Question 1

As a general rule,zero pollution is not socially desirable because

Accepted Answer

A) there would be no production. 
B) the Environmental Protection Agency (EP
A) needs to have something to do. 
C) no pollution would lead to global warming. 
D) all of the above. 
A) there would be no production. 
B) the Environmental Protection Agency (EP
A) needs to have something to do. 
C) no pollution would lead to global warming. 
D) all of the above. A

Question 2

Marginal benefits are downward sloping when

Accepted Answer

A) there are no total benefits. 
B) the slope of the marginal benefits curve is negative. 
C) total benefits are increasing at a decreasing rate. 
D) marginal costs are upward sloping. 
A) there are no total benefits. 
B) the slope of the marginal benefits curve is negative. 
C) total benefits are increasing at a decreasing rate. 
D) marginal costs are upward sloping. B

Question 3

Which of the following is correct?

Accepted Answer

A) SMC = PMC - MD 
B) MPB = MSB + MEB 
C) SMC = PMC + MD 
D) MSC = MPB 
E) MSB =MSC + MPB 
A) SMC = PMC - MD 
B) MPB = MSB + MEB 
C) SMC = PMC + MD 
D) MSC = MPB 
E) MSB =MSC + MPB C

Question 4

Negative externalities cause loss of welfare not transmitted by market factors.

Accepted Answer

A) True 
 B)False

Question 5

Figure 5.4
-In Figure 5.4,if the marginal damages line did not originate at 0,

Accepted Answer

A) it would mean that marginal damages did not exist. 
B) there is no way to find MSC. 
C) MSC would not originate at the same intercept as MPC. 
D) all of the above. 
A) it would mean that marginal damages did not exist. 
B) there is no way to find MSC. 
C) MSC would not originate at the same intercept as MPC. 
D) all of the above.

Question 6

In the 1970s,the US relied on Command-and-Control models of pollution regulation.

Accepted Answer

A) True 
 B)False

Question 7

Command-and-control regulations

Accepted Answer

A) are less flexible than incentive based regulations. 
B) come from the private sector. 
C) have technology standards a type of control. 
D) a & c. 
E) a & b. 
A) are less flexible than incentive based regulations. 
B) come from the private sector. 
C) have technology standards a type of control. 
D) a & c. 
E) a & b.

Question 8

A Pigouvian subsidy

Accepted Answer

A) can not exist with externalities. 
B) is the same thing as a Pigouvian tax. 
C) is measured in terms of Pigouvian dollars. 
D) moves production to the socially optimal level of output. 
A) can not exist with externalities. 
B) is the same thing as a Pigouvian tax. 
C) is measured in terms of Pigouvian dollars. 
D) moves production to the socially optimal level of output.

Question 9

Marginal damages

Accepted Answer

A) must always be considered in social marginal costs. 
B) must not be considered in social marginal costs. 
C) must sometimes be considered in social marginal costs. 
D) have nothing to do with social marginal costs. 
A) must always be considered in social marginal costs. 
B) must not be considered in social marginal costs. 
C) must sometimes be considered in social marginal costs. 
D) have nothing to do with social marginal costs.

Question 10

Externalities can be positive,as well as negative.

Accepted Answer

A) True 
 B)False

Question 11

Marginal damages are hard to measure because

Accepted Answer

A) they can be generated from multiple sources. 
B) they are hard to graph. 
C) they happen over time. 
D) no one cares about them. 
A) they can be generated from multiple sources. 
B) they are hard to graph. 
C) they happen over time. 
D) no one cares about them.

Question 12

The private marginal benefit for commodity X is given by 15 - X,where X is the number of units consumed.The private marginal cost of producing X is constant at 10.In the absence of any government intervention,how much X is produced? What is the gain to society involved in moving from the inefficient to the efficient level of production?

Accepted Answer

Without intervention,optimal w

Question 13

Suppose the factory Afro-Puffs Inc.produces wigs.As a by-product of this wig production,they also produce dangerous emissions of toxic gases (as a result of the strong glue used to hold the hair in place).The De-Lite car factory,down the road,experiences a negative externality from this production process.Suppose that the supply curve (private marginal costs)for the wig factory is X=(2/5)P- 2,and it faces a market demand of Xd=15 - P/2.The marginal damages caused by the production of wigs can be written as X=P - 1/2.
(a)Find the equilibrium price and quantity in the market for wigs.
(b)Find the socially optimal level of wigs and the corresponding price.
(c)How much should the wig factory be taxed per wig?

Accepted Answer

(a)Set PMC equal to demand and solve for

Question 14

Refer to the following graphs.Which graph(s)represent(s)an externality?

Accepted Answer

A) graph A 
B) graphs A and B 
C) graph B 
D) neither graph A nor graph B 
A) graph A 
B) graphs A and B 
C) graph B 
D) neither graph A nor graph B

Question 15

The desire in the US for owner-occupied housing led to subsidies that contributed to the recession which started in 2007.

Accepted Answer

A) True 
 B)False

Question 16

A steel factory has the right to discharge waste into a river.The waste reduces the number of fish,causing damage for fisheries.Let X denotes the quantity of waste dumped.The marginal damage,denoted MD,is given by the equation MD = 2 + 5Q.The marginal benefit (MB)of dumping waste is given by the equation MB = 34 - 3Q.
(a)Calculate the efficient quantity of waste.
(b)What is the efficient fee,in dollars per unit of waste,which would cause the firm to dump only an efficient quantity of waste?
(c)What would be the quantity dumped if the firm did not care about the fishery?

Accepted Answer

(a)Set MD = MB and solve for Q*.Q* = 4.

Question 17

Pollution rights may be traded if

Accepted Answer

A) polluters try to hide pollution. 
B) administrators are uncertain about Pigouvian taxes. 
C) there is no market for pollution. 
D) pollution is harmless. 
A) polluters try to hide pollution. 
B) administrators are uncertain about Pigouvian taxes. 
C) there is no market for pollution. 
D) pollution is harmless.

Question 18

Figure 5.9
-Refer to Figure 5.9.What is the total amount of tax paid by Bart?

Accepted Answer

A) 0 
B) 50 
C) 15 
D) 750 
A) 0 
B) 50 
C) 15 
D) 750

Question 19

Which method helps in obtaining the socially optimal level of output?

Accepted Answer

A) Pigouvian taxes 
B) regulation 
C) property rights and bargaining 
D) all of the above 
A) Pigouvian taxes 
B) regulation 
C) property rights and bargaining 
D) all of the above

Question 20

Externalities require government intervention when

Accepted Answer

A) violence will result between disputing parties. 
B) there are only a few sellers in the market. 
C) property rights are not clearly established. 
D) the government imposes sales taxes. 
E) all of the above. 
A) violence will result between disputing parties. 
B) there are only a few sellers in the market. 
C) property rights are not clearly established. 
D) the government imposes sales taxes. 
E) all of the above.

As a general rule,zero pollution is not socially desirable because

Marginal benefits are downward sloping when

Which of the following is correct?

Negative externalities cause loss of welfare not transmitted by market factors.

Figure 5.4 -In Figure 5.4,if the marginal damages line did not originate at 0,

In the 1970s,the US relied on Command-and-Control models of pollution regulation.

Command-and-control regulations

A Pigouvian subsidy

Marginal damages

Externalities can be positive,as well as negative.

Marginal damages are hard to measure because

Refer to the following graphs.Which graph(s)represent(s)an externality?

The desire in the US for owner-occupied housing led to subsidies that contributed to the recession which started in 2007.

Pollution rights may be traded if

Figure 5.9 -Refer to Figure 5.9.What is the total amount of tax paid by Bart?

Which method helps in obtaining the socially optimal level of output?

Externalities require government intervention when

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

Exam 5: Externalities

As a general rule,zero pollution is not socially desirable because

Marginal benefits are downward sloping when

Which of the following is correct?

Negative externalities cause loss of welfare not transmitted by market factors.

Figure 5.4 -In Figure 5.4,if the marginal damages line did not originate at 0,

In the 1970s,the US relied on Command-and-Control models of pollution regulation.

Command-and-control regulations

A Pigouvian subsidy

Marginal damages

Externalities can be positive,as well as negative.

Marginal damages are hard to measure because

Refer to the following graphs.Which graph(s)represent(s)an externality?

The desire in the US for owner-occupied housing led to subsidies that contributed to the recession which started in 2007.

Pollution rights may be traded if

Figure 5.9 -Refer to Figure 5.9.What is the total amount of tax paid by Bart?

Which method helps in obtaining the socially optimal level of output?

Externalities require government intervention when

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters