Question 1

Taxes imposed on polluting firms,for internalizing the externalities created by them,may not always lead to an efficient solution because:

Accepted Answer

A) the taxes lowers the firms' incentives to reduce pollution 
B) it is difficult to determine the appropriate level of the tax that will result in an efficient output. 
C) firms that cannot earn positive economic profits after the tax is imposed will go out of business. 
D) the tax imposed by the government results in an increase in the average price level. 
A) the taxes lowers the firms' incentives to reduce pollution 
B) it is difficult to determine the appropriate level of the tax that will result in an efficient output. 
C) firms that cannot earn positive economic profits after the tax is imposed will go out of business. 
D) the tax imposed by the government results in an increase in the average price level.

Question 2

Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of the public good is $150,then the quantity of the public good produced should be:

Accepted Answer

A) increased even if none of the individuals are excluded. 
B) increased only if individual A can be excluded. 
C) decreased even if none of the individuals are excluded. 
D) decreased unless individual A or B can be excluded. 
A) increased even if none of the individuals are excluded. 
B) increased only if individual A can be excluded. 
C) decreased even if none of the individuals are excluded. 
D) decreased unless individual A or B can be excluded.

Question 3

Use the following figure to answer the question : Figure 20-2 : shows the competitive supply curve of a commodity is given by SS1U1B11S1U1B0,the private marginal benefit curve is DS1U1B11S1U1B0,the marginal social benefit curve is DS1U1B12S1U1B0,and the MBS1U1B1ES1U1B0 curve reflects the marginal external benefits.  
-Refer to Figure 20-2.If the government provides a subsidy of $8 per unit of output,then the:

Accepted Answer

A) marginal social benefit will exceed the marginal social cost and the good will be underproduced. 
B) marginal social cost will exceed the marginal social benefit and the good will be underproduced. 
C) marginal social benefit will exceed the marginal social cost and the good will be overproduced. 
D) marginal social cost will exceed the marginal social benefit and the good will be overproduced. 
A) marginal social benefit will exceed the marginal social cost and the good will be underproduced. 
B) marginal social cost will exceed the marginal social benefit and the good will be underproduced. 
C) marginal social benefit will exceed the marginal social cost and the good will be overproduced. 
D) marginal social cost will exceed the marginal social benefit and the good will be overproduced.

Question 4

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 5

The social cost of producing a commodity is equal to the:

Accepted Answer

A) the sum of fixed and variable costs. 
B) the difference between the total cost and opportunity cost. 
C) the sum of private and external costs. 
D) the difference between the private and external cost. 
A) the sum of fixed and variable costs. 
B) the difference between the total cost and opportunity cost. 
C) the sum of private and external costs. 
D) the difference between the private and external cost.

Question 6

Use the following figure to answer the question : Figure 20-2 : shows the competitive supply curve of a commodity is given by SS1U1B11S1U1B0,the private marginal benefit curve is DS1U1B11S1U1B0,the marginal social benefit curve is DS1U1B12S1U1B0,and the MBS1U1B1ES1U1B0 curve reflects the marginal external benefits.  
-In Figure 20-2,the price level when the efficient output is being produced is _____ than the price level when the market equilibrium output is being produced by _____.

Accepted Answer

A) less;$8 
B) more;$4 
C) less;$3 
D) more;$3 
A) less;$8 
B) more;$4 
C) less;$3 
D) more;$3

Question 7

Use the following figure to answer the question : Figure 20-1 : 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.  
-In Figure 20-1,the marginal external cost at the equilibrium output level is:

Accepted Answer

A) $0. 
B) $40. 
C) $10. 
D) $28. 
A) $0. 
B) $40. 
C) $10. 
D) $28.

Question 8

Which of the following statements is true of patents?

Accepted Answer

A) Patents should be granted for such inventions which cannot be immediately imitated. 
B) The cost of granting patents to private firms is more than the benefit,if the goods produced by them are characterized by nonexclusion. 
C) In the absence of patents the amount of new knowledge produced will not be socially optimal. 
D) A patent grants permanent monopoly power to an inventor. 
A) Patents should be granted for such inventions which cannot be immediately imitated. 
B) The cost of granting patents to private firms is more than the benefit,if the goods produced by them are characterized by nonexclusion. 
C) In the absence of patents the amount of new knowledge produced will not be socially optimal. 
D) A patent grants permanent monopoly power to an inventor.

Question 9

When the entire costs and benefits of a transaction are borne by the participants of that transaction:

Accepted Answer

A) the market outcome will be inefficient. 
B) then private costs and social costs are identical. 
C) an external cost is imposed on the society. 
D) an external benefit is generated in the society. 
A) the market outcome will be inefficient. 
B) then private costs and social costs are identical. 
C) an external cost is imposed on the society. 
D) an external benefit is generated in the society.

Question 10

Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of producing the public good is $200,then the quantity of the public good should be:

Accepted Answer

A) increased even if none of the individuals can be excluded. 
B) increased only if individual A can be excluded. 
C) decreased if none of the individuals can be excluded. 
D) decreased unless individual A or B can be excluded. 
A) increased even if none of the individuals can be excluded. 
B) increased only if individual A can be excluded. 
C) decreased if none of the individuals can be excluded. 
D) decreased unless individual A or B can be excluded.

Question 11

Which of the following helps to achieve efficiency in production?

Accepted Answer

A) Altruistic production and consumption behavior 
B) Sufficient information to measure total social costs and benefits 
C) Additional capital per worker 
D) A rigid monetary and fiscal policy 
A) Altruistic production and consumption behavior 
B) Sufficient information to measure total social costs and benefits 
C) Additional capital per worker 
D) A rigid monetary and fiscal policy

Question 12

Externalities mainly arise because:

Accepted Answer

A) consumers have more market power than sellers. 
B) producers have more market power than consumers. 
C) of inadequate provision of public goods. 
D) of inappropriate assignment of property rights. 
A) consumers have more market power than sellers. 
B) producers have more market power than consumers. 
C) of inadequate provision of public goods. 
D) of inappropriate assignment of property rights.

Question 13

A beautiful sunset can be categorized as a good that is 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 14

Which of the following is the best example of a public good?

Accepted Answer

A) A museum funded by government taxes 
B) All-you-can-eat buffet 
C) Satellite television 
D) A lighthouse 
A) A museum funded by government taxes 
B) All-you-can-eat buffet 
C) Satellite television 
D) A lighthouse

Question 15

When externalities occur,economic agents:

Accepted Answer

A) disregard the external effects of their actions,but the market outcome is efficient. 
B) disregard the external effects of their actions,and the market outcome is inefficient. 
C) consider the external effects of their actions,and the market outcome is efficient. 
D) consider the external effects of their actions,but the market outcome is inefficient. 
A) disregard the external effects of their actions,but the market outcome is efficient. 
B) disregard the external effects of their actions,and the market outcome is inefficient. 
C) consider the external effects of their actions,and the market outcome is efficient. 
D) consider the external effects of their actions,but the market outcome is inefficient.

Question 16

Suppose there are two chemicals manufacturing firms,A and B,in the city of Maltova which release 10 units and 8 units of toxic wastes every year in the absence of any restriction.The government of Maltova then imposes a tax of $5,000 per million ton of toxic waste on the factories.Explain with the help of a suitable figure that although the same tax is imposed on both the factories,and the government is unaware of each firm's marginal costs,the government is able to reduce pollution by 11 units with minimum cost.

Accepted Answer

@#IMG-DLM&_TB1826_00 
The figure given above illus

Question 17

A tax used to internalize an external cost is unlike most other taxes because it:

Accepted Answer

A) creates a deadweight loss. 
B) moves the output level away from the socially optimal level. 
C) drives the output level toward the socially optimal level. 
D) distorts incentives. 
A) creates a deadweight loss. 
B) moves the output level away from the socially optimal level. 
C) drives the output level toward the socially optimal level. 
D) distorts incentives.

Question 18

Tradable pollution permits achieve a given emission target efficiently because:

Accepted Answer

A) firms can bargain over the price of the permits. 
B) permits will be purchased by the firms that incur the least abatement cost. 
C) permits will be purchased by the firms that incur high abatement costs. 
D) the polluting firms will eventually go out of business. 
A) firms can bargain over the price of the permits. 
B) permits will be purchased by the firms that incur the least abatement cost. 
C) permits will be purchased by the firms that incur high abatement costs. 
D) the polluting firms will eventually go out of business.

Question 19

Use the following figure to answer the question : Figure 20-1 : 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 20

Which of the following is an example of a good characterized by exclusion and nonrivalry in consumption?

Accepted Answer

A) National defense 
B) A toll free interstate highway 
C) Cable television 
D) A sedan 
A) National defense 
B) A toll free interstate highway 
C) Cable television 
D) A sedan

Taxes imposed on polluting firms,for internalizing the externalities created by them,may not always lead to an efficient solution because:

Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of the public good is $150,then the quantity of the public good produced should be:

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

The social cost of producing a commodity is equal to the:

Which of the following statements is true of patents?

When the entire costs and benefits of a transaction are borne by the participants of that transaction:

Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of producing the public good is $200,then the quantity of the public good should be:

Which of the following helps to achieve efficiency in production?

Externalities mainly arise because:

A beautiful sunset can be categorized as a good that is characterized by:

Which of the following is the best example of a public good?

When externalities occur,economic agents:

A tax used to internalize an external cost is unlike most other taxes because it:

Tradable pollution permits achieve a given emission target efficiently because:

Which of the following is an example of a good characterized by exclusion and nonrivalry in consumption?

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

Taxes imposed on polluting firms,for internalizing the externalities created by them,may not always lead to an efficient solution because:

Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of the public good is $150,then the quantity of the public good produced should be:

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

The social cost of producing a commodity is equal to the:

Which of the following statements is true of patents?

When the entire costs and benefits of a transaction are borne by the participants of that transaction:

Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of producing the public good is $200,then the quantity of the public good should be:

Which of the following helps to achieve efficiency in production?

Externalities mainly arise because:

A beautiful sunset can be categorized as a good that is characterized by:

Which of the following is the best example of a public good?

When externalities occur,economic agents:

A tax used to internalize an external cost is unlike most other taxes because it:

Tradable pollution permits achieve a given emission target efficiently because:

Which of the following is an example of a good characterized by exclusion and nonrivalry in consumption?

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