Question 1

Which of the following statements about the economically efficient level of air pollution is correct?

Accepted Answer

A) The economically efficient level of pollution is zero. 
B) The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C) The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D) The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised. 
A) The economically efficient level of pollution is zero. 
B) The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C) The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D) The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised.

Question 2

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.

Accepted Answer

If harmed parties do not have rights or

Question 3

Figure 15.9   Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 15.9 illustrates the situation in the toilet paper market.
-Refer to Figure 15.9.The private profit-maximising output level is

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Question 4

'Free riding' is a characteristic of which type of good?

Accepted Answer

A) A private good 
B) A common resource 
C) A public good 
D) A good that is both rival and excludable 
A) A private good 
B) A common resource 
C) A public good 
D) A good that is both rival and excludable

Question 5

Ronald Coase was awarded the 1991 Nobel Prize in Economics primarily for addressing problems related to externalities.Which of the following describes Coase's work?

Accepted Answer

A) Coase argued that government intervention is necessary to achieve economic efficiency in markets that are affected by externalities. 
B) Coase proved that economic efficiency cannot be achieved in a market that is affected by positive or negative externalities. 
C) Coase argued that under some circumstances, private solutions to the problems of externalities will occur. 
D) Coase proved that a competitive market achieved a greater degree of economic efficiency than a non-competitive market when externalities occur. 
A) Coase argued that government intervention is necessary to achieve economic efficiency in markets that are affected by externalities. 
B) Coase proved that economic efficiency cannot be achieved in a market that is affected by positive or negative externalities. 
C) Coase argued that under some circumstances, private solutions to the problems of externalities will occur. 
D) Coase proved that a competitive market achieved a greater degree of economic efficiency than a non-competitive market when externalities occur.

Question 6

The cost borne by a producer in the production of a good or service is called

Accepted Answer

A) private cost. 
B) public cost. 
C) social cost. 
D) internal cost. 
A) private cost. 
B) public cost. 
C) social cost. 
D) internal cost.

Question 7

Figure 15.4   Suppose there are several paper mills producing paper for a market.These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source.Figure 15.4 shows the paper market.Use this Figure to answer the following question(s).
-Refer to Figure 15.4.What is the economically efficient output level?

Accepted Answer

A) Q1 
B) Q2 minus Q1 
C) Q2 
D) Q1 plus Q2 
A) Q1 
B) Q2 minus Q1 
C) Q2 
D) Q1 plus Q2

Question 8

Figure 15.14   Figure 15.14 shows the market for Atlantic tuna, a common resource.The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output.The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 15.14.The current market equilibrium output is partly the result of overfishing.In that case, what does S2 represent?

Accepted Answer

A) The social marginal benefit of harvesting tuna 
B) The private marginal benefit of harvesting tuna 
C) The social marginal cost of harvesting tuna 
D) The private marginal cost of harvesting tuna 
A) The social marginal benefit of harvesting tuna 
B) The private marginal benefit of harvesting tuna 
C) The social marginal cost of harvesting tuna 
D) The private marginal cost of harvesting tuna

Question 9

State the Coase theorem.

Accepted Answer

The Coase theorem states that if transac

Question 10

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

Accepted Answer

A Pigovian tax is a government

Question 11

An advantage of imposing a tax on the producer that generates pollution is that

Accepted Answer

A) it forces the polluting producer to internalise the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers. 
A) it forces the polluting producer to internalise the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers.

Question 12

What is a private good?

Accepted Answer

A) A good that is non-excludable and rival 
B) A good that is excludable and rival 
C) A good that is excludable and non-rival 
D) A good that is non-rival and non-excludable 
A) A good that is non-excludable and rival 
B) A good that is excludable and rival 
C) A good that is excludable and non-rival 
D) A good that is non-rival and non-excludable

Question 13

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

Accepted Answer

A) The equilibrium in the market is not efficient; the marginal benefit from electricity is greater than the marginal social cost. 
B) A deadweight loss occurs; at equilibrium, the additional social cost of production is greater than the additional benefit to consumers. 
C) The equilibrium in the market is not efficient; because of the cost of the acid rain, economic efficiency would be greater if more electricity were produced. 
D) The equilibrium in the market is not efficient; consumer surplus is equal to producer surplus. 
A) The equilibrium in the market is not efficient; the marginal benefit from electricity is greater than the marginal social cost. 
B) A deadweight loss occurs; at equilibrium, the additional social cost of production is greater than the additional benefit to consumers. 
C) The equilibrium in the market is not efficient; because of the cost of the acid rain, economic efficiency would be greater if more electricity were produced. 
D) The equilibrium in the market is not efficient; consumer surplus is equal to producer surplus.

Question 14

What do economists call policies that mandate the installation of specific pollution control devices?

Accepted Answer

A) Welfare policies 
B) Benefit policies 
C) Command and control policies 
D) Incentive policies 
A) Welfare policies 
B) Benefit policies 
C) Command and control policies 
D) Incentive policies

Question 15

Common resources differ from public goods in that

Accepted Answer

A) common resources are non-excludable while public goods are excludable to those who do not pay for the good. 
B) unlike public goods, common resources are rival in consumption. 
C) common resources are collectively owned by a group of people while public goods are government owned. 
D) common resources are resources that cannot be renewed, but the production of public goods can be increased any time. 
A) common resources are non-excludable while public goods are excludable to those who do not pay for the good. 
B) unlike public goods, common resources are rival in consumption. 
C) common resources are collectively owned by a group of people while public goods are government owned. 
D) common resources are resources that cannot be renewed, but the production of public goods can be increased any time.

Question 16

The Coase theorem states that

Accepted Answer

A) government intervention is always needed if externalities are present. 
B) assigning property rights is the only thing the government should do in a market economy. 
C) if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 
D) a free market equilibrium is the best solution to address externalities. 
A) government intervention is always needed if externalities are present. 
B) assigning property rights is the only thing the government should do in a market economy. 
C) if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 
D) a free market equilibrium is the best solution to address externalities.

Question 17

Which of the following would result in a positive externality?

Accepted Answer

A) A local government establishes a price ceiling on rental apartments. 
B) An electric utility burns coal that causes acid rain. 
C) Medical research results in a cure for malaria. 
D) McDonald's adds new fat-free items to its menu. 
A) A local government establishes a price ceiling on rental apartments. 
B) An electric utility burns coal that causes acid rain. 
C) Medical research results in a cure for malaria. 
D) McDonald's adds new fat-free items to its menu.

Question 18

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Accepted Answer

A) Public goods 
B) Private goods 
C) Quasi-public goods 
D) Common resources 
A) Public goods 
B) Private goods 
C) Quasi-public goods 
D) Common resources

Question 19

Figure 15.4   Suppose there are several paper mills producing paper for a market.These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source.Figure 15.4 shows the paper market.Use this Figure to answer the following question(s).
-Refer to Figure 15.4.What does S2 represent?

Accepted Answer

A) The market supply curve that reflects social cost 
B) The market supply curve that reflect private cost 
C) The market supply curve that reflects external cost 
D) The market supply curve that reflects social benefit 
A) The market supply curve that reflects social cost 
B) The market supply curve that reflect private cost 
C) The market supply curve that reflects external cost 
D) The market supply curve that reflects social benefit

Question 20

Figure 15.7  
-Refer to Figure 15.7.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A) the supply of pollution reduction curve. 
B) the demand for pollution reduction curve. 
C) the negative externality curve. 
D) the value of pollution reduction curve. 
A) the supply of pollution reduction curve. 
B) the demand for pollution reduction curve. 
C) the negative externality curve. 
D) the value of pollution reduction curve.

Which of the following statements about the economically efficient level of air pollution is correct?

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.

'Free riding' is a characteristic of which type of good?

Ronald Coase was awarded the 1991 Nobel Prize in Economics primarily for addressing problems related to externalities.Which of the following describes Coase's work?

The cost borne by a producer in the production of a good or service is called

State the Coase theorem.

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

An advantage of imposing a tax on the producer that generates pollution is that

What is a private good?

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

What do economists call policies that mandate the installation of specific pollution control devices?

Common resources differ from public goods in that

The Coase theorem states that

Which of the following would result in a positive externality?

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Figure 15.7 -Refer to Figure 15.7.The marginal cost of reducing pollution curve is the same curve as

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

Which of the following statements about the economically efficient level of air pollution is correct?

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.

'Free riding' is a characteristic of which type of good?

Ronald Coase was awarded the 1991 Nobel Prize in Economics primarily for addressing problems related to externalities.Which of the following describes Coase's work?

The cost borne by a producer in the production of a good or service is called

State the Coase theorem.

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

An advantage of imposing a tax on the producer that generates pollution is that

What is a private good?

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

What do economists call policies that mandate the installation of specific pollution control devices?

Common resources differ from public goods in that

The Coase theorem states that

Which of the following would result in a positive externality?

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Figure 15.7 -Refer to Figure 15.7.The marginal cost of reducing pollution curve is the same curve as

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