Question 1

How does a negative externality in production reduce economic efficiency?

Accepted Answer

is reduced. This encourages th

Question 2

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 3

-Refer to Figure 15-3. The private profit maximising output level is

Accepted Answer

A)  Qm. 
B)  Qn. 
C)  Qo. 
D)  Qo - Qm. 
A)  Qm. 
B)  Qn. 
C)  Qo. 
D)  Qo - Qm.

Question 4

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 5

All of the following are examples of public goods except

Accepted Answer

A)  broadcast television with commercials. 
B)  clean water systems. 
C)  stock of knowledge in the public domain. 
D)  crime prevention. 
A)  broadcast television with commercials. 
B)  clean water systems. 
C)  stock of knowledge in the public domain. 
D)  crime prevention.

Question 6

Private producers have no incentive to provide public goods because

Accepted Answer

A)  the government subsidy granted is usually insufficient to enable private producers to make a profit. 
B)  production of huge quantities of public goods entails huge fixed costs. 
C)  they cannot avoid the tragedy of the commons. 
D)  once produced, it will not be possible to exclude those who do not pay for the good. 
A)  the government subsidy granted is usually insufficient to enable private producers to make a profit. 
B)  production of huge quantities of public goods entails huge fixed costs. 
C)  they cannot avoid the tragedy of the commons. 
D)  once produced, it will not be possible to exclude those who do not pay for the good.

Question 7

A market demand curve reflects the

Accepted Answer

A)  private benefits of consuming a product. 
B)  external benefits of consuming a product. 
C)  social benefits of consuming a product. 
D)  the sum of private and social benefits of consuming a product. 
A)  private benefits of consuming a product. 
B)  external benefits of consuming a product. 
C)  social benefits of consuming a product. 
D)  the sum of private and social benefits of consuming a product.

Question 8

-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 9

-Refer to Figure 15-6. What does D1 represent?

Accepted Answer

A)  the demand curve reflecting social benefit 
B)  the positive externalities curve 
C)  the demand curve reflecting private benefit 
D)  the social welfare curve 
A)  the demand curve reflecting social benefit 
B)  the positive externalities curve 
C)  the demand curve reflecting private benefit 
D)  the social welfare curve

Question 10

Which of the following conditions holds in an economically efficient competitive market equilibrium?

Accepted Answer

A)  The deadweight loss is positive but at a minimum. 
B)  Producer and consumer surplus are exactly equal in size. 
C)  There are no positive and no negative external effects from consumption and production. 
D)  The marginal benefit of the last unit produced and consumed is maximised. 
A)  The deadweight loss is positive but at a minimum. 
B)  Producer and consumer surplus are exactly equal in size. 
C)  There are no positive and no negative external effects from consumption and production. 
D)  The marginal benefit of the last unit produced and consumed is maximised.

Question 11

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 12

-Refer to Figure 15-9. The efficient output is

Accepted Answer

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

Question 13

An externality is

Accepted Answer

A)  a benefit realised by the purchaser of a good or service. 
B)  a cost paid for by the producer of a good or service. 
C)  a benefit or cost experienced by someone who is not a producer or consumer of a good or service. 
D)  anything that is external or not relevant to the production of a good or service. 
A)  a benefit realised by the purchaser of a good or service. 
B)  a cost paid for by the producer of a good or service. 
C)  a benefit or cost experienced by someone who is not a producer or consumer of a good or service. 
D)  anything that is external or not relevant to the production of a good or service.

Question 14

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 15

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 16

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

Accepted Answer

A)  further reductions will make society better off. 
B)  further reduction will make society worse off. 
C)  pollution taxes should be imposed on producers to pay for further reductions. 
D)  economic efficiency will be increased if further reductions are made. 
A)  further reductions will make society better off. 
B)  further reduction will make society worse off. 
C)  pollution taxes should be imposed on producers to pay for further reductions. 
D)  economic efficiency will be increased if further reductions are made.

Question 17

'A competitive market achieves economic efficiency by maximising the sum of consumer surplus and producer surplus.' This statement

Accepted Answer

A)  is true only if there are positive externalities in production in the market. 
B)  is true only if there are no negative externalities in the market. 
C)  is true only if there are no positive or negative externalities in the market. 
D)  is true in theory, but economic efficiency cannot be achieved in a real market. 
A)  is true only if there are positive externalities in production in the market. 
B)  is true only if there are no negative externalities in the market. 
C)  is true only if there are no positive or negative externalities in the market. 
D)  is true in theory, but economic efficiency cannot be achieved in a real market.

Question 18

Consider the following characteristics: a. low transactions costs
B. small levels of pollution
C. high levels of pollution
D. clear assignment of property rights.
Which of the above are assumptions behind the Coase Theorem?

Accepted Answer

A)  a, b, and d 
B)  a, c, and d 
C)  a and d 
D)  a only 
A)  a, b, and d 
B)  a, c, and d 
C)  a and d 
D)  a only

Question 19

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

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 20

If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

Accepted Answer

A)  external costs. 
B)  transactions costs. 
C)  marginal benefits. 
D)  social costs of the pollution. 
A)  external costs. 
B)  transactions costs. 
C)  marginal benefits. 
D)  social costs of the pollution.

How does a negative externality in production reduce economic efficiency?

Common resources differ from public goods in that

-Refer to Figure 15-3. The private profit maximising output level is

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?

All of the following are examples of public goods except

Private producers have no incentive to provide public goods because

A market demand curve reflects the

-Refer to Figure 15-9. The private profit-maximising output level is

-Refer to Figure 15-6. What does D₁ represent?

Which of the following conditions holds in an economically efficient competitive market equilibrium?

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

-Refer to Figure 15-9. The efficient output is

An externality is

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?

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

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

'A competitive market achieves economic efficiency by maximising the sum of consumer surplus and producer surplus.' This statement

Consider the following characteristics: a. low transactions costs B. small levels of pollution C. high levels of pollution D. clear assignment of property rights. Which of the above are assumptions behind the Coase Theorem?

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

If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters

Exam 15: Externalities , Environmental Policy and Public Goods

How does a negative externality in production reduce economic efficiency?

Common resources differ from public goods in that

-Refer to Figure 15-3. The private profit maximising output level is

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?

All of the following are examples of public goods except

Private producers have no incentive to provide public goods because

A market demand curve reflects the

-Refer to Figure 15-9. The private profit-maximising output level is

-Refer to Figure 15-6. What does D1 represent?

Which of the following conditions holds in an economically efficient competitive market equilibrium?

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

-Refer to Figure 15-9. The efficient output is

An externality is

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?

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

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

'A competitive market achieves economic efficiency by maximising the sum of consumer surplus and producer surplus.' This statement

Consider the following characteristics: a. low transactions costs B. small levels of pollution C. high levels of pollution D. clear assignment of property rights. Which of the above are assumptions behind the Coase Theorem?

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

If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters

-Refer to Figure 15-6. What does D₁ represent?