Question 1

An external benefit is created when you pursue a university education.

Accepted Answer

A) True 
 B)False

Question 2

Figure 15.8   Consider a chemical plant that discharges toxic waste into a nearby waterway.To reduce the emissions of toxic waste, the firm can install pollution abatement devices.Figure 15.8 shows the marginal benefit and the marginal cost from reduction the toxic waste emissions.
-Refer to Figure 15.8.What is the economically efficient level of pollution reduction?

Accepted Answer

A) 12.5 million tons 
B) 9 million tons 
C) 8 million tons 
D) 0 tons 
A) 12.5 million tons 
B) 9 million tons 
C) 8 million tons 
D) 0 tons

Question 3

Explain how mandatory seat belt laws may reduce the negative externalities of risky behaviour.

Accepted Answer

Mandatory seat belt laws are designed to

Question 4

Goods can be classified on the basis of whether their consumption is

Accepted Answer

A) internal and excludable. 
B) rival and competitive. 
C) includable and cooperative. 
D) rival and excludable. 
A) internal and excludable. 
B) rival and competitive. 
C) includable and cooperative. 
D) rival and excludable.

Question 5

What are some of the limitations of the Coase theorem in practice?

Accepted Answer

Some limitations of the theorem are as f

Question 6

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

Accepted Answer

A) further reductions will make society better off. 
B) the marginal benefit will rise and the marginal cost will fall as further reductions are made. 
C) economic efficiency will be achieved when emissions are reduced to zero. 
D) private businesses, rather the consumers, should be made to pay for the cost of further reductions. 
A) further reductions will make society better off. 
B) the marginal benefit will rise and the marginal cost will fall as further reductions are made. 
C) economic efficiency will be achieved when emissions are reduced to zero. 
D) private businesses, rather the consumers, should be made to pay for the cost of further reductions.

Question 7

Should the level of pollution be reduced to zero and if not, then to what level?

Accepted Answer

No, the level of pollution should not be

Question 8

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually, the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.Why was the grass depleted?

Accepted Answer

A) Self-interest motives led livestock owners to raise too many cows and sheep. 
B) The area of pasture was non-excludable and the consumption of the grass was rival. 
C) It did not get enough rainfall. 
D) Because of a policy of neglect on the part on the English government 
A) Self-interest motives led livestock owners to raise too many cows and sheep. 
B) The area of pasture was non-excludable and the consumption of the grass was rival. 
C) It did not get enough rainfall. 
D) Because of a policy of neglect on the part on the English government

Question 9

Figure 15.7  
-Refer to Figure 15.7.Which of the following statements is true?

Accepted Answer

A) At QE, the benefits of reducing pollution outweighs the cost of pollution reduction. 
B) At QB, society is under allocating resources to pollution reduction. 
C) The optimal quantity of pollution reduction is QB. 
D) The optimal quantity of pollution reduction is QE. 
A) At QE, the benefits of reducing pollution outweighs the cost of pollution reduction. 
B) At QB, society is under allocating resources to pollution reduction. 
C) The optimal quantity of pollution reduction is QB. 
D) The optimal quantity of pollution reduction is QE.

Question 10

What are the two primary characteristics that distinguish public goods?

Accepted Answer

A) Exclusivity and rivalry 
B) Government intervention and low prices 
C) Market failure and high prices 
D) Non-excludability and non-rivalry 
A) Exclusivity and rivalry 
B) Government intervention and low prices 
C) Market failure and high prices 
D) Non-excludability and non-rivalry

Question 11

In economics, the optimal level of pollution is

Accepted Answer

A) zero. 
B) the level for which the total benefit from reducing the pollution is the greatest. 
C) the level for which the marginal benefit from reducing the pollution is the greatest. 
D) the level for which the net benefit from reducing the pollution is the greatest. 
A) zero. 
B) the level for which the total benefit from reducing the pollution is the greatest. 
C) the level for which the marginal benefit from reducing the pollution is the greatest. 
D) the level for which the net benefit from reducing the pollution is the greatest.

Question 12

In economics, the term 'free rider' refers to

Accepted Answer

A) a person who evades taxes. 
B) a supervisor who delegates menial time-consuming activities to others. 
C) one who volunteers her services. 
D) one who waits for others to produce a good and then enjoys its benefits without paying for it. 
A) a person who evades taxes. 
B) a supervisor who delegates menial time-consuming activities to others. 
C) one who volunteers her services. 
D) one who waits for others to produce a good and then enjoys its benefits without paying for it.

Question 13

If there is pollution in producing a product, then the market equilibrium price is too high and equilibrium quantity is too low.

Accepted Answer

A) True 
 B)False

Question 14

When market prices do not reflect true production costs, it could indicate

Accepted Answer

A) resources in an economy are not fully utilised. 
B) the market price of a product is above the average cost of production. 
C) there is only a handful of firms competing against each other in an industry. 
D) a market failure. 
A) resources in an economy are not fully utilised. 
B) the market price of a product is above the average cost of production. 
C) there is only a handful of firms competing against each other in an industry. 
D) a market failure.

Question 15

Figure 15.2   Figure 15.2 shows a market with a negative externality.
-Refer to Figure 15.2.The deadweight loss due to the externality is represented by the area

Accepted Answer

A) abc. 
B) abf. 
C) abd. 
D) ade. 
A) abc. 
B) abf. 
C) abd. 
D) ade.

Question 16

Why is it difficult for a private market to provide the economically efficient quantity of a public good?

Accepted Answer

A) Because by law, governments cannot use cost-benefit analysis to determine this quantity 
B) Because individual preferences are not revealed on the market for the good 
C) Because public goods produce positive and negative externalities 
D) Because it is too expensive to produce the necessary amount of the good 
A) Because by law, governments cannot use cost-benefit analysis to determine this quantity 
B) Because individual preferences are not revealed on the market for the good 
C) Because public goods produce positive and negative externalities 
D) Because it is too expensive to produce the necessary amount of the good

Question 17

Which of the following represents the true economic cost of production when firms produce goods that cause negative externalities?

Accepted Answer

A) The private cost of production 
B) The social cost of production 
C) The external cost of production 
D) The explicit cost of production 
A) The private cost of production 
B) The social cost of production 
C) The external cost of production 
D) The explicit cost of production

Question 18

When there is a positive externality in a free market, too much of the good is produced and consumed.

Accepted Answer

A) True 
 B)False

Question 19

A modern example of the tragedy of the commons is the forests in many poor countries.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true of the free rider problem?

Accepted Answer

A) People consume a pure public good without payment, even though the good may not be produced if no one chooses to pay. 
B) The marginal cost of allowing additional consumers to consume a public good is zero. 
C) High income individuals subsidise the production of goods, such as education, that make society better off. 
D) Markets fail to allocate resources efficiently when benefits outweigh costs. 
A) People consume a pure public good without payment, even though the good may not be produced if no one chooses to pay. 
B) The marginal cost of allowing additional consumers to consume a public good is zero. 
C) High income individuals subsidise the production of goods, such as education, that make society better off. 
D) Markets fail to allocate resources efficiently when benefits outweigh costs.

An external benefit is created when you pursue a university education.

Explain how mandatory seat belt laws may reduce the negative externalities of risky behaviour.

Goods can be classified on the basis of whether their consumption is

What are some of the limitations of the Coase theorem in practice?

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

Should the level of pollution be reduced to zero and if not, then to what level?

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually, the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.Why was the grass depleted?

Figure 15.7 -Refer to Figure 15.7.Which of the following statements is true?

What are the two primary characteristics that distinguish public goods?

In economics, the optimal level of pollution is

In economics, the term 'free rider' refers to

If there is pollution in producing a product, then the market equilibrium price is too high and equilibrium quantity is too low.

When market prices do not reflect true production costs, it could indicate

Figure 15.2 Figure 15.2 shows a market with a negative externality. -Refer to Figure 15.2.The deadweight loss due to the externality is represented by the area

Why is it difficult for a private market to provide the economically efficient quantity of a public good?

Which of the following represents the true economic cost of production when firms produce goods that cause negative externalities?

When there is a positive externality in a free market, too much of the good is produced and consumed.

A modern example of the tragedy of the commons is the forests in many poor countries.

Which of the following statements is true of the free rider problem?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

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Exam 15: Externalities, Environmental Policy and Public Goods

An external benefit is created when you pursue a university education.

Explain how mandatory seat belt laws may reduce the negative externalities of risky behaviour.

Goods can be classified on the basis of whether their consumption is

What are some of the limitations of the Coase theorem in practice?

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

Should the level of pollution be reduced to zero and if not, then to what level?

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually, the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.Why was the grass depleted?

Figure 15.7 -Refer to Figure 15.7.Which of the following statements is true?

What are the two primary characteristics that distinguish public goods?

In economics, the optimal level of pollution is

In economics, the term 'free rider' refers to

If there is pollution in producing a product, then the market equilibrium price is too high and equilibrium quantity is too low.

When market prices do not reflect true production costs, it could indicate

Figure 15.2 Figure 15.2 shows a market with a negative externality. -Refer to Figure 15.2.The deadweight loss due to the externality is represented by the area

Why is it difficult for a private market to provide the economically efficient quantity of a public good?

Which of the following represents the true economic cost of production when firms produce goods that cause negative externalities?

When there is a positive externality in a free market, too much of the good is produced and consumed.

A modern example of the tragedy of the commons is the forests in many poor countries.

Which of the following statements is true of the free rider problem?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters