Question 1

-The table above shows the marginal costs and marginal benefits of college education. The marginal private cost of college education at the efficient quantity of enrollment is

Accepted Answer

A)  $8,000 per year. 
B)  $12,000 per year. 
C)  $14,000 per year. 
D)  $16,000 per year. 
A)  $8,000 per year. 
B)  $12,000 per year. 
C)  $14,000 per year. 
D)  $16,000 per year.

Question 2

-The above figure shows the marginal benefits and marginal costs of a college education. The efficient number of students is

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 3

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then producers will receive a total amount (price plus subsidy) equal to

Accepted Answer

A)  $20 per unit. 
B)  $15 per unit. 
C)  $10 per unit. 
D)  $5 per unit. 
A)  $20 per unit. 
B)  $15 per unit. 
C)  $10 per unit. 
D)  $5 per unit.

Question 4

What is marginal external cost? Give an example.

Accepted Answer

Marginal external cost is the additional

Question 5

Which of the following does NOT contain an externality?

Accepted Answer

A)  I sell you an ice cream and you drip it all over the person sitting next to you. 
B)  I sell you an ice cream and it gives you a headache. 
C)  I sell you an ice cream and you share it with your friend. 
D)  I give you an ice cream and you share it with a friend. 
A)  I sell you an ice cream and you drip it all over the person sitting next to you. 
B)  I sell you an ice cream and it gives you a headache. 
C)  I sell you an ice cream and you share it with your friend. 
D)  I give you an ice cream and you share it with a friend.

Question 6

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. An efficient allocation of resources occurs at

Accepted Answer

A)  point F. 
B)  point G. 
C)  point H. 
D)  point I. 
A)  point F. 
B)  point G. 
C)  point H. 
D)  point I.

Question 7

-In the above figure, in order to achieve efficiency, a tax of ________ per unit is needed.

Accepted Answer

A)  $3 
B)  $6 
C)  $0 
D)  $2 
A)  $3 
B)  $6 
C)  $0 
D)  $2

Question 8

-The demand for bus service is perfectly elastic at a price of $1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride.

Accepted Answer

A)  $0.75 
B)  $1.60 
C)  $1.25 
D)  $3.25 
A)  $0.75 
B)  $1.60 
C)  $1.25 
D)  $3.25

Question 9

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

Accepted Answer

A) True 
 B)False

Question 10

Why does an external cost lead to inefficient overproduction?

Accepted Answer

If there is an external cost, then the m

Question 11

Generating electricity creates air pollution. This industry, if left unregulated, will produce

Accepted Answer

A)  more than the efficient level of output. 
B)  the efficient level of output. 
C)  less than the efficient level of output. 
D)  sometimes more and sometimes less than the efficient level of output. 
A)  more than the efficient level of output. 
B)  the efficient level of output. 
C)  less than the efficient level of output. 
D)  sometimes more and sometimes less than the efficient level of output.

Question 12

-In the above figure, if the market is competitive and unregulated

Accepted Answer

A)  more than the efficient amount of output will be produced. 
B)  less than the efficient amount of output will be produced. 
C)  the efficient amount of output will be produced. 
D)  the distribution of income will be fair. 
A)  more than the efficient amount of output will be produced. 
B)  less than the efficient amount of output will be produced. 
C)  the efficient amount of output will be produced. 
D)  the distribution of income will be fair.

Question 13

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium output, the

Accepted Answer

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

Question 14

Consider the production of some industrial good that involves air pollution. The table below gives the marginal social cost (MSC), the marginal cost (MC), and the marginal social benefit (MSB) for each level of output (Q).   To arrive at the efficient market equilibrium the government could impose a tax of

Accepted Answer

A)  $3. 
B)  $4. 
C)  $8. 
D)  $9. 
A)  $3. 
B)  $4. 
C)  $8. 
D)  $9.

Question 15

In the case of an external benefit generated by an activity, such as education, a private subsidy for that activity can achieve an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 16

-The above figure shows the marginal benefits and marginal costs of a college education. If a subsidy of $5,000 is paid to the colleges, then colleges charge tuition of

Accepted Answer

A)  $0. 
B)  $5,000. 
C)  $10,000. 
D)  $15,000. 
A)  $0. 
B)  $5,000. 
C)  $10,000. 
D)  $15,000.

Question 17

"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 18

The Coase theorem applies when property rights are given

Accepted Answer

A)  to the victim of pollution but not to the polluter. 
B)  to the polluter but not to the victim. 
C)  to either the polluter or the victim. 
D)  neither to the polluter nor to the victim. 
A)  to the victim of pollution but not to the polluter. 
B)  to the polluter but not to the victim. 
C)  to either the polluter or the victim. 
D)  neither to the polluter nor to the victim.

Question 19

How does the government determine the quota amount that will produce an efficient use of a common resource?

Accepted Answer

The government must determine the margin

Question 20

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, what is the quantity of pesticide produced?

Accepted Answer

A)  300 tons per month 
B)  240 tons per month 
C)  180 tons per month 
D)  360 tons per month 
A)  300 tons per month 
B)  240 tons per month 
C)  180 tons per month 
D)  360 tons per month

-The table above shows the marginal costs and marginal benefits of college education. The marginal private cost of college education at the efficient quantity of enrollment is

-The above figure shows the marginal benefits and marginal costs of a college education. The efficient number of students is

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then producers will receive a total amount (price plus subsidy) equal to

What is marginal external cost? Give an example.

Which of the following does NOT contain an externality?

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. An efficient allocation of resources occurs at

-In the above figure, in order to achieve efficiency, a tax of ________ per unit is needed.

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

Why does an external cost lead to inefficient overproduction?

Generating electricity creates air pollution. This industry, if left unregulated, will produce

-In the above figure, if the market is competitive and unregulated

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium output, the

In the case of an external benefit generated by an activity, such as education, a private subsidy for that activity can achieve an efficient outcome.

-The above figure shows the marginal benefits and marginal costs of a college education. If a subsidy of $5,000 is paid to the colleges, then colleges charge tuition of

"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.

The Coase theorem applies when property rights are given

How does the government determine the quota amount that will produce an efficient use of a common resource?

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

-The table above shows the marginal costs and marginal benefits of college education. The marginal private cost of college education at the efficient quantity of enrollment is

-The above figure shows the marginal benefits and marginal costs of a college education. The efficient number of students is

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then producers will receive a total amount (price plus subsidy) equal to

What is marginal external cost? Give an example.

Which of the following does NOT contain an externality?

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. An efficient allocation of resources occurs at

-In the above figure, in order to achieve efficiency, a tax of ________ per unit is needed.

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

Why does an external cost lead to inefficient overproduction?

Generating electricity creates air pollution. This industry, if left unregulated, will produce

-In the above figure, if the market is competitive and unregulated

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium output, the

In the case of an external benefit generated by an activity, such as education, a private subsidy for that activity can achieve an efficient outcome.

-The above figure shows the marginal benefits and marginal costs of a college education. If a subsidy of $5,000 is paid to the colleges, then colleges charge tuition of

"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.

The Coase theorem applies when property rights are given

How does the government determine the quota amount that will produce an efficient use of a common resource?

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