Question 1

If there is pollution in producing a product,then the market equilibrium price

Accepted Answer

A)  is too high and equilibrium quantity is too low. 
B)  and equilibrium quantity are too low. 
C)  and equilibrium quantity are too high. 
D)  is too low and equilibrium quantity is too high. 
A)  is too high and equilibrium quantity is too low. 
B)  and equilibrium quantity are too low. 
C)  and equilibrium quantity are too high. 
D)  is too low and equilibrium quantity is too high.

Question 2

Which of the following is an example of a quasi-public good?

Accepted Answer

A)  cable television 
B)  organic apples 
C)  stock of knowledge in the public domain 
D)  crime prevention 
A)  cable television 
B)  organic apples 
C)  stock of knowledge in the public domain 
D)  crime prevention

Question 3

What is a "social cost" of production?

Accepted Answer

A)  the cost of the natural resources used up in production 
B)  the total costs of producing a product, both implicit and explicit costs 
C)  the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product 
D)  the cost of the environmental damage created by production 
A)  the cost of the natural resources used up in production 
B)  the total costs of producing a product, both implicit and explicit costs 
C)  the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product 
D)  the cost of the environmental damage created by production

Question 4

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Accepted Answer

A)  an increase in the equilibrium market price. 
B)  a decrease in the equilibrium quantity produced and consumed. 
C)  a decrease in market supply of the good. 
D)  an increase in the demand for the good. 
A)  an increase in the equilibrium market price. 
B)  a decrease in the equilibrium quantity produced and consumed. 
C)  a decrease in market supply of the good. 
D)  an increase in the demand for the good.

Question 5

In the United States,many beekeepers travel from state to state,renting out their bee colonies to farmers for pollination services.This is an example of

Accepted Answer

A)  a Coasian solution to a positive externality problem. 
B)  a Pigouvian solution to a positive externality problem. 
C)  a tradable exchange contract. 
D)  command and control policy. 
A)  a Coasian solution to a positive externality problem. 
B)  a Pigouvian solution to a positive externality problem. 
C)  a tradable exchange contract. 
D)  command and control policy.

Question 6

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

Accepted Answer

Private cost of production is the cost b

Question 7

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.The private profit-maximizing output level is

Accepted Answer

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

Question 8

How does a negative externality in production reduce economic efficiency?

Accepted Answer

If there is a negative externality in pr

Question 9

Briefly explain the command-and-control approach in dealing with an externality such as pollution.Give an example of the U.S.government using the command-and-control approach to deal with the pollution problem.

Accepted Answer

Command-and-control is an approach that

Question 10

The market demand for a public good can be determined by

Accepted Answer

A)  adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B)  adding up how much each citizen expects to consume at each possible price. 
C)  adding up how much each consumer is willing to pay for each unit of the public good. 
D)  estimating the value of the benefit that each unit provides and multiplying that by the number of consumers. 
A)  adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B)  adding up how much each citizen expects to consume at each possible price. 
C)  adding up how much each consumer is willing to pay for each unit of the public good. 
D)  estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.

Question 11

In economics,the optimal level of pollution is

Accepted Answer

A)  zero. 
B)  the level for which the total benefit from reducing the pollution is the greatest. 
C)  the level for which the marginal benefit from reducing the pollution is the greatest. 
D)  the level for which the net benefit from reducing the pollution is the greatest. 
A)  zero. 
B)  the level for which the total benefit from reducing the pollution is the greatest. 
C)  the level for which the marginal benefit from reducing the pollution is the greatest. 
D)  the level for which the net benefit from reducing the pollution is the greatest.

Question 12

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

Accepted Answer

A)  the private benefit of harvesting tuna is higher than the social benefit of harvesting it. 
B)  the private benefit of harvesting tuna is lower than the social benefit of harvesting it. 
C)  the social cost of harvesting the fish is lower than the private cost. 
D)  the private cost of harvesting the fish is lower than the social cost. 
A)  the private benefit of harvesting tuna is higher than the social benefit of harvesting it. 
B)  the private benefit of harvesting tuna is lower than the social benefit of harvesting it. 
C)  the social cost of harvesting the fish is lower than the private cost. 
D)  the private cost of harvesting the fish is lower than the social cost.

Question 13

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Accepted Answer

A)  A. C. Pigou 
B)  Adam Smith 
C)  Ronald Coase 
D)  John Maynard Keynes 
A)  A. C. Pigou 
B)  Adam Smith 
C)  Ronald Coase 
D)  John Maynard Keynes

Question 14

A negative externality exists if

Accepted Answer

A)  there are price controls in a market. 
B)  there are quantity controls in a market. 
C)  the marginal social cost of producing a good or service exceeds the private cost. 
D)  the marginal private cost of producing a good or service exceeds the social cost. 
A)  there are price controls in a market. 
B)  there are quantity controls in a market. 
C)  the marginal social cost of producing a good or service exceeds the private cost. 
D)  the marginal private cost of producing a good or service exceeds the social cost.

Question 15

A major problem with using tradable emissions allowance system to control pollution is

Accepted Answer

A)  that it grants firms a license to pollute. 
B)  the difficulty in determining the emissions target. 
C)  it discourages firms from implementing cost-effective pollution control technology. 
D)  that it does not eliminate pollution completely. 
A)  that it grants firms a license to pollute. 
B)  the difficulty in determining the emissions target. 
C)  it discourages firms from implementing cost-effective pollution control technology. 
D)  that it does not eliminate pollution completely.

Question 16

One difference between the demand for a private good and that for a public good is that

Accepted Answer

A)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
B)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
C)  with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. 
D)  the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former. 
A)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
B)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
C)  with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. 
D)  the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former.

Question 17

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

Accepted Answer

A) True 
 B)False

Question 18

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

Accepted Answer

A) True 
 B)False

Question 19

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.The efficient output is

Accepted Answer

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

Question 20

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

Accepted Answer

A Pigovian tax is a government

Exam 5: Externalities, environmental Policy, and Public Goods

If there is pollution in producing a product,then the market equilibrium price

Which of the following is an example of a quasi-public good?

What is a "social cost" of production?

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

In the United States,many beekeepers travel from state to state,renting out their bee colonies to farmers for pollination services.This is an example of

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

How does a negative externality in production reduce economic efficiency?

Briefly explain the command-and-control approach in dealing with an externality such as pollution.Give an example of the U.S.government using the command-and-control approach to deal with the pollution problem.

The market demand for a public good can be determined by

In economics,the optimal level of pollution is

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

A negative externality exists if

A major problem with using tradable emissions allowance system to control pollution is

One difference between the demand for a private good and that for a public good is that

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

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.The efficient output is

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

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

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