Question 1

Figure 5-2   Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The efficient output level is

Accepted Answer

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

Question 2

When there is a positive externality

Accepted Answer

A)  the private benefit received by consumers is greater than the external benefit. 
B)  the social benefit received by consumers is greater than the private benefit. 
C)  the private benefit received by consumers is greater than the private cost. 
D)  the private benefit received by consumers is greater than the social benefit. 
A)  the private benefit received by consumers is greater than the external benefit. 
B)  the social benefit received by consumers is greater than the private benefit. 
C)  the private benefit received by consumers is greater than the private cost. 
D)  the private benefit received by consumers is greater than the social benefit.

Question 3

Figure 5-13   Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

Accepted Answer

A)  $0.75 
B)  $1.25 
C)  $1.75 
D)  $2.00 
A)  $0.75 
B)  $1.25 
C)  $1.75 
D)  $2.00

Question 4

Which of the following activities create a negative externality?

Accepted Answer

A)  cleaning up the sidewalk on your block 
B)  graduating from college 
C)  repainting the house you live in to improve its appearance 
D)  keeping a junked car parked on your front lawn 
A)  cleaning up the sidewalk on your block 
B)  graduating from college 
C)  repainting the house you live in to improve its appearance 
D)  keeping a junked car parked on your front lawn

Question 5

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

Accepted Answer

A) True 
 B)False

Question 6

An externality is

Accepted Answer

A)  a benefit realized 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 realized 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 7

Figure 5-6   Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities.
-Refer to Figure 5-6.Why is there a deadweight loss?

Accepted Answer

A)  because the marginal private benefit for each additional unit between Q1 and Q2 exceeds the marginal cost 
B)  because the marginal private cost for each additional unit between Q1 and Q2 exceeds the marginal private benefit 
C)  because the marginal social cost for each additional unit between Q1 and Q2 exceeds the marginal social benefit 
D)  because the marginal social benefit for each additional unit between Q1 and Q2 exceeds the marginal cost 
A)  because the marginal private benefit for each additional unit between Q1 and Q2 exceeds the marginal cost 
B)  because the marginal private cost for each additional unit between Q1 and Q2 exceeds the marginal private benefit 
C)  because the marginal social cost for each additional unit between Q1 and Q2 exceeds the marginal social benefit 
D)  because the marginal social benefit for each additional unit between Q1 and Q2 exceeds the marginal cost

Question 8

The U.S.government has frequently used a "command and control" approach in dealing with pollution.Which of the following describes this approach?

Accepted Answer

A)  The government uses taxes in order to internalize the externalities caused by pollution. 
B)  The government uses subsidies to encourage firms to use new technology that reduces pollution. 
C)  The government imposes quantitative limits on the amount of pollution firms are allowed to generate. 
D)  The government distributes information to consumers and producers on how to reduce pollution. 
A)  The government uses taxes in order to internalize the externalities caused by pollution. 
B)  The government uses subsidies to encourage firms to use new technology that reduces pollution. 
C)  The government imposes quantitative limits on the amount of pollution firms are allowed to generate. 
D)  The government distributes information to consumers and producers on how to reduce pollution.

Question 9

How does a public good differ from a quasi-public good? In your answer give an example of each type of good.

Accepted Answer

A pubic good is: (a)nonrivalrous - one p

Question 10

An external benefit is created when you pursue a college education.

Accepted Answer

A) True 
 B)False

Question 11

Explain how the decision by parents to not immunize their children,hoping that their children will not get sick because other parents have had their children immunized,is an example of free riding.How is this behavior dangerous to the public?

Accepted Answer

Free riding is benefiting from a good wi

Question 12

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Figure 5-6   Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities.
-Refer to Figure 5-6.What does D2 represent?

Accepted Answer

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

Question 15

Figure 5-13   Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Accepted Answer

A)  $3.00 
B)  $3.75 
C)  $4.25 
D)  $5.00 
A)  $3.00 
B)  $3.75 
C)  $4.25 
D)  $5.00

Question 16

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

Accepted Answer

Mandatory seat belt laws are designed to

Question 17

For-profit producers will produce only private goods because

Accepted Answer

A)  markets exist for private goods but not for public goods. 
B)  the cost of production can be easily determined. 
C)  buyers will be willing to pay for the goods since the benefits are excludable. 
D)  all external benefits can be internalized using market prices. 
A)  markets exist for private goods but not for public goods. 
B)  the cost of production can be easily determined. 
C)  buyers will be willing to pay for the goods since the benefits are excludable. 
D)  all external benefits can be internalized using market prices.

Question 18

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

Accepted Answer

A)  externalize the externality. 
B)  result in a marginal social benefit greater than the marginal cost of the electricity. 
C)  be an example of supply side economic policy. 
D)  internalize the externality. 
A)  externalize the externality. 
B)  result in a marginal social benefit greater than the marginal cost of the electricity. 
C)  be an example of supply side economic policy. 
D)  internalize the externality.

Question 19

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 20

What does the phrase "internalizing an external cost" mean?

Accepted Answer

A)  limiting the extent to which domestic firms can outsource production 
B)  prohibiting economic activities that create externalities 
C)  forcing producers to factor into their production costs the cost of the externalities created in the production of their output 
D)  finding a way to address cross-border pollution 
A)  limiting the extent to which domestic firms can outsource production 
B)  prohibiting economic activities that create externalities 
C)  forcing producers to factor into their production costs the cost of the externalities created in the production of their output 
D)  finding a way to address cross-border pollution

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The efficient output level is

When there is a positive externality

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

Which of the following activities create a negative externality?

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

An externality is

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.Why is there a deadweight loss?

The U.S.government has frequently used a "command and control" approach in dealing with pollution.Which of the following describes this approach?

How does a public good differ from a quasi-public good? In your answer give an example of each type of good.

An external benefit is created when you pursue a college education.

Explain how the decision by parents to not immunize their children,hoping that their children will not get sick because other parents have had their children immunized,is an example of free riding.How is this behavior dangerous to the public?

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

A market demand curve reflects the

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₂ represent?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

For-profit producers will produce only private goods because

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

All of the following are examples of public goods except

What does the phrase "internalizing an external cost" mean?

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

Filters

Exam 5: Externalities, environmental Policy, and Public Goods

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The efficient output level is

When there is a positive externality

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

Which of the following activities create a negative externality?

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

An externality is

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.Why is there a deadweight loss?

The U.S.government has frequently used a "command and control" approach in dealing with pollution.Which of the following describes this approach?

How does a public good differ from a quasi-public good? In your answer give an example of each type of good.

An external benefit is created when you pursue a college education.

Explain how the decision by parents to not immunize their children,hoping that their children will not get sick because other parents have had their children immunized,is an example of free riding.How is this behavior dangerous to the public?

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

A market demand curve reflects the

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D2 represent?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

For-profit producers will produce only private goods because

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

All of the following are examples of public goods except

What does the phrase "internalizing an external cost" mean?

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

Filters

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₂ represent?