Question 1

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

Accepted Answer

A) ​impose a tax on production of the good in order to increase production. 
B) ​impose a tax on production of the good in order to decrease production. 
C) ​offer a subsidy for production of the good in order to increase production. 
D) ​offer a subsidy for production of the good in order to decrease production. 
A) ​impose a tax on production of the good in order to increase production. 
B) ​impose a tax on production of the good in order to decrease production. 
C) ​offer a subsidy for production of the good in order to increase production. 
D) ​offer a subsidy for production of the good in order to decrease production.

Question 2

If the production of a particular good involves significant external costs, to force the externality to be internalized the government might:

Accepted Answer

A) ​impose a tax on production of the good in order to increase production. 
B) ​impose a tax on production of the good in order to decrease production. 
C) ​offer a subsidy for production of the good in order to increase production. 
D) ​offer a subsidy for production of the good in order to decrease production. 
A) ​impose a tax on production of the good in order to increase production. 
B) ​impose a tax on production of the good in order to decrease production. 
C) ​offer a subsidy for production of the good in order to increase production. 
D) ​offer a subsidy for production of the good in order to decrease production.

Question 3

Public goods are characterized by:

Accepted Answer

A) ​rivalry in consumption. 
B) ​nonrivalry in consumption. 
C) ​excludability of nonpayers. 
D) ​none of the above 
A) ​rivalry in consumption. 
B) ​nonrivalry in consumption. 
C) ​excludability of nonpayers. 
D) ​none of the above

Question 4

A tax on pollution would:

Accepted Answer

A) ​increase the quantity of pollution generated by giving firms the right to pollute. 
B) ​result in firms polluting the same amount as before the imposition of a tax. 
C) ​decrease the quantity of pollution generated. 
D) ​have an indeterminate impact on pollution levels. 
A) ​increase the quantity of pollution generated by giving firms the right to pollute. 
B) ​result in firms polluting the same amount as before the imposition of a tax. 
C) ​decrease the quantity of pollution generated. 
D) ​have an indeterminate impact on pollution levels.

Question 5

Economists believe that the optimal level of pollution is zero.

Accepted Answer

A) True 
 B)False

Question 6

The free-rider problem arises when:

Accepted Answer

A) ​goods cease to be scarce. 
B) ​goods are produced by the government. 
C) ​goods can't be provided exclusively to paying customers. 
D) ​the marginal benefit to a private individual outweighs the marginal cost of producing a good. 
A) ​goods cease to be scarce. 
B) ​goods are produced by the government. 
C) ​goods can't be provided exclusively to paying customers. 
D) ​the marginal benefit to a private individual outweighs the marginal cost of producing a good.

Question 7

What distinguishes public goods from private goods?
​

Accepted Answer

Public goods are both nonrival in consum

Question 8

An individual firm has little incentive to voluntarily internalize any external costs it was creating because:

Accepted Answer

A) ​it would shift its cost curves downward. 
B) ​it would put it at a competitive disadvantage compared to its rivals. 
C) ​it would have to increase output to make up for the added costs. 
D) ​they do not care at all about other people. 
A) ​it would shift its cost curves downward. 
B) ​it would put it at a competitive disadvantage compared to its rivals. 
C) ​it would have to increase output to make up for the added costs. 
D) ​they do not care at all about other people.

Question 9

Thousands of Japanese fishermen have used gill nets to catch tuna with great efficiency. Many environmentalists have objected to this practice since many other marine animals (such as dolphins and sharks) are killed by the nets and discarded by the fishermen. Which of the following statements is most accurate?

Accepted Answer

A) ​A private solution can be reached through negotiation between the fishermen and the environmentalists. 
B) ​A private solution is not practical due to the large number of individuals affected. 
C) ​The market price of tuna is higher than the socially optimum price of tuna. 
D) ​A private solution to this problem would not affect the price of tuna. 
A) ​A private solution can be reached through negotiation between the fishermen and the environmentalists. 
B) ​A private solution is not practical due to the large number of individuals affected. 
C) ​The market price of tuna is higher than the socially optimum price of tuna. 
D) ​A private solution to this problem would not affect the price of tuna.

Question 10

Inoculation against communicable diseases is an example of an activity that generates positive externalities.

Accepted Answer

A) True 
 B)False

Question 11

Private solutions often are not possible due to the costs of negotiating and enforcing these solutions. Such costs are called:

Accepted Answer

A) ​transaction costs. 
B) ​external costs. 
C) ​deadweight losses. 
D) ​social costs. 
A) ​transaction costs. 
B) ​external costs. 
C) ​deadweight losses. 
D) ​social costs.

Question 12

Positive externalities include benefits received the seller but not benefits received by the buyer.

Accepted Answer

A) True 
 B)False

Question 13

In the market for insurance, the adverse selection problem leads

Accepted Answer

A) ​those most likely to collect on insurance to buy it. 
B) ​those who buy insurance to take fewer precautions to avoid the insured risk. 
C) ​those with less insurance to take on more risk. 
D) ​to none of the above. 
A) ​those most likely to collect on insurance to buy it. 
B) ​those who buy insurance to take fewer precautions to avoid the insured risk. 
C) ​those with less insurance to take on more risk. 
D) ​to none of the above.

Question 14

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,

Accepted Answer

A) ​More than the efficient amount is being produced 
B) ​Less than the efficient amount is being produced 
C) ​the efficient amount is being produced 
D) ​We do not know whether the efficient amount, or more or less, is being produced. 
A) ​More than the efficient amount is being produced 
B) ​Less than the efficient amount is being produced 
C) ​the efficient amount is being produced 
D) ​We do not know whether the efficient amount, or more or less, is being produced.

Question 15

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

Accepted Answer

A) ​telephone service 
B) ​national defense 
C) ​a city-owned bus 
D) ​electricity generated by a city-owned public utility 
A) ​telephone service 
B) ​national defense 
C) ​a city-owned bus 
D) ​electricity generated by a city-owned public utility

Question 16

Pollution taxes always cause deadweight losses, reducing economic efficiency.​

Accepted Answer

A) True 
 B)False

Question 17

Negative externalities are costs incurred by: I.buyers
II)sellers
IiI)someone other than buyers or sellers

Accepted Answer

A) ​(i) only 
B) ​(ii) only 
C) ​(iii) only 
D) ​both (i) and (ii) 
A) ​(i) only 
B) ​(ii) only 
C) ​(iii) only 
D) ​both (i) and (ii)

Question 18

Factory A can reduce emissions at a cost of $250 per ton. Factory B can reduce emissions at a cost of $400 per ton. In a system in which the government issues transferable pollution right at a price of $200 per ton:

Accepted Answer

A) ​Factory A can profit from selling its pollution rights to Factory B. 
B) ​Both firms have an incentive to buy pollution rights. 
C) ​Factory B can profit from selling its pollution rights to Factory A. 
D) ​Both firms have an incentive to sell pollution rights. 
A) ​Factory A can profit from selling its pollution rights to Factory B. 
B) ​Both firms have an incentive to buy pollution rights. 
C) ​Factory B can profit from selling its pollution rights to Factory A. 
D) ​Both firms have an incentive to sell pollution rights.

Question 19

Pollution reduction policies are likely to lead to:

Accepted Answer

A) ​higher product prices. 
B) ​lower product prices. 
C) ​unchanged product prices. 
D) ​indeterminate changes in product prices. 
A) ​higher product prices. 
B) ​lower product prices. 
C) ​unchanged product prices. 
D) ​indeterminate changes in product prices.

Question 20

Suppose that your roommate is very untidy. Suppose she/he gets a $100 benefit from being messy but imposes a $200 cost on you. (Assume that there are no regulations against untidiness in your living quarters.) The Coase Theorem would suggest that an efficient solution can be reached where:

Accepted Answer

A) ​you pay your roommate at least $100 but no more than $200 to clean up after her/himself 
B) ​you pay your roommate at least $201 to clean up after her/himself. 
C) ​you continue to live with your untidy roommate until you are able to make other living arrangements elsewhere. 
D) ​your roommate pays you at least $100 to have you clean up after her/him. 
A) ​you pay your roommate at least $100 but no more than $200 to clean up after her/himself 
B) ​you pay your roommate at least $201 to clean up after her/himself. 
C) ​you continue to live with your untidy roommate until you are able to make other living arrangements elsewhere. 
D) ​your roommate pays you at least $100 to have you clean up after her/him.

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

If the production of a particular good involves significant external costs, to force the externality to be internalized the government might:

Public goods are characterized by:

A tax on pollution would:

Economists believe that the optimal level of pollution is zero.

The free-rider problem arises when:

What distinguishes public goods from private goods?

An individual firm has little incentive to voluntarily internalize any external costs it was creating because:

Inoculation against communicable diseases is an example of an activity that generates positive externalities.

Private solutions often are not possible due to the costs of negotiating and enforcing these solutions. Such costs are called:

Positive externalities include benefits received the seller but not benefits received by the buyer.

In the market for insurance, the adverse selection problem leads

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,

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

Pollution taxes always cause deadweight losses, reducing economic efficiency.

Negative externalities are costs incurred by: I.buyers II)sellers IiI)someone other than buyers or sellers

Factory A can reduce emissions at a cost of $250 per ton. Factory B can reduce emissions at a cost of $400 per ton. In a system in which the government issues transferable pollution right at a price of $200 per ton:

Pollution reduction policies are likely to lead to:

Suppose that your roommate is very untidy. Suppose she/he gets a $100 benefit from being messy but imposes a $200 cost on you. (Assume that there are no regulations against untidiness in your living quarters.) The Coase Theorem would suggest that an efficient solution can be reached where:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exam 8: Market Failure

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

If the production of a particular good involves significant external costs, to force the externality to be internalized the government might:

Public goods are characterized by:

A tax on pollution would:

Economists believe that the optimal level of pollution is zero.

The free-rider problem arises when:

What distinguishes public goods from private goods? ​

An individual firm has little incentive to voluntarily internalize any external costs it was creating because:

Inoculation against communicable diseases is an example of an activity that generates positive externalities.

Private solutions often are not possible due to the costs of negotiating and enforcing these solutions. Such costs are called:

Positive externalities include benefits received the seller but not benefits received by the buyer.

In the market for insurance, the adverse selection problem leads

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,

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

Pollution taxes always cause deadweight losses, reducing economic efficiency.​

Negative externalities are costs incurred by: I.buyers II)sellers IiI)someone other than buyers or sellers

Factory A can reduce emissions at a cost of $250 per ton. Factory B can reduce emissions at a cost of $400 per ton. In a system in which the government issues transferable pollution right at a price of $200 per ton:

Pollution reduction policies are likely to lead to:

Suppose that your roommate is very untidy. Suppose she/he gets a $100 benefit from being messy but imposes a $200 cost on you. (Assume that there are no regulations against untidiness in your living quarters.) The Coase Theorem would suggest that an efficient solution can be reached where:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

What distinguishes public goods from private goods?

Pollution taxes always cause deadweight losses, reducing economic efficiency.