Question 1

Figure 5-3  
-Refer to Figure 5-3.The deadweight loss due to the externality is represented by the area

Accepted Answer

A) mso. 
B) msn. 
C) nso. 
D) mtn. 
A) mso. 
B) msn. 
C) nso. 
D) mtn.

Question 2

A carbon tax which is designed to reduce pollution is an example of a

Accepted Answer

A) command-and-control policy. 
B) government administrative rule. 
C) noneffective incentive. 
D) market-based policy. 
A) command-and-control policy. 
B) government administrative rule. 
C) noneffective incentive. 
D) market-based policy.

Question 3

Public goods are distinguished by two primary characteristics.What are they?

Accepted Answer

A) nonrivalry and nonexcludability 
B) government intervention and low prices 
C) market failure and high prices 
D) rivalry and exclusivity 
A) nonrivalry and nonexcludability 
B) government intervention and low prices 
C) market failure and high prices 
D) rivalry and exclusivity

Question 4

The efficient level of paper production will occur where the

Accepted Answer

A) marginal private benefit from consuming paper is equal to the marginal social cost of production. 
B) marginal social benefit from consuming paper is equal to the marginal social cost of production. 
C) economically efficient level of the output of paper is equal to the economically efficient level of inputs. 
D) production of paper no longer produces negative externalities. 
A) marginal private benefit from consuming paper is equal to the marginal social cost of production. 
B) marginal social benefit from consuming paper is equal to the marginal social cost of production. 
C) economically efficient level of the output of paper is equal to the economically efficient level of inputs. 
D) production of paper no longer produces negative externalities.

Question 5

Which of the following exemplifies the tragedy of the commons?

Accepted Answer

A) Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. 
B) The Pleasant Hill community is growing so fast that the city's only post office is not able to keep pace with the population growth in the community. 
C) Canadian citizens receive free universal health care administered by provincial governments. 
D) The Malaysian tapir,distinguished for its unusual coloration,is a target for poachers who hunt it for its tough and leathery hide. 
A) Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. 
B) The Pleasant Hill community is growing so fast that the city's only post office is not able to keep pace with the population growth in the community. 
C) Canadian citizens receive free universal health care administered by provincial governments. 
D) The Malaysian tapir,distinguished for its unusual coloration,is a target for poachers who hunt it for its tough and leathery hide.

Question 6

When the federal government orders firms to use particular methods to reduce pollution,it is said to be using

Accepted Answer

A) command-and-control policies. 
B) strong-arm tactics. 
C) global initiatives. 
D) market-based policies. 
A) command-and-control policies. 
B) strong-arm tactics. 
C) global initiatives. 
D) market-based policies.

Question 7

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 8

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 public good. 
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 public good.

Question 9

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 10

How does a negative externality in production reduce economic efficiency?

Accepted Answer

If there is a negative externality in pr

Question 11

Consider the following characteristics: a.low transactions costs
B.small levels of pollution
C.high levels of pollution
D.clear assignment of property rights
Which of the above are assumptions behind the Coase Theorem?

Accepted Answer

A) a,b,and d 
B) a,c,and d 
C) a and d 
D) a only 
A) a,b,and d 
B) a,c,and d 
C) a and d 
D) a only

Question 12

Consider a chemical plant that discharges toxic fumes over a nearby community.To reduce the emissions of toxic fumes the firm can install pollution abatement devices.Figure 5-8 shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions.
-Refer to Figure 5-8.Suppose the emissions reduction target is currently established at 8 million tons.Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?

Accepted Answer

A) No,because there is a net cost represented by the area B + C. 
B) Yes,because the marginal benefit exceeds the marginal cost at 8 million tons. 
C) Yes,because toxic fumes are dangerous and must be eliminated at any cost. 
D) No,because the firms will pass the additional cost on to consumers. 
A) No,because there is a net cost represented by the area B + C. 
B) Yes,because the marginal benefit exceeds the marginal cost at 8 million tons. 
C) Yes,because toxic fumes are dangerous and must be eliminated at any cost. 
D) No,because the firms will pass the additional cost on to consumers.

Question 13

An advantage of imposing a tax on the producer that generates pollution is that

Accepted Answer

A) it forces the polluting producer to internalize the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers. 
A) it forces the polluting producer to internalize the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers.

Question 14

Conceptually,the efficient level of carbon emissions is the level for which

Accepted Answer

A) the marginal benefit of reducing carbon emissions is maximized. 
B) the marginal cost of reducing carbon emissions is minimized. 
C) the marginal benefit of reducing carbon emissions is equal to the marginal cost of reducing carbon emissions. 
D) the marginal benefit of reducing carbon emissions is minimized and the marginal cost of reducing carbon emissions is maximized. 
A) the marginal benefit of reducing carbon emissions is maximized. 
B) the marginal cost of reducing carbon emissions is minimized. 
C) the marginal benefit of reducing carbon emissions is equal to the marginal cost of reducing carbon emissions. 
D) the marginal benefit of reducing carbon emissions is minimized and the marginal cost of reducing carbon emissions is maximized.

Question 15

Figure 5-5 shows a market with an externality.The current market equilibrium output of Q1 is not the economically efficient output.The economically efficient output is Q2.
-Refer to Figure 5-5.Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality.The economically efficient output is Q2.In that case,diagram shows

Accepted Answer

A) the effect of a subsidy granted to producers of a good. 
B) the effect of an excess demand in a market. 
C) the effect of a positive externality in the consumption of a good. 
D) the effect of a negative externality in the consumption of a good. 
A) the effect of a subsidy granted to producers of a good. 
B) the effect of an excess demand in a market. 
C) the effect of a positive externality in the consumption of a good. 
D) the effect of a negative externality in the consumption of a good.

Question 16

Figure 5-14 shows the market for aviation security.Aviation security generates a positive externality because people who are not airline passengers benefit from aviation security.
-Refer to Figure 5-14 to answer the following questions.
a.In the absence of any government intervention what is the equilibrium level of security that airlines will supply? Using the diagram,denote this level,Q*.Briefly explain why this quantity is not the economically efficient level of aviation security.
b.In the diagram,illustrate the presence of positive externalities in the aviation security market.Label any new curve that you draw.
c.On your diagram identify the economically efficient level of aviation security.Denote this level Qe.
d.Explain how a government subsidy for the airlines can bring about the economically efficient aviation security level.Be sure to identify the size of the subsidy.

Accepted Answer

@#IMG-DLM& a.See the figure above.Q* is not the op

Question 17

Which of the following conditions holds in an economically efficient competitive market equilibrium?

Accepted Answer

A) The deadweight loss is positive but at a minimum. 
B) Producer and consumer surplus are exactly equal in size. 
C) There are no positive and no negative external effects from consumption and production. 
D) The marginal benefit of the last unit produced and consumed is maximized. 
A) The deadweight loss is positive but at a minimum. 
B) Producer and consumer surplus are exactly equal in size. 
C) There are no positive and no negative external effects from consumption and production. 
D) The marginal benefit of the last unit produced and consumed is maximized.

Question 18

In economics,the term "free rider" refers to

Accepted Answer

A) a person who evades taxes. 
B) a supervisor who delegates menial time-consuming activities to others. 
C) one who volunteers her services. 
D) one who waits for others to produce a good and then enjoys its benefits without paying for it. 
A) a person who evades taxes. 
B) a supervisor who delegates menial time-consuming activities to others. 
C) one who volunteers her services. 
D) one who waits for others to produce a good and then enjoys its benefits without paying for it.

Question 19

Should the level of pollution be reduced to zero and if not,then to what level?

Accepted Answer

No,the level of pollution should not be

Question 20

When production generates a negative externality,the true cost of production is the

Accepted Answer

A) private cost of production. 
B) public cost of production. 
C) social cost of production. 
D) average cost of production. 
A) private cost of production. 
B) public cost of production. 
C) social cost of production. 
D) average cost of production.

Exam 5: Externalities, environmental Policy, and Public Goods

Figure 5-3 -Refer to Figure 5-3.The deadweight loss due to the externality is represented by the area

A carbon tax which is designed to reduce pollution is an example of a

Public goods are distinguished by two primary characteristics.What are they?

The efficient level of paper production will occur where the

Which of the following exemplifies the tragedy of the commons?

When the federal government orders firms to use particular methods to reduce pollution,it is said to be using

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.

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

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.

How does a negative externality in production reduce economic efficiency?

Consider the following characteristics: a.low transactions costs B.small levels of pollution C.high levels of pollution D.clear assignment of property rights Which of the above are assumptions behind the Coase Theorem?

An advantage of imposing a tax on the producer that generates pollution is that

Conceptually,the efficient level of carbon emissions is the level for which

Which of the following conditions holds in an economically efficient competitive market equilibrium?

In economics,the term "free rider" refers to

Should the level of pollution be reduced to zero and if not,then to what level?

When production generates a negative externality,the true cost of production is the

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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