Question 1

Table 10-3
  
-Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Accepted Answer

A)  $2 
B)  $3 
C)  $5 
D)  $10 
A)  $2 
B)  $3 
C)  $5 
D)  $10

Question 2

Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

Accepted Answer

A) True 
 B)False

Question 3

A positive externality occurs when

Accepted Answer

A)  Jack receives a benefit from John's consumption of a certain good. 
B)  Jack receives personal benefits from his own consumption of a certain good. 
C)  Jack's benefit exceeds John's benefit when they each consume the same good. 
D)  Jack's receives a loss from John's consumption of a certain good. 
A)  Jack receives a benefit from John's consumption of a certain good. 
B)  Jack receives personal benefits from his own consumption of a certain good. 
C)  Jack's benefit exceeds John's benefit when they each consume the same good. 
D)  Jack's receives a loss from John's consumption of a certain good.

Question 4

Figure 10-9
  
-Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Accepted Answer

A)  Panel a). 
B)  Panel b). 
C)  Panel c). 
D)  Both b) and c) are correct. 
A)  Panel a). 
B)  Panel b). 
C)  Panel c). 
D)  Both b) and c) are correct.

Question 5

A corrective tax places a price on the right to pollute.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  air pollution 
B)  a person littering in a public park 
C)  a nice garden in front of your neighbor's house 
D)  the pollution of a stream 
A)  air pollution 
B)  a person littering in a public park 
C)  a nice garden in front of your neighbor's house 
D)  the pollution of a stream

Question 7

Figure 10-7  
-Refer to Figure 10-7. To internalize the externality in this market, the government should

Accepted Answer

A)  impose a tax on this product. 
B)  provide a subsidy for this product. 
C)  forbid production. 
D)  produce the product itself. 
A)  impose a tax on this product. 
B)  provide a subsidy for this product. 
C)  forbid production. 
D)  produce the product itself.

Question 8

Table 10-6
The following table shows the total costs for each of four firms A, B, C, and D to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $46, and for Firm A to eliminate two units of pollution, it would cost a total of $103.
  
-Refer to Table 10-6. If the government charged a fee of $85 per unit of pollution, how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)  10 
B)  12 
C)  14 
D)  16 
A)  10 
B)  12 
C)  14 
D)  16

Question 9

A negative externality

Accepted Answer

A)  is an adverse impact on a bystander. 
B)  causes the product in a market to be under-produced. 
C)  is an adverse impact on market participants. 
D)  is present in markets where the good or service does not have any impact on bystanders. 
A)  is an adverse impact on a bystander. 
B)  causes the product in a market to be under-produced. 
C)  is an adverse impact on market participants. 
D)  is present in markets where the good or service does not have any impact on bystanders.

Question 10

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own. What name do we use for these types of policies?

Accepted Answer

We call th

Question 11

Use a graph to illustrate the quantity of pollution that would be emitted a) after a corrective tax has been imposed and b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Accepted Answer

@#IMG-DLM& Yes, these two quantities cou

Question 12

An externality is an example of

Accepted Answer

A)  a corrective tax. 
B)  a tradable pollution permit. 
C)  a market failure. 
D)  Both a and b are correct. 
A)  a corrective tax. 
B)  a tradable pollution permit. 
C)  a market failure. 
D)  Both a and b are correct.

Question 13

Corrective taxes are more efficient than regulations for keeping the environment clean.

Accepted Answer

A) True 
 B)False

Question 14

To enhance the well-being of society, a social planner will encourage firms to increase production when

Accepted Answer

A)  the firms are producing basic goods. 
B)  there is a shortage in the market. 
C)  technology spillovers are associated with production. 
D)  negative externalities "spill over" into production. 
A)  the firms are producing basic goods. 
B)  there is a shortage in the market. 
C)  technology spillovers are associated with production. 
D)  negative externalities "spill over" into production.

Question 15

Suppose the market-equilibrium quantity of good x is 5,000 units and the socially-optimal quantity of good x is 4,000 units. Then

Accepted Answer

A)  the production of good x imposes external costs on society. 
B)  the private value of good x exceeds the private cost of good x when 5,000 units are produced. 
C)  the private cost of good x exceeds the private value of good x when 5,000 units are produced. 
D)  the social cost of good x exceeds the private value of good x when 4,000 units are produced. 
A)  the production of good x imposes external costs on society. 
B)  the private value of good x exceeds the private cost of good x when 5,000 units are produced. 
C)  the private cost of good x exceeds the private value of good x when 5,000 units are produced. 
D)  the social cost of good x exceeds the private value of good x when 4,000 units are produced.

Question 16

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is an advantage of tradable pollution permits?

Accepted Answer

A)  Each firm is allowed to pollute exactly the same amount. 
B)  Revenue from the sale of permits is greater than revenue from a corrective tax. 
C)  The initial allocation of permits to firms does not affect the efficiency of the market. 
D)  Firms will engage in joint research efforts to reduce pollution. 
A)  Each firm is allowed to pollute exactly the same amount. 
B)  Revenue from the sale of permits is greater than revenue from a corrective tax. 
C)  The initial allocation of permits to firms does not affect the efficiency of the market. 
D)  Firms will engage in joint research efforts to reduce pollution.

Question 18

Figure 10-15  
-Refer to Figure 10-15. Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects?

Accepted Answer

A)  PB must be equivalent to the corrective tax. 
B)  QA must be equivalent to the amount of pollution allowed to the pollution permit holders. 
C)  The equilibrium price and quantity of pollution must be the same in both graphs. 
D)  The amount of pollution emitted by each firm must be the same. 
A)  PB must be equivalent to the corrective tax. 
B)  QA must be equivalent to the amount of pollution allowed to the pollution permit holders. 
C)  The equilibrium price and quantity of pollution must be the same in both graphs. 
D)  The amount of pollution emitted by each firm must be the same.

Question 19

Corrective taxes are typically advocated to correct for the effects of

Accepted Answer

A)  positive externalities. 
B)  negative externalities. 
C)  patents. 
D)  All of the above are correct. 
A)  positive externalities. 
B)  negative externalities. 
C)  patents. 
D)  All of the above are correct.

Question 20

Table 10-3
  
-Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Accepted Answer

A)  $18. 
B)  $38. 
C)  $46. 
D)  $55. 
A)  $18. 
B)  $38. 
C)  $46. 
D)  $55.

Exam 10: Externalities

Table 10-3 -Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

A positive externality occurs when

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

A corrective tax places a price on the right to pollute.

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

Figure 10-7 -Refer to Figure 10-7. To internalize the externality in this market, the government should

A negative externality

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own. What name do we use for these types of policies?

Use a graph to illustrate the quantity of pollution that would be emitted a) after a corrective tax has been imposed and b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

An externality is an example of

Corrective taxes are more efficient than regulations for keeping the environment clean.

To enhance the well-being of society, a social planner will encourage firms to increase production when

Suppose the market-equilibrium quantity of good x is 5,000 units and the socially-optimal quantity of good x is 4,000 units. Then

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Which of the following is an advantage of tradable pollution permits?

Figure 10-15 -Refer to Figure 10-15. Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects?

Corrective taxes are typically advocated to correct for the effects of

Table 10-3 -Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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