Question 1

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then

Accepted Answer

A)  the amount of output moves farther away from the efficient amount. 
B)  transaction costs will be high. 
C)  the efficient amount of the good will be produced. 
D)  property rights must have already been established. 
A)  the amount of output moves farther away from the efficient amount. 
B)  transaction costs will be high. 
C)  the efficient amount of the good will be produced. 
D)  property rights must have already been established.

Question 2

When CSU sophomore Cody Clow and his housemates chose not to heed the city's ordinance against unreasonable noise and host a loud party at their off-campus residence last fall, they were confronted and ticketed by police. Fort Collins city code describes unreasonable noise as any sound that will "unreasonably interfere with the enjoyment of life or property." The method the local government used cope with the externality most closely resembles a ________.

Accepted Answer

A)  tax 
B)  voucher 
C)  subsidy 
D)  cap-and-trade policy 
A)  tax 
B)  voucher 
C)  subsidy 
D)  cap-and-trade policy

Question 3

For a common resource, efficiency requires that the ________ equals the ________.

Accepted Answer

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

Question 4

One reason that education has external benefits is that

Accepted Answer

A)  knowledge has diminishing marginal productivity. 
B)  education creates job opportunities for teachers. 
C)  education creates better citizens. 
D)  property owners pay taxes to support the school system. 
A)  knowledge has diminishing marginal productivity. 
B)  education creates job opportunities for teachers. 
C)  education creates better citizens. 
D)  property owners pay taxes to support the school system.

Question 5

When the production of a good creates an external cost, by setting the tax rate equal to the ________, firms can be made to behave in the same way as they would if they bore the cost of the externality directly.

Accepted Answer

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

Question 6

If the marginal social cost of a good is $70 and the marginal external cost is $20, what does the marginal private cost equal?

Accepted Answer

The marginal social cost equals the marg

Question 7

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 equilibrium price of the pesticide?

Accepted Answer

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

Question 8

If the production of a good causes pollution (an external cost) is the unregulated competitive market equilibrium of that product efficient?

Accepted Answer

The presence of pollution means that the

Question 9

The efficient quantity of output of a product with external costs of production is

Accepted Answer

A)  where the demand curve and the producer's supply curve intersect. 
B)  where the marginal social cost curve and marginal social benefit curve intersect. 
C)  as low as possible. 
D)  zero. 
A)  where the demand curve and the producer's supply curve intersect. 
B)  where the marginal social cost curve and marginal social benefit curve intersect. 
C)  as low as possible. 
D)  zero.

Question 10

Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will

Accepted Answer

A)  decrease supply of the good. 
B)  increase supply of the good. 
C)  decrease demand for the good. 
D)  increase demand for the good. 
A)  decrease supply of the good. 
B)  increase supply of the good. 
C)  decrease demand for the good. 
D)  increase demand for the good.

Question 11

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, if the government provides a subsidy to colleges of $6,000 per student per year, how many students will be accepted?

Accepted Answer

A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  16 million per year 
A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  16 million per year

Question 12

If the government assigns private property rights to a common resource, then the

Accepted Answer

A)  resource is under-utilized. 
B)  marginal private cost becomes equal to the marginal social cost. 
C)  government needs to set a quota to achieve efficiency. 
D)  None of the above answers is correct. 
A)  resource is under-utilized. 
B)  marginal private cost becomes equal to the marginal social cost. 
C)  government needs to set a quota to achieve efficiency. 
D)  None of the above answers is correct.

Question 13

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient amount of college education, the cost paid by the taxpayers is

Accepted Answer

A)  zero. 
B)  $8,000 per student. 
C)  $4,000 per student. 
D)  $12,000 per student. 
A)  zero. 
B)  $8,000 per student. 
C)  $4,000 per student. 
D)  $12,000 per student.

Question 14

-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 level of output, the marginal external cost per ton is

Accepted Answer

A)  zero. 
B)  $30. 
C)  $80. 
D)  $110. 
A)  zero. 
B)  $30. 
C)  $80. 
D)  $110.

Question 15

The cost of producing a good or service that is paid by people other than the producers is

Accepted Answer

A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  an external cost. 
A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  an external cost.

Question 16

Consider the production of some industrial good that creates 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).   The inefficient market quantity is ________ and the efficient market quantity is ________.

Accepted Answer

A)  4; 3 
B)  6; 3 
C)  3; 4 
D)  4; 6 
A)  4; 3 
B)  6; 3 
C)  3; 4 
D)  4; 6

Question 17

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 tuition?

Accepted Answer

A)  $10,000 per year 
B)  $14,000 per year 
C)  $8,000 per year 
D)  $16,000 per year 
A)  $10,000 per year 
B)  $14,000 per year 
C)  $8,000 per year 
D)  $16,000 per year

Question 18

Using the Coase theorem, why might a firm that currently pollutes a river no one owns pollute the river less if it owned the river?

Accepted Answer

The firm would pollute less if it owned

Question 19

In which of the following markets are external benefits most likely to exist?

Accepted Answer

A)  in the market for gasoline 
B)  in the market for ball pens 
C)  in the market for flu shots 
D)  in the market for cigarettes 
A)  in the market for gasoline 
B)  in the market for ball pens 
C)  in the market for flu shots 
D)  in the market for cigarettes

Question 20

Subsidizing education can lead an efficient level of production because education has external benefits.

Accepted Answer

A) True 
 B)False

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then

For a common resource, efficiency requires that the equals the .

One reason that education has external benefits is that

When the production of a good creates an external cost, by setting the tax rate equal to the ________, firms can be made to behave in the same way as they would if they bore the cost of the externality directly.

If the marginal social cost of a good is $70 and the marginal external cost is $20, what does the marginal private cost equal?

If the production of a good causes pollution (an external cost) is the unregulated competitive market equilibrium of that product efficient?

The efficient quantity of output of a product with external costs of production is

Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will

If the government assigns private property rights to a common resource, then the

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient amount of college education, the cost paid by the taxpayers is

-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 level of output, the marginal external cost per ton is

The cost of producing a good or service that is paid by people other than the producers is

Consider the production of some industrial good that creates 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). The inefficient market quantity is and the efficient market quantity is .

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 tuition?

Using the Coase theorem, why might a firm that currently pollutes a river no one owns pollute the river less if it owned the river?

In which of the following markets are external benefits most likely to exist?

Subsidizing education can lead an efficient level of production because education has external benefits.

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

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then

For a common resource, efficiency requires that the ________ equals the ________.

One reason that education has external benefits is that

When the production of a good creates an external cost, by setting the tax rate equal to the ________, firms can be made to behave in the same way as they would if they bore the cost of the externality directly.

If the marginal social cost of a good is $70 and the marginal external cost is $20, what does the marginal private cost equal?

If the production of a good causes pollution (an external cost) is the unregulated competitive market equilibrium of that product efficient?

The efficient quantity of output of a product with external costs of production is

Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will

If the government assigns private property rights to a common resource, then the

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient amount of college education, the cost paid by the taxpayers is

-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 level of output, the marginal external cost per ton is

The cost of producing a good or service that is paid by people other than the producers is

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 tuition?

Using the Coase theorem, why might a firm that currently pollutes a river no one owns pollute the river less if it owned the river?

In which of the following markets are external benefits most likely to exist?

Subsidizing education can lead an efficient level of production because education has external benefits.

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

For a common resource, efficiency requires that the equals the .