Question 1

The efficient output of a public good occurs at the point where the:

Accepted Answer

A) curve formed by the horizontal summation of marginal benefit curves of users intersects the marginal cost curve. 
B) curve formed by the horizontal summation of the individual demand curves intersects the marginal cost curve. 
C) curve formed by the vertical summation of all users' demand curves intersects the marginal cost curve. 
D) curve formed by the vertical summation of the social cost curves intersects the social benefit curve. 
A) curve formed by the horizontal summation of marginal benefit curves of users intersects the marginal cost curve. 
B) curve formed by the horizontal summation of the individual demand curves intersects the marginal cost curve. 
C) curve formed by the vertical summation of all users' demand curves intersects the marginal cost curve. 
D) curve formed by the vertical summation of the social cost curves intersects the social benefit curve.

Question 2

Explain with the help of a suitable figure,why the government needs to subsidize inoculation against a viral infection.

Accepted Answer

When private transactions,like inoculati

Question 3

Suppose a competitive industry generates some sort of pollution while producing its output.In order to internalize the externality,the government may:

Accepted Answer

A) impose a tax equal to the marginal external cost of pollution. 
B) offer a subsidy equal to the marginal external benefit derived from the consumption of the good. 
C) impose a quota that reduces output to the point where private marginal costs of production equal marginal revenue. 
D) impose a price floor on the good produced by the industry. 
A) impose a tax equal to the marginal external cost of pollution. 
B) offer a subsidy equal to the marginal external benefit derived from the consumption of the good. 
C) impose a quota that reduces output to the point where private marginal costs of production equal marginal revenue. 
D) impose a price floor on the good produced by the industry.

Question 4

Which of the following aspects of the free-rider problem is overcome by government financing of a public good?

Accepted Answer

A) The problem of overproduction 
B) The external cost associated with production 
C) The tendency of people to withhold payment 
D) The high search cost associated with the consumption of the good 
A) The problem of overproduction 
B) The external cost associated with production 
C) The tendency of people to withhold payment 
D) The high search cost associated with the consumption of the good

Question 5

Explain with the help of a suitable real life example how common resources are depleted if property rights are not ensured?

Accepted Answer

Students answer may vary.Common ownershi

Question 6

Which of the following activities is most likely to generate a positive externality?

Accepted Answer

A) Tony plants roses in the large flowerbed in front of his condominium. 
B) Terry takes classes at a community college. 
C) Pat installs a new CD player in his sedan. 
D) Sam shovels the snow from the porch of his house. 
A) Tony plants roses in the large flowerbed in front of his condominium. 
B) Terry takes classes at a community college. 
C) Pat installs a new CD player in his sedan. 
D) Sam shovels the snow from the porch of his house.

Question 7

A competitive market will generally _____ a good that involves an external cost.

Accepted Answer

A) underproduce 
B) overproduce 
C) produce the optimal amount of 
D) produce no units of 
A) underproduce 
B) overproduce 
C) produce the optimal amount of 
D) produce no units of

Question 8

In case of a good that is nonrival in consumption,the quantity of the good produced:

Accepted Answer

A) increases with the increase in consumption. 
B) decreases with the increase in consumption 
C) is not affected by the change in consumption. 
D) is not affected by changes in the cost of production of the good. 
A) increases with the increase in consumption. 
B) decreases with the increase in consumption 
C) is not affected by the change in consumption. 
D) is not affected by changes in the cost of production of the good.

Question 9

In the figure given below,DS1U1B11S1U1B0 and SS1U1B11S1U1B0 are the private demand and supply curves,of a commodity produced by a competitive firm.SS1U1B12S1U1B0 reflects the social marginal cost of production,while SS1U1B10S1U1B0 represents the external marginal cost.  
-Refer to Figure 20-1.When the efficient output is being produced,the price of the good must be:

Accepted Answer

A) $90. 
B) $108. 
C) $100. 
D) $40. 
A) $90. 
B) $108. 
C) $100. 
D) $40.

Question 10

A swimming club charges membership fees to all the members.This implies that a pool at this club would be characterized by:

Accepted Answer

A) nonrivalry in consumption and nonexclusion. 
B) rivalry in consumption and nonexclusion. 
C) nonrivalry in consumption and exclusion. 
D) rivalry in consumption and exclusion. 
A) nonrivalry in consumption and nonexclusion. 
B) rivalry in consumption and nonexclusion. 
C) nonrivalry in consumption and exclusion. 
D) rivalry in consumption and exclusion.

Question 11

When there are external costs to production,output produced in a competitive market:

Accepted Answer

A) is less than the efficient level. 
B) is more than the efficient level. 
C) increases with an imposition of a tax on the commodity. 
D) eventually falls to zero. 
A) is less than the efficient level. 
B) is more than the efficient level. 
C) increases with an imposition of a tax on the commodity. 
D) eventually falls to zero.

Question 12

Which of the following is true of patents?

Accepted Answer

A) Patents encourage unlimited investment in research and development. 
B) Patents have no associated costs. 
C) Patents grant temporary monopoly power. 
D) Patents are not binding unless the product is a luxury good. 
A) Patents encourage unlimited investment in research and development. 
B) Patents have no associated costs. 
C) Patents grant temporary monopoly power. 
D) Patents are not binding unless the product is a luxury good.

Question 13

The severity of the free rider problem that arises in case of a public good:

Accepted Answer

A) is lower if the good is provided by the government. 
B) varies directly with the cost of producing it. 
C) is overstated in expensive public projects. 
D) varies directly with the number of people who consume it. 
A) is lower if the good is provided by the government. 
B) varies directly with the cost of producing it. 
C) is overstated in expensive public projects. 
D) varies directly with the number of people who consume it.

Question 14

Assume that the current price of a marketable permit to emit one ton of sulfur dioxide is $60.For firm A,the marginal cost of reducing one ton of sulfur dioxide is $50.For firm B,the marginal cost of reducing one ton of sulfur dioxide is $70.Under a tradable-permit scheme:

Accepted Answer

A) both firms will buy a permit and emit one more ton of sulfur dioxide. 
B) firm A will buy a permit and emit one more ton of sulfur dioxide,whereas firm B will reduce its emissions of the gas by one ton. 
C) firm B will buy a permit and emit one more ton of sulfur dioxide,whereas firm A will reduce its emissions of the gas by one ton. 
D) both firms will reduce their emissions of sulfur dioxide by one ton. 
A) both firms will buy a permit and emit one more ton of sulfur dioxide. 
B) firm A will buy a permit and emit one more ton of sulfur dioxide,whereas firm B will reduce its emissions of the gas by one ton. 
C) firm B will buy a permit and emit one more ton of sulfur dioxide,whereas firm A will reduce its emissions of the gas by one ton. 
D) both firms will reduce their emissions of sulfur dioxide by one ton.

Question 15

A local band practices next door to Joe,who enjoys a peaceful and quiet environment.The benefit (in present value terms)to the band of practicing is $100 and the cost (in present value terms)to Joe of the band practicing is $150.
(
A)What will happen if the band is held legally liable for their noise damage? Assume this is the only place they can practice.

Accepted Answer

If the band is held legally liable for t

Question 16

In the figure given below,DS1U1B11S1U1B0 and SS1U1B11S1U1B0 are the private demand and supply curves,of a commodity produced by a competitive firm.SS1U1B12S1U1B0 reflects the social marginal cost of production,while SS1U1B10S1U1B0 represents the external marginal cost.  
-Refer to Figure 20-1.Which of the following policies can be adopted by the government to increase production from the equilibrium level to the efficient level?

Accepted Answer

A) Provide a subsidy of $30 per unit 
B) Impose a tax of $100 per unit 
C) Provide a subsidy of $100 per unit 
D) Impose a tax of $20 per unit 
A) Provide a subsidy of $30 per unit 
B) Impose a tax of $100 per unit 
C) Provide a subsidy of $100 per unit 
D) Impose a tax of $20 per unit

Question 17

The good for which the characteristics of exclusion and rivalry in consumption do not apply is referred to as a:

Accepted Answer

A) public good. 
B) common resource. 
C) inferior good. 
D) normal good. 
A) public good. 
B) common resource. 
C) inferior good. 
D) normal good.

Question 18

In the figure given below,DS1U1B11S1U1B0 and SS1U1B11S1U1B0 are the private demand and supply curves,of a commodity produced by a competitive firm.SS1U1B12S1U1B0 reflects the social marginal cost of production,while SS1U1B10S1U1B0 represents the external marginal cost.  
-According to Figure 20-1,the efficient output is ______ than the equilibrium output by _____ units.

Accepted Answer

A) more;400 
B) less;400 
C) more;100 
D) less;200 
A) more;400 
B) less;400 
C) more;100 
D) less;200

Question 19

Mention some of the situations in which the Coase Theorem will not ensure an efficient outcome?

Accepted Answer

The Coase Theorem states that,as long as

Question 20

When a producer does not internalize the negative externality associated with the production of a good,then:

Accepted Answer

A) the socially optimal quantity of output must be larger than the market output. 
B) the socially optimal quantity of output must be less than the market output. 
C) the socially optimal quantity of output must be equal to the market output. 
D) the socially optimal quantity of output can be either larger or smaller than the market output. 
A) the socially optimal quantity of output must be larger than the market output. 
B) the socially optimal quantity of output must be less than the market output. 
C) the socially optimal quantity of output must be equal to the market output. 
D) the socially optimal quantity of output can be either larger or smaller than the market output.

The efficient output of a public good occurs at the point where the:

Explain with the help of a suitable figure,why the government needs to subsidize inoculation against a viral infection.

Suppose a competitive industry generates some sort of pollution while producing its output.In order to internalize the externality,the government may:

Which of the following aspects of the free-rider problem is overcome by government financing of a public good?

Explain with the help of a suitable real life example how common resources are depleted if property rights are not ensured?

Which of the following activities is most likely to generate a positive externality?

A competitive market will generally _____ a good that involves an external cost.

In case of a good that is nonrival in consumption,the quantity of the good produced:

A swimming club charges membership fees to all the members.This implies that a pool at this club would be characterized by:

When there are external costs to production,output produced in a competitive market:

Which of the following is true of patents?

The severity of the free rider problem that arises in case of a public good:

Assume that the current price of a marketable permit to emit one ton of sulfur dioxide is $60.For firm A,the marginal cost of reducing one ton of sulfur dioxide is $50.For firm B,the marginal cost of reducing one ton of sulfur dioxide is $70.Under a tradable-permit scheme:

The good for which the characteristics of exclusion and rivalry in consumption do not apply is referred to as a:

Mention some of the situations in which the Coase Theorem will not ensure an efficient outcome?

When a producer does not internalize the negative externality associated with the production of a good,then:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

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Exam 20: Public Goods and Externalities

The efficient output of a public good occurs at the point where the:

Explain with the help of a suitable figure,why the government needs to subsidize inoculation against a viral infection.

Suppose a competitive industry generates some sort of pollution while producing its output.In order to internalize the externality,the government may:

Which of the following aspects of the free-rider problem is overcome by government financing of a public good?

Explain with the help of a suitable real life example how common resources are depleted if property rights are not ensured?

Which of the following activities is most likely to generate a positive externality?

A competitive market will generally _____ a good that involves an external cost.

In case of a good that is nonrival in consumption,the quantity of the good produced:

A swimming club charges membership fees to all the members.This implies that a pool at this club would be characterized by:

When there are external costs to production,output produced in a competitive market:

Which of the following is true of patents?

The severity of the free rider problem that arises in case of a public good:

Assume that the current price of a marketable permit to emit one ton of sulfur dioxide is $60.For firm A,the marginal cost of reducing one ton of sulfur dioxide is $50.For firm B,the marginal cost of reducing one ton of sulfur dioxide is $70.Under a tradable-permit scheme:

The good for which the characteristics of exclusion and rivalry in consumption do not apply is referred to as a:

Mention some of the situations in which the Coase Theorem will not ensure an efficient outcome?

When a producer does not internalize the negative externality associated with the production of a good,then:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Filters