal private cost when output equals 2 tons of paper per week equals

The Coase Theorem is the proposition that private economic transactions are efficient if the number of involved parties is small, if property rights ________, and transactions costs are ________.

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

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is

"The problem with a common resource is that no one gets to use the resource." Comment on the preceding assertion.

-In the figure above, if the market is unregulated, then at the equilibrium output level, the marginal social cost of production

An external cost is a cost of producing a good or service that is

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

The Coase Theorem is the proposition that private economic transactions are efficient if the number of involved parties is small, if property rights , and transactions costs are .