Question 1

Figure 10-2. The graph depicts the market for plastic.  
-Refer to Figure 10-2. A benevolent social planner would like to see

Accepted Answer

A)  200 units of plastic produced. 
B)  500 units of plastic produced. 
C)  650 units of plastic produced. 
D)  more than 650 units of plastic produced. 
A)  200 units of plastic produced. 
B)  500 units of plastic produced. 
C)  650 units of plastic produced. 
D)  more than 650 units of plastic produced.

Question 2

Table 10-3
  
-Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Accepted Answer

A)  $18. 
B)  $38. 
C)  $46. 
D)  $55. 
A)  $18. 
B)  $38. 
C)  $46. 
D)  $55.

Question 3

Figure 10-8  
-Refer to Figure 10-8. If the government wanted to tax or subsidize this good to achieve the socially-optimal level of output, it would

Accepted Answer

A)  introduce a subsidy of $2 per unit. 
B)  impose a tax of $2 per unit. 
C)  introduce a subsidy of $4 per unit. 
D)  impose a tax of $4 per unit. 
A)  introduce a subsidy of $2 per unit. 
B)  impose a tax of $2 per unit. 
C)  introduce a subsidy of $4 per unit. 
D)  impose a tax of $4 per unit.

Question 4

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics.   Multiple Choice - Section 02: Public Policies toward Externalities
-Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

Accepted Answer

A)  $1,250. 
B)  $1,600. 
C)  $2,000. 
D)  $2,500. 
A)  $1,250. 
B)  $1,600. 
C)  $2,000. 
D)  $2,500.

Question 5

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0gallon of gasoline entails the following:
-a private cost of $3.10;
-a social cost of $3.55;
-a value to consumers of $3.70.
-Refer to Scenario 10-1. Let QMARKET represent the equilibrium quantity of gasoline, and let QOPTIMUM represent the socially optimal quantity of gasoline. Which of the following inequalities is correct?

Accepted Answer

A)  1,000 < QOPTIMUM < QMARKET 
B)  QOPTIMUM < 1,000 < QMARKET 
C)  QMARKET < 1,000 < QOPTIMUM 
D)  QOPTIMUM < QMARKET < 1,000 
A)  1,000 < QOPTIMUM < QMARKET 
B)  QOPTIMUM < 1,000 < QMARKET 
C)  QMARKET < 1,000 < QOPTIMUM 
D)  QOPTIMUM < QMARKET < 1,000

Question 6

Because there are positive externalities from higher education,

Accepted Answer

A)  private markets will under-supply college classes. 
B)  private markets will over-supply college classes. 
C)  the government should impose a tax on college students. 
D)  government intervention cannot improve the market for college classes. 
A)  private markets will under-supply college classes. 
B)  private markets will over-supply college classes. 
C)  the government should impose a tax on college students. 
D)  government intervention cannot improve the market for college classes.

Question 7

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics.   Multiple Choice - Section 02: Public Policies toward Externalities
-Refer to Figure 10-13. Each unit of plastics that is produced results in an external

Accepted Answer

A)  cost of $6. 
B)  cost of $8. 
C)  benefit of $6. 
D)  benefit of $8. 
A)  cost of $6. 
B)  cost of $8. 
C)  benefit of $6. 
D)  benefit of $8.

Question 8

Since externalities tend to keep markets from reaching a socially optimal equilibrium, government action

Accepted Answer

A)  is always needed because private solutions can never be attained. 
B)  is needed when private solutions fail to arise. 
C)  will be needed only to correct for positive externalities. 
D)  will be needed only to correct for negative externalities. 
A)  is always needed because private solutions can never be attained. 
B)  is needed when private solutions fail to arise. 
C)  will be needed only to correct for positive externalities. 
D)  will be needed only to correct for negative externalities.

Question 9

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Accepted Answer

Sheryl's guitar­playing gives

Question 10

Figure 10-9
  
-Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Accepted Answer

A)  Panel (a). 
B)  Panel (b). 
C)  Panel (c). 
D)  Both (b) and (c) are correct. 
A)  Panel (a). 
B)  Panel (b). 
C)  Panel (c). 
D)  Both (b) and (c) are correct.

Question 11

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Accepted Answer

A)  They are equal. 
B)  The equilibrium quantity is greater than the socially optimal quantity. 
C)  The equilibrium quantity is less than the socially optimal quantity. 
D)  There is not enough information to answer the question. 
A)  They are equal. 
B)  The equilibrium quantity is greater than the socially optimal quantity. 
C)  The equilibrium quantity is less than the socially optimal quantity. 
D)  There is not enough information to answer the question.

Question 12

When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.

Accepted Answer

A) True 
 B)False

Question 13

Since almost all forms of transportation produce some type of pollution,

Accepted Answer

A)  the government should ban all transportation. 
B)  the government should ban all pollution. 
C)  society has to weigh the cost and benefits when deciding how much pollution to allow. 
D)  refrain from intervening because the market can best solve this problem. 
A)  the government should ban all transportation. 
B)  the government should ban all pollution. 
C)  society has to weigh the cost and benefits when deciding how much pollution to allow. 
D)  refrain from intervening because the market can best solve this problem.

Question 14

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

Accepted Answer

A) True 
 B)False

Question 15

When the social cost curve is above a product's supply curve,

Accepted Answer

A)  the government has intervened in the market. 
B)  a negative externality exists in the market. 
C)  a positive externality exists in the market. 
D)  the distribution of resources is unfair. 
A)  the government has intervened in the market. 
B)  a negative externality exists in the market. 
C)  a positive externality exists in the market. 
D)  the distribution of resources is unfair.

Question 16

Government intervention is necessary to correct all externalities.

Accepted Answer

A) True 
 B)False

Question 17

An externality is

Accepted Answer

A)  the costs that parties incur in the process of agreeing and following through on a bargain. 
B)  the uncompensated impact of one person's actions on the well-being of a bystander. 
C)  the proposition that private parties can bargain without cost over the allocation of resources. 
D)  a market equilibrium tax. 
A)  the costs that parties incur in the process of agreeing and following through on a bargain. 
B)  the uncompensated impact of one person's actions on the well-being of a bystander. 
C)  the proposition that private parties can bargain without cost over the allocation of resources. 
D)  a market equilibrium tax.

Question 18

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0fire extinguisher entails the following:
-a private cost of $10;
-an external cost of $0;
-a private value of $9;
-an external benefit of $3.
-
-Refer to Scenario 10-4. In order to maximize the total benefit of fire extinguishers to society as a whole, should the number of fire extinguishers produced be less than, equal to, or greater than 500? Explain.

Accepted Answer

For the 500^t^hfire extinguisher, the social

Question 19

Alexander lives in an apartment building and gets a $250 benefit from playing his stereo. Mary, who lives next door to Alexander and often loses sleep due to the loud music coming from Alexander's stereo, bears a $350 cost from the noise. Mary would like to offer Alexander some money to turn down the volume on his stereo. If Mary had to hire a lawyer to draw up the contract, what is the maximum amount she could pay to the lawyer to ensure that both Alexander and Mary would benefit from the agreement?

Accepted Answer

A)  an amount less than $100 
B)  an amount between $100 and $250 
C)  an amount between $250 and $350 
D)  Any amount could result in both parties benefiting from the agreement. 
A)  an amount less than $100 
B)  an amount between $100 and $250 
C)  an amount between $250 and $350 
D)  Any amount could result in both parties benefiting from the agreement.

Question 20

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Accepted Answer

A)  They are equal. 
B)  The equilibrium quantity is greater than the socially optimal quantity. 
C)  The equilibrium quantity is less than the socially optimal quantity. 
D)  There is not enough information to answer the question. 
A)  They are equal. 
B)  The equilibrium quantity is greater than the socially optimal quantity. 
C)  The equilibrium quantity is less than the socially optimal quantity. 
D)  There is not enough information to answer the question.

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. A benevolent social planner would like to see

Table 10-3 -Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Figure 10-8 -Refer to Figure 10-8. If the government wanted to tax or subsidize this good to achieve the socially-optimal level of output, it would

Because there are positive externalities from higher education,

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. Each unit of plastics that is produced results in an external

Since externalities tend to keep markets from reaching a socially optimal equilibrium, government action

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.

Since almost all forms of transportation produce some type of pollution,

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

When the social cost curve is above a product's supply curve,

Government intervention is necessary to correct all externalities.

An externality is

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Exam 10: Externalities

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. A benevolent social planner would like to see

Table 10-3 -Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Figure 10-8 -Refer to Figure 10-8. If the government wanted to tax or subsidize this good to achieve the socially-optimal level of output, it would

Because there are positive externalities from higher education,

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. Each unit of plastics that is produced results in an external

Since externalities tend to keep markets from reaching a socially optimal equilibrium, government action

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.

Since almost all forms of transportation produce some type of pollution,

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

When the social cost curve is above a product's supply curve,

Government intervention is necessary to correct all externalities.

An externality is

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters