Question 1

Which of the following statements is not correct?

Accepted Answer

A)  Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level. 
B)  Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution. 
C)  Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution. 
D)  Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment. 
A)  Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level. 
B)  Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution. 
C)  Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution. 
D)  Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment.

Question 2

Figure 10-11  
-Refer to Figure 10-11. Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is

Accepted Answer

A)  $5,880. 
B)  $9,480. 
C)  $13,230. 
D)  $15,360. 
A)  $5,880. 
B)  $9,480. 
C)  $13,230. 
D)  $15,360.

Question 3

Figure 10-9  
-Refer to Figure 10-9, Panel (b) and Panel (c). The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Accepted Answer

A)  Q2. 
B)  Q3. 
C)  Q4. 
D)  Q5. 
A)  Q2. 
B)  Q3. 
C)  Q4. 
D)  Q5.

Question 4

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0fire extinguisher entails the following:
-a private cost of $10;
-an external cost of $0;
-a private value of $9;
-an external benefit of $3.
-
-Refer to Scenario 10-4. Is the socially-optimal quantity of fire extinguishers less than, equal to, or greater than 500? Explain.

Accepted Answer

For the 500^t^hfire extinguisher,

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Gasoline taxes are an example of an EPA regulation. 
B)  Gasoline taxes are higher in many European countries than in the United States. 
C)  Gasoline taxes contribute to global warming. 
D)  Gasoline taxes are an example of a command-and-control policy. 
A)  Gasoline taxes are an example of an EPA regulation. 
B)  Gasoline taxes are higher in many European countries than in the United States. 
C)  Gasoline taxes contribute to global warming. 
D)  Gasoline taxes are an example of a command-and-control policy.

Question 6

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Accepted Answer

The new demand curve

Question 7

Emission controls on automobiles are an example of a

Accepted Answer

A)  corrective tax. 
B)  command-and-control policy to increase social efficiency. 
C)  policy that reduces pollution by allocating resources through market mechanisms. 
D)  policy to reduce congestion on urban freeways. 
A)  corrective tax. 
B)  command-and-control policy to increase social efficiency. 
C)  policy that reduces pollution by allocating resources through market mechanisms. 
D)  policy to reduce congestion on urban freeways.

Question 8

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 9

Firms that are involved in more than one type of business could be evidence of an attempt to

Accepted Answer

A)  increase private profit at the expense of consumers. 
B)  internalize some forms of positive externalities. 
C)  reduce the impact of government regulations on their business. 
D)  increase the private marginal cost of production. 
A)  increase private profit at the expense of consumers. 
B)  internalize some forms of positive externalities. 
C)  reduce the impact of government regulations on their business. 
D)  increase the private marginal cost of production.

Question 10

Industrial policy aims to

Accepted Answer

A)  reduce pollution by requiring factories to reduce their pollution by a certain number of tons per year. 
B)  reduce pollution by levying a tax on factories of a certain number of dollars for every ton of pollution that the factory emits. 
C)  encourage business firms to subsidize continuing education for their employees. 
D)  promote technology-enhancing industries. 
A)  reduce pollution by requiring factories to reduce their pollution by a certain number of tons per year. 
B)  reduce pollution by levying a tax on factories of a certain number of dollars for every ton of pollution that the factory emits. 
C)  encourage business firms to subsidize continuing education for their employees. 
D)  promote technology-enhancing industries.

Question 11

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Accepted Answer

A)  shift up by an amount equal to the subsidy. 
B)  shift down by an amount less than the subsidy. 
C)  shift down by an amount equal to the subsidy. 
D)  shift down by an amount greater than the subsidy. 
A)  shift up by an amount equal to the subsidy. 
B)  shift down by an amount less than the subsidy. 
C)  shift down by an amount equal to the subsidy. 
D)  shift down by an amount greater than the subsidy.

Question 12

Figure 10-11  
-Refer to Figure 10-11. "The social value of the last unit produced exceeds the private cost of the last unit produced by $13.50." This statement is correct at which quantity of output?

Accepted Answer

A)  210 units 
B)  270 units 
C)  330 units 
D)  390 units 
A)  210 units 
B)  270 units 
C)  330 units 
D)  390 units

Question 13

If gasoline taxes were significantly increased in the United States, then

Accepted Answer

A)  some of the government regulations that require automakers to produce more fuel-efficient cars would become unnecessary. 
B)  other taxes, such as income taxes, could be lowered. 
C)  it is likely that roads would become safer and the environment would become cleaner. 
D)  All of the above are correct. 
A)  some of the government regulations that require automakers to produce more fuel-efficient cars would become unnecessary. 
B)  other taxes, such as income taxes, could be lowered. 
C)  it is likely that roads would become safer and the environment would become cleaner. 
D)  All of the above are correct.

Question 14

Dioxin emission that results from the production of paper is a good example of a negative externality because

Accepted Answer

A)  self-interested paper firms are generally unaware of environmental regulations. 
B)  there are fines for producing too much dioxin. 
C)  self-interested paper producers will not consider the full cost of the dioxin pollution they create. 
D)  toxic emissions are the best example of an externality. 
A)  self-interested paper firms are generally unaware of environmental regulations. 
B)  there are fines for producing too much dioxin. 
C)  self-interested paper producers will not consider the full cost of the dioxin pollution they create. 
D)  toxic emissions are the best example of an externality.

Question 15

A corrective tax

Accepted Answer

A)  causes each factory to reduce pollution by the same amount. 
B)  assigns a legal pollution limit for firms. 
C)  places a price on the right to pollute. 
D)  costs society more than pollution regulations. 
A)  causes each factory to reduce pollution by the same amount. 
B)  assigns a legal pollution limit for firms. 
C)  places a price on the right to pollute. 
D)  costs society more than pollution regulations.

Question 16

When a particular negative externality affects a very large number of people, it is likely that

Accepted Answer

A)  government will not find it worthwhile to impose a corrective tax. 
B)  private solutions to the problem will dominate any attempt by government to alleviate the problem. 
C)  the solution to externalities suggested by the Coase theorem will work very well. 
D)  the solution to externalities suggested by the Coase theorem will not work. 
A)  government will not find it worthwhile to impose a corrective tax. 
B)  private solutions to the problem will dominate any attempt by government to alleviate the problem. 
C)  the solution to externalities suggested by the Coase theorem will work very well. 
D)  the solution to externalities suggested by the Coase theorem will not work.

Question 17

According to recent research, the gas tax in the United States is lower than the optimal level.

Accepted Answer

A) True 
 B)False

Question 18

Figure 10-12  
-Refer to Figure 10-12. An alternative label for the quantity   would be

Accepted Answer

The answer of Figure 10-12  
-Refer to Figure 10-12....

Question 19

Figure 10-11  
-Refer to Figure 10-11. On the

Accepted Answer

A)  390th unit of output, private value exceeds private cost. 
B)  390th unit of output, private value exceeds external value. 
C)  450th unit of output, private value exceeds social value. 
D)  450th unit of output, private cost exceeds social value. 
A)  390th unit of output, private value exceeds private cost. 
B)  390th unit of output, private value exceeds external value. 
C)  450th unit of output, private value exceeds social value. 
D)  450th unit of output, private cost exceeds social value.

Question 20

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

Which of the following statements is not correct?

Figure 10-11 -Refer to Figure 10-11. Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c). The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Which of the following statements is correct?

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Emission controls on automobiles are an example of a

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

Firms that are involved in more than one type of business could be evidence of an attempt to

Industrial policy aims to

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Figure 10-11 -Refer to Figure 10-11. "The social value of the last unit produced exceeds the private cost of the last unit produced by $13.50." This statement is correct at which quantity of output?

If gasoline taxes were significantly increased in the United States, then

Dioxin emission that results from the production of paper is a good example of a negative externality because

A corrective tax

When a particular negative externality affects a very large number of people, it is likely that

According to recent research, the gas tax in the United States is lower than the optimal level.

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity would be

Figure 10-11 -Refer to Figure 10-11. On the

Firms that can reduce pollution easily would be willing to sell their pollution permits.

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 Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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