Question 1

For a common resource, the marginal private cost of the resource is equal to the marginal social cost.

Accepted Answer

A) True 
 B)False

Question 2

Why are fish in the ocean an example of a resource that suffers from the tragedy of the commons but cattle grazing in a farmer's pasture do not suffer from the tragedy of the commons?

Accepted Answer

Fish in the ocean are a common resource

Question 3

The problem of the commons arises because ________ exceeds ________ when the resource is used.

Accepted Answer

A)  marginal social cost; marginal private cost 
B)  marginal private benefit; marginal social benefit 
C)  marginal private benefit; marginal private cost 
D)  marginal private cost; marginal social cost 
A)  marginal social cost; marginal private cost 
B)  marginal private benefit; marginal social benefit 
C)  marginal private benefit; marginal private cost 
D)  marginal private cost; marginal social cost

Question 4

If a good has an external benefit, efficiency can be achieved by

Accepted Answer

A)  leaving the market unregulated. 
B)  monopolizing the market. 
C)  offering a private subsidy on the good equal to the external benefit. 
D)  imposing a tax on the good equal to the external benefit. 
A)  leaving the market unregulated. 
B)  monopolizing the market. 
C)  offering a private subsidy on the good equal to the external benefit. 
D)  imposing a tax on the good equal to the external benefit.

Question 5

Generating electricity creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium where

Accepted Answer

A)  marginal private cost equals marginal social benefit. 
B)  marginal social cost equals marginal social benefit. 
C)  marginal social cost equals marginal private cost. 
D)  marginal social benefit is greater than marginal social cost. 
A)  marginal private cost equals marginal social benefit. 
B)  marginal social cost equals marginal social benefit. 
C)  marginal social cost equals marginal private cost. 
D)  marginal social benefit is greater than marginal social cost.

Question 6

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant.
-In the figure above, with no government involvement and if the colleges are competitive, what is the deadweight loss?

Accepted Answer

A)  $12 billion per year 
B)  $6 billion per year 
C)  $4 billion per year 
D)  zero 
A)  $12 billion per year 
B)  $6 billion per year 
C)  $4 billion per year 
D)  zero

Question 7

An individual transferable quota can be used to achieve the

Accepted Answer

A)  equilibrium for a public good. 
B)  efficient use of a common resource. 
C)  equilibrium for a private good. 
D)  equilibrium for a common resource. 
A)  equilibrium for a public good. 
B)  efficient use of a common resource. 
C)  equilibrium for a private good. 
D)  equilibrium for a common resource.

Question 8

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland

Accepted Answer

A)  produces the efficient quantity of gasoline. 
B)  overproduces by 0.2 million gallons of gasoline a month. 
C)  underproduces by 0.1 million gallons of gasoline a month. 
D)  overproduces by 0.1 million gallons of gasoline a month. 
A)  produces the efficient quantity of gasoline. 
B)  overproduces by 0.2 million gallons of gasoline a month. 
C)  underproduces by 0.1 million gallons of gasoline a month. 
D)  overproduces by 0.1 million gallons of gasoline a month.

Question 9

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the

Accepted Answer

A)  allocation of resources is efficient. 
B)  market equilibrium produces 800 tons more than the efficient amount. 
C)  market equilibrium produces 1,600 tons more than the efficient amount. 
D)  market equilibrium produces 800 tons less than the efficient amount. 
A)  allocation of resources is efficient. 
B)  market equilibrium produces 800 tons more than the efficient amount. 
C)  market equilibrium produces 1,600 tons more than the efficient amount. 
D)  market equilibrium produces 800 tons less than the efficient amount.

Question 10

-The above figure shows the marginal benefits and marginal costs of a college education. If colleges receive a $5,000 subsidy, then enrollment equals

Accepted Answer

A)  0. 
B)  10 million. 
C)  15 million. 
D)  25 million. 
A)  0. 
B)  10 million. 
C)  15 million. 
D)  25 million.

Question 11

When individuals make decisions about how much schooling to obtain, they

Accepted Answer

A)  do not take account of the personal benefits that it creates. 
B)  do not take account of the external benefits that it creates. 
C)  overvalue the personal benefits that it creates. 
D)  overvalue the external benefits that it creates. 
A)  do not take account of the personal benefits that it creates. 
B)  do not take account of the external benefits that it creates. 
C)  overvalue the personal benefits that it creates. 
D)  overvalue the external benefits that it creates.

Question 12

An example of an externality occurs when a chemical factory

Accepted Answer

A)  is producing ethanol and dumps waste in a river upstream from a popular fishing spot. 
B)  produces fertilizers that do not help plants grow. 
C)  produces fertilizers that kill plants rather than feed them. 
D)  overworks its employees. 
A)  is producing ethanol and dumps waste in a river upstream from a popular fishing spot. 
B)  produces fertilizers that do not help plants grow. 
C)  produces fertilizers that kill plants rather than feed them. 
D)  overworks its employees.

Question 13

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________.

Accepted Answer

A)  0 tons per week 
B)  300 tons per week 
C)  400 tons per week 
D)  None of the above answers is correct. 
A)  0 tons per week 
B)  300 tons per week 
C)  400 tons per week 
D)  None of the above answers is correct.

Question 14

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, at the equilibrium quantity what is the marginal social cost of producing the pesticide?

Accepted Answer

A)  $80 
B)  $40 
C)  $60 
D)  $30 
A)  $80 
B)  $40 
C)  $60 
D)  $30

Question 15

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low

Accepted Answer

A)  external costs result in deadweight losses. 
B)  external benefits result in deadweight losses. 
C)  private transactions are efficient. 
D)  public transactions are efficient. 
A)  external costs result in deadweight losses. 
B)  external benefits result in deadweight losses. 
C)  private transactions are efficient. 
D)  public transactions are efficient.

Question 16

A large farming operation which uses a potent fertilizer is located up river from a trout farmer. If property rights of the river exist and transactions costs are low, the amount of pollution will be ________.

Accepted Answer

A)  efficient only if the trout farmer owns the river 
B)  inefficient if the farming operation owns the river 
C)  efficient if either the farming operation or the trout farmer own the river 
D)  always inefficient 
A)  efficient only if the trout farmer owns the river 
B)  inefficient if the farming operation owns the river 
C)  efficient if either the farming operation or the trout farmer own the river 
D)  always inefficient

Question 17

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

Accepted Answer

A)  cap-and-trade. 
B)  mandating clean technology. 
C)  subsidies. 
D)  taxes. 
A)  cap-and-trade. 
B)  mandating clean technology. 
C)  subsidies. 
D)  taxes.

Question 18

Describe some of the external benefits associated with education. What can government do to encourage production of the efficient amount of education?

Accepted Answer

External benefits to education include t

Question 19

-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 20

One way that government can increase the production of goods that have external benefits is to

Accepted Answer

A)  tax the activity. 
B)  subsidize the activity. 
C)  use marketable permits. 
D)  Both answers B and C are correct. 
A)  tax the activity. 
B)  subsidize the activity. 
C)  use marketable permits. 
D)  Both answers B and C are correct.

For a common resource, the marginal private cost of the resource is equal to the marginal social cost.

Why are fish in the ocean an example of a resource that suffers from the tragedy of the commons but cattle grazing in a farmer's pasture do not suffer from the tragedy of the commons?

The problem of the commons arises because exceeds when the resource is used.

If a good has an external benefit, efficiency can be achieved by

Generating electricity creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium where

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, with no government involvement and if the colleges are competitive, what is the deadweight loss?

An individual transferable quota can be used to achieve the

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the

-The above figure shows the marginal benefits and marginal costs of a college education. If colleges receive a $5,000 subsidy, then enrollment equals

When individuals make decisions about how much schooling to obtain, they

An example of an externality occurs when a chemical factory

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________.

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low

A large farming operation which uses a potent fertilizer is located up river from a trout farmer. If property rights of the river exist and transactions costs are low, the amount of pollution will be ________.

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

Describe some of the external benefits associated with education. What can government do to encourage production of the efficient amount of education?

One way that government can increase the production of goods that have external benefits is to

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

For a common resource, the marginal private cost of the resource is equal to the marginal social cost.

Why are fish in the ocean an example of a resource that suffers from the tragedy of the commons but cattle grazing in a farmer's pasture do not suffer from the tragedy of the commons?

The problem of the commons arises because ________ exceeds ________ when the resource is used.

If a good has an external benefit, efficiency can be achieved by

Generating electricity creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium where

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, with no government involvement and if the colleges are competitive, what is the deadweight loss?

An individual transferable quota can be used to achieve the

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the

-The above figure shows the marginal benefits and marginal costs of a college education. If colleges receive a $5,000 subsidy, then enrollment equals

When individuals make decisions about how much schooling to obtain, they

An example of an externality occurs when a chemical factory

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________.

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low

A large farming operation which uses a potent fertilizer is located up river from a trout farmer. If property rights of the river exist and transactions costs are low, the amount of pollution will be ________.

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

Describe some of the external benefits associated with education. What can government do to encourage production of the efficient amount of education?

One way that government can increase the production of goods that have external benefits is to

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 problem of the commons arises because exceeds when the resource is used.