Question 1

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

Accepted Answer

A)  is zero. 
B)  equals the marginal social cost. 
C)  equals the marginal social benefit. 
D)  equals the marginal private benefit. 
A)  is zero. 
B)  equals the marginal social cost. 
C)  equals the marginal social benefit. 
D)  equals the marginal private benefit.

Question 2

-The table above provides information about the marginal private benefit of education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the market for education is competitive and unregulated, the equilibrium quantity of education will be ________ and the tuition will be ________.

Accepted Answer

A)  20,000 student-years; $20,000 
B)  40,000 student-years; $16,000 
C)  60,000 student-years; $12,000 
D)  80,000 student-years; $8,000 
A)  20,000 student-years; $20,000 
B)  40,000 student-years; $16,000 
C)  60,000 student-years; $12,000 
D)  80,000 student-years; $8,000

Question 3

With the debris of more than 50 years of climbing on the beautiful high slopes - oxygen canisters, tents, backpacks and even some bodies - Mount Everest has been called the world's highest garbage dump. If Everest is a common resource, currently there is an ________ of the mountain.

Accepted Answer

A)  inefficient underuse 
B)  efficient overuse 
C)  efficient underuse 
D)  inefficient overuse 
A)  inefficient underuse 
B)  efficient overuse 
C)  efficient underuse 
D)  inefficient overuse

Question 4

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then without government intervention

Accepted Answer

A)  no students will go to college. 
B)  less than 10 million students will go to college. 
C)  10 million students will go to college. 
D)  more than 10 million students will go to college. 
A)  no students will go to college. 
B)  less than 10 million students will go to college. 
C)  10 million students will go to college. 
D)  more than 10 million students will go to college.

Question 5

-When the market for gasoline in Motorland is in equilibrium, the market price of gasoline is ________ the marginal social cost.

Accepted Answer

A)  $1.50 above 
B)  $1.50 below 
C)  equal to 
D)  $1.20 above 
A)  $1.50 above 
B)  $1.50 below 
C)  equal to 
D)  $1.20 above

Question 6

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The market equilibrium with no government intervention is raising ________.

Accepted Answer

A)  0 goats 
B)  40 goats 
C)  50 goats 
D)  55 goats 
A)  0 goats 
B)  40 goats 
C)  50 goats 
D)  55 goats

Question 7

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

Accepted Answer

A)  are nonexistent; low 
B)  exist; high 
C)  are nonexistent; high 
D)  exist; low 
A)  are nonexistent; low 
B)  exist; high 
C)  are nonexistent; high 
D)  exist; low

Question 8

The tragedy of the commons is the absence of incentives to

Accepted Answer

A)  correctly measure the marginal social benefit from a common resource. 
B)  prevent under use of the common resource. 
C)  prevent overuse and depletion of a common resource. 
D)  discover the common resource. 
A)  correctly measure the marginal social benefit from a common resource. 
B)  prevent under use of the common resource. 
C)  prevent overuse and depletion of a common resource. 
D)  discover the common resource.

Question 9

The external benefit of a good

Accepted Answer

A)  equals its consumer surplus. 
B)  equals its producer surplus. 
C)  equals its total surplus. 
D)  is a benefit from the good falling on people who are not the consumers of the good. 
A)  equals its consumer surplus. 
B)  equals its producer surplus. 
C)  equals its total surplus. 
D)  is a benefit from the good falling on people who are not the consumers of the good.

Question 10

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established

Accepted Answer

A)  the government must intervene to eliminate any externalities in the market. 
B)  private transactions are efficient. 
C)  there will be no pollution. 
D)  Both answers B and C are correct. 
A)  the government must intervene to eliminate any externalities in the market. 
B)  private transactions are efficient. 
C)  there will be no pollution. 
D)  Both answers B and C are correct.

Question 11

In the figure above, if no one owns the lake the tax that achieves the efficient outcome is ________ per ton of pesticide produced.

Accepted Answer

A)  $30 
B)  $40 
C)  $20 
D)  $10 
A)  $30 
B)  $40 
C)  $20 
D)  $10

Question 12

Governments can use subsidies ________.

Accepted Answer

A)  as a means of increasing government spending 
B)  when they want to increase taxes 
C)  to achieve an efficient outcome if there are external costs 
D)  to achieve an efficient outcome if there are external benefits 
A)  as a means of increasing government spending 
B)  when they want to increase taxes 
C)  to achieve an efficient outcome if there are external costs 
D)  to achieve an efficient outcome if there are external benefits

Question 13

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal social benefit per unit is

Accepted Answer

A)  zero. 
B)  $20 per unit. 
C)  $50 per unit. 
D)  $70 per unit. 
A)  zero. 
B)  $20 per unit. 
C)  $50 per unit. 
D)  $70 per unit.

Question 14

The granite boulders in Rocky Mountain National Park are a favored place among talented climbers who specialize in the art of bouldering, or climbing harder (but shorter) routes without tying into a rope. Climbers have taken to (illegally) stashing foam crash pads underneath the boulders but marmots and other rodents chew up the pads and the litter is spread by the wind. To limit overuse of this park, suppose a limited number of permits are sold each year to climbers who can sell them at any time to other climbers. This method of achieving efficient use of a common resource is most like what government policy?

Accepted Answer

A)  Production quota 
B)  Property right 
C)  Individual transferable quota 
D)  Marginal social benefit right 
A)  Production quota 
B)  Property right 
C)  Individual transferable quota 
D)  Marginal social benefit right

Question 15

A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. Initially the lake is owned by no one. Keeping in mind the Coase theorem, suppose transactions costs are low and the fishing club is given ownership of the lake. Compared to the situation with no property rights, the quantity of chemicals produced

Accepted Answer

A)  will decrease. 
B)  will stay the same. 
C)  will increase. 
D)  changes, but the direction of the change is ambiguous. 
A)  will decrease. 
B)  will stay the same. 
C)  will increase. 
D)  changes, but the direction of the change is ambiguous.

Question 16

A private cost is a cost of production that is borne by the

Accepted Answer

A)  consumer of the good. 
B)  producer of the good. 
C)  government. 
D)  consumer of the good and the government. 
A)  consumer of the good. 
B)  producer of the good. 
C)  government. 
D)  consumer of the good and the government.

Question 17

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level

Accepted Answer

A)  marginal private cost equals 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 equals 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 18

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. Suppose the government assigns individual transferable quotas (ITQ) set to achieve the efficient outcome. The market price of an ITQ is ________ per pound.

Accepted Answer

A)  $4.20 
B)  $2.00 
C)  $6.00 
D)  $4.00 
A)  $4.20 
B)  $2.00 
C)  $6.00 
D)  $4.00

Question 19

Scientists have said for years cod was so seriously overfished in European Union waters that there was a risk of extinction due to stock collapse. Why would cod be on the risk of extinction?

Accepted Answer

A)  Fishing in the sea for cod is an example of a public good. 
B)  Fishing in the sea for cod is an example of a common resource. 
C)  Fishing in the sea for cod is an example of a private good. 
D)  Fishing in the sea for cod is an example of a natural monopoly. 
A)  Fishing in the sea for cod is an example of a public good. 
B)  Fishing in the sea for cod is an example of a common resource. 
C)  Fishing in the sea for cod is an example of a private good. 
D)  Fishing in the sea for cod is an example of a natural monopoly.

Question 20

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

Accepted Answer

While many people might like to see a mi

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

With the debris of more than 50 years of climbing on the beautiful high slopes - oxygen canisters, tents, backpacks and even some bodies - Mount Everest has been called the world's highest garbage dump. If Everest is a common resource, currently there is an ________ of the mountain.

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then without government intervention

-When the market for gasoline in Motorland is in equilibrium, the market price of gasoline is ________ the marginal social cost.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The market equilibrium with no government intervention is raising ________.

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

The tragedy of the commons is the absence of incentives to

The external benefit of a good

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established

In the figure above, if no one owns the lake the tax that achieves the efficient outcome is ________ per ton of pesticide produced.

Governments can use subsidies ________.

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal social benefit per unit is

A private cost is a cost of production that is borne by the

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level

Scientists have said for years cod was so seriously overfished in European Union waters that there was a risk of extinction due to stock collapse. Why would cod be on the risk of extinction?

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

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

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

With the debris of more than 50 years of climbing on the beautiful high slopes - oxygen canisters, tents, backpacks and even some bodies - Mount Everest has been called the world's highest garbage dump. If Everest is a common resource, currently there is an ________ of the mountain.

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then without government intervention

-When the market for gasoline in Motorland is in equilibrium, the market price of gasoline is ________ the marginal social cost.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The market equilibrium with no government intervention is raising ________.

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

The tragedy of the commons is the absence of incentives to

The external benefit of a good

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established

In the figure above, if no one owns the lake the tax that achieves the efficient outcome is ________ per ton of pesticide produced.

Governments can use subsidies ________.

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal social benefit per unit is

A private cost is a cost of production that is borne by the

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level

Scientists have said for years cod was so seriously overfished in European Union waters that there was a risk of extinction due to stock collapse. Why would cod be on the risk of extinction?

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

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 if the number of involved parties is low, if property rights and transactions costs are , then private transactions are efficient.