Question 1

Figure 5-3  
-Refer to Figure 5-3.The efficient output level is

Accepted Answer

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

Question 2

If the EPA does implement its plan to enact tougher limits on smog-forming ozone,________ would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would ________.

Accepted Answer

A)  consumers; widen 
B)  producers; widen 
C)  producers; narrow 
D)  consumers; narrow 
A)  consumers; widen 
B)  producers; widen 
C)  producers; narrow 
D)  consumers; narrow C

Question 3

What is an externality?

Accepted Answer

An externality is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

Question 4

Which of the following is an example of a common resource?

Accepted Answer

A)  the Sumatran tiger population in the world 
B)  rabbit fur 
C)  the stock of knowledge in the public domain 
D)  taxicab services 
A)  the Sumatran tiger population in the world 
B)  rabbit fur 
C)  the stock of knowledge in the public domain 
D)  taxicab services

Question 5

In 2011,the Environmental Protection Agency proposed a plan to enact tougher limits on smog-forming ozone.The goal of this program is to

Accepted Answer

A)  adjust the nation's air quality standard for ozone to the lower level of 60 to 70 parts per billion. 
B)  eliminate all smog-forming ozone by the year 2020. 
C)  cap the amount of ozone emissions in the United States and trade emissions-reducing technology to developing nations. 
D)  trade ozone emissions permits to developing nations in exchange for hydroelectric and solar power. 
A)  adjust the nation's air quality standard for ozone to the lower level of 60 to 70 parts per billion. 
B)  eliminate all smog-forming ozone by the year 2020. 
C)  cap the amount of ozone emissions in the United States and trade emissions-reducing technology to developing nations. 
D)  trade ozone emissions permits to developing nations in exchange for hydroelectric and solar power.

Question 6

A product is considered to be rivalrous if

Accepted Answer

A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community. 
A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community.

Question 7

What is a market failure?

Accepted Answer

A)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C)  It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event. 
D)  It refers to a breakdown in a market economy because of widespread corruption in government. 
A)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C)  It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event. 
D)  It refers to a breakdown in a market economy because of widespread corruption in government.

Question 8

Figure 5-5   
Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-5 illustrates the situation in the toilet paper market.
-Refer to Figure 5-5.Let's suppose the government imposes a tax of $50 per ton of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

Accepted Answer

A)  It rises by $50. 
B)  It rises by more than $50. 
C)  It rises by less than $50. 
D)  It remains the same because the tax is imposed on producers who create the externality. 
A)  It rises by $50. 
B)  It rises by more than $50. 
C)  It rises by less than $50. 
D)  It remains the same because the tax is imposed on producers who create the externality.

Question 9

Which of the following is an example of a positive externality?

Accepted Answer

A)  banning the sale of candy in elementary schools 
B)  planting trees along a sidewalk which add beauty and creates shade 
C)  forbidding the use of cell phones in public 
D)  prohibit street parking in all residential neighborhoods 
A)  banning the sale of candy in elementary schools 
B)  planting trees along a sidewalk which add beauty and creates shade 
C)  forbidding the use of cell phones in public 
D)  prohibit street parking in all residential neighborhoods

Question 10

Figure 5-3  
-Refer to Figure 5-3.The size of marginal external benefits can be determined by

Accepted Answer

A)  the demand curve D2. 
B)  D2 + D1 at each output level 
C)  D2 - D1 at each output level. 
D)  the demand curve D1. 
A)  the demand curve D2. 
B)  D2 + D1 at each output level 
C)  D2 - D1 at each output level. 
D)  the demand curve D1.

Question 11

Figure 5-4  
-Refer to Figure 5-4.The marginal benefit of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the positive externality curve. 
D)  the external benefit curve. 
A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the positive externality curve. 
D)  the external benefit curve.

Question 12

An externality refers to economic events outside a market.

Accepted Answer

A) True 
 B)False

Question 13

When there is a positive externality in a free market,too much of the good is produced and consumed.

Accepted Answer

A) True 
 B)False

Question 14

If you burn your trash in the back yard in spite of regulations against it,then you are

Accepted Answer

A)  acting economically irrationally and creating a social cost. 
B)  avoiding the private costs associated with disposing your trash some other way and creating a social cost. 
C)  acting rationally and creating a positive externality. 
D)  saving landfill space and creating a social benefit. 
A)  acting economically irrationally and creating a social cost. 
B)  avoiding the private costs associated with disposing your trash some other way and creating a social cost. 
C)  acting rationally and creating a positive externality. 
D)  saving landfill space and creating a social benefit.

Question 15

How does the construction of a market demand curve for a private good differ from that for a public good?

Accepted Answer

A)  There is no difference; in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
B)  There is no difference; in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price. 
C)  The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
D)  The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price. 
A)  There is no difference; in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
B)  There is no difference; in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price. 
C)  The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
D)  The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price.

Question 16

The "tragedy of the commons" refers to the phenomenon where

Accepted Answer

A)  individuals are free riders. 
B)  people overuse a common resource. 
C)  people do not internalize an externality. 
D)  there is rivalry in consumption. 
A)  individuals are free riders. 
B)  people overuse a common resource. 
C)  people do not internalize an externality. 
D)  there is rivalry in consumption.

Question 17

Figure 5-2  
 Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The private profit maximizing quantity for the firm is

Accepted Answer

A)  Qa. 
B)  Qb. 
C)  Qb - Qd. 
D)  Qd. 
A)  Qa. 
B)  Qb. 
C)  Qb - Qd. 
D)  Qd.

Question 18

In 2011,New Jersey Governor Chris Christie announced that he would pull the state out of the Regional Greenhouse Gas Initiative (RGGI),which is a coalition of 10 states that agreed to reduce their emissions of carbon dioxide by 10 percent by 2018.RGGI is an example of

Accepted Answer

A)  command and control. 
B)  cap-and-trade. 
C)  the greenhouse gas reduction initiative. 
D)  the zero pollution goal. 
A)  command and control. 
B)  cap-and-trade. 
C)  the greenhouse gas reduction initiative. 
D)  the zero pollution goal.

Question 19

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 20

"When it comes to public goods,individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

Accepted Answer

The statement is true.For example,in the

Exam 5: Externalities, environmental Policy, and Public Goods

Figure 5-3 -Refer to Figure 5-3.The efficient output level is

If the EPA does implement its plan to enact tougher limits on smog-forming ozone,________ would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would ________.

What is an externality?

Which of the following is an example of a common resource?

In 2011,the Environmental Protection Agency proposed a plan to enact tougher limits on smog-forming ozone.The goal of this program is to

A product is considered to be rivalrous if

What is a market failure?

Which of the following is an example of a positive externality?

Figure 5-3 -Refer to Figure 5-3.The size of marginal external benefits can be determined by

Figure 5-4 -Refer to Figure 5-4.The marginal benefit of reducing pollution curve is the same curve as

An externality refers to economic events outside a market.

When there is a positive externality in a free market,too much of the good is produced and consumed.

If you burn your trash in the back yard in spite of regulations against it,then you are

How does the construction of a market demand curve for a private good differ from that for a public good?

The "tragedy of the commons" refers to the phenomenon where

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The private profit maximizing quantity for the firm is

In 2011,New Jersey Governor Chris Christie announced that he would pull the state out of the Regional Greenhouse Gas Initiative (RGGI),which is a coalition of 10 states that agreed to reduce their emissions of carbon dioxide by 10 percent by 2018.RGGI is an example of

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________.

"When it comes to public goods,individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If the EPA does implement its plan to enact tougher limits on smog-forming ozone, would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would .

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would and the equilibrium price of soda would .