Question 1

Why does the existence of an external benefit lead to the production of less than the efficient quantity?

Accepted Answer

Buyers ignore the presence of an externa

Question 2

List and briefly define the three methods government can use to cope with an external cost,such as pollution.

Accepted Answer

The three methods are pollution limits,p

Question 3

The sum of the marginal private benefit and the marginal external benefit derived from eco-tourism in British Columbia is called the

Accepted Answer

A) total private benefit. 
B) net gain. 
C) total external benefit. 
D) marginal social benefit. 
E) total Coase benefit. 
A) total private benefit. 
B) net gain. 
C) total external benefit. 
D) marginal social benefit. 
E) total Coase benefit.

Question 4

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.If the government assesses the marginal external cost correctly,what is the amount of the pollution tax that eliminates the inefficiency?

Accepted Answer

A) $2 per pound 
B) $3 per pound 
C) $4 per pound 
D) $1 per pound 
E) None of the above answers is correct. 
A) $2 per pound 
B) $3 per pound 
C) $4 per pound 
D) $1 per pound 
E) None of the above answers is correct.

Question 5

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a ________ that equals the ________ of the pollution.

Accepted Answer

A) pollution charge;marginal social cost 
B) pollution charge;marginal external cost 
C) pollution tax;marginal social cost 
D) pollution tax;marginal external cost 
E) pollution subsidy;marginal social cost 
A) pollution charge;marginal social cost 
B) pollution charge;marginal external cost 
C) pollution tax;marginal social cost 
D) pollution tax;marginal external cost 
E) pollution subsidy;marginal social cost

Question 6

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.At 10 concerts,the

Accepted Answer

A) marginal private cost equals the marginal external cost. 
B) marginal social cost equals $60,000. 
C) marginal private cost is more than $40,000. 
D) marginal external cost equals $60,000. 
E) marginal external cost equals $80,000. 
A) marginal private cost equals the marginal external cost. 
B) marginal social cost equals $60,000. 
C) marginal private cost is more than $40,000. 
D) marginal external cost equals $60,000. 
E) marginal external cost equals $80,000.

Question 7

When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the

Accepted Answer

A) marginal social cost of production. 
B) marginal external cost of production. 
C) marginal private cost of production. 
D) marginal private benefit of consumption. 
E) marginal external benefit minus the marginal external cost. 
A) marginal social cost of production. 
B) marginal external cost of production. 
C) marginal private cost of production. 
D) marginal private benefit of consumption. 
E) marginal external benefit minus the marginal external cost.

Question 8

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

Accepted Answer

A) always equals the benefit the consumer derives from that good or service. 
B) equals the cost borne by people other than the producer. 
C) is the marginal private cost. 
D) is the external cost. 
E) is the marginal social cost. 
A) always equals the benefit the consumer derives from that good or service. 
B) equals the cost borne by people other than the producer. 
C) is the marginal private cost. 
D) is the external cost. 
E) is the marginal social cost.

Question 9

The benefit that Joan gets from eating cherries is an example of

Accepted Answer

A) when the external benefit equals the private benefit. 
B) a private benefit. 
C) an external benefit. 
D) an external cost. 
E) the marginal social cost of eating cherries. 
A) when the external benefit equals the private benefit. 
B) a private benefit. 
C) an external benefit. 
D) an external cost. 
E) the marginal social cost of eating cherries.

Question 10

Jacob pays $5,000 to paint his house because pollution from a nearby factory damaged the paint.To the factory,the $5,000 cost is

Accepted Answer

A) a private cost and not an external cost. 
B) an external cost and not a private cost. 
C) both a private cost and an external cost. 
D) neither a private cost nor an external cost. 
E) a private benefit because viewers will benefit from watching the extra hour of the show. 
A) a private cost and not an external cost. 
B) an external cost and not a private cost. 
C) both a private cost and an external cost. 
D) neither a private cost nor an external cost. 
E) a private benefit because viewers will benefit from watching the extra hour of the show.

Question 11

Which of the following is the best example of a transactions cost?

Accepted Answer

A) the value of the time spent negotiating a contract 
B) the price of a new set of tires 
C) the cost associated with producing a golf club 
D) the price of labor and materials used to produce a house 
E) the price of food 
A) the value of the time spent negotiating a contract 
B) the price of a new set of tires 
C) the cost associated with producing a golf club 
D) the price of labor and materials used to produce a house 
E) the price of food

Question 12

Externalities

Accepted Answer

A) are important in the areas of environment and education. 
B) only have a negative impact on people. 
C) deal with issues that are not our internal issues. 
D) affect the people who are responsible for production. 
E) are nonexistent in unregulated,competitive markets. 
A) are important in the areas of environment and education. 
B) only have a negative impact on people. 
C) deal with issues that are not our internal issues. 
D) affect the people who are responsible for production. 
E) are nonexistent in unregulated,competitive markets.

Question 13

Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would

Accepted Answer

A) produce the efficient amount. 
B) produce more than the efficient amount. 
C) produce some research,but less than the efficient amount. 
D) produce zero research. 
E) either produce more than or less than the efficient amount depending on whether the external benefit is on the production or consumption of the research. 
A) produce the efficient amount. 
B) produce more than the efficient amount. 
C) produce some research,but less than the efficient amount. 
D) produce zero research. 
E) either produce more than or less than the efficient amount depending on whether the external benefit is on the production or consumption of the research.

Question 14

Transactions costs are the

Accepted Answer

A) costs of using the Coase theorem. 
B) opportunity costs of conducting a transaction. 
C) external marginal costs of the externality. 
D) reason why taxes cannot affect the inefficiency resulting from an external cost. 
E) external costs when a firm pollutes. 
A) costs of using the Coase theorem. 
B) opportunity costs of conducting a transaction. 
C) external marginal costs of the externality. 
D) reason why taxes cannot affect the inefficiency resulting from an external cost. 
E) external costs when a firm pollutes.

Question 15

When the government uses a private subsidy in a market with an external benefit,to reach the efficient quantity of production,the subsidy must be equal to the marginal

Accepted Answer

A) social benefit. 
B) cost of production. 
C) private benefit. 
D) external benefit. 
E) external cost. 
A) social benefit. 
B) cost of production. 
C) private benefit. 
D) external benefit. 
E) external cost.

Question 16

-The above figure shows the market for fertilizer.When fertilizer is applied to lawns,it runs off into neighboring streams and ponds,killing fish and creating an external cost.
a.What is the equilibrium price and quantity of fertilizer in an unregulated,competitive market?
b.What is the efficient quantity of fertilizer?
c.Suppose government imposes a tax equal to the marginal external cost.What is the equilibrium price paid by consumers and the equilibrium quantity after implementation of the tax?
d.At the output level in part (c),how much is the tax?
e.How much tax revenue does government collect?
f.What is the deadweight loss borne by society if the externality is left uncorrected?

Accepted Answer

a.The equilibrium price is $1,000 a ton

Question 17

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the number of students going to college is ________ and the efficient number of students is ________.

Accepted Answer

A) 13 million students per year;16 million students per year 
B) 14 million students per year;16 million students per year 
C) 10 million students per year;14 million students per year 
D) 10 million students per year;13 million students per year 
E) 14 million students per year;10 million students per year 
A) 13 million students per year;16 million students per year 
B) 14 million students per year;16 million students per year 
C) 10 million students per year;14 million students per year 
D) 10 million students per year;13 million students per year 
E) 14 million students per year;10 million students per year

Question 18

Which of the following is an example of an external benefit?

Accepted Answer

A) a ton of coal burned in a power plant to produce electricity 
B) a car accident that crowds a major Los Angeles freeway 
C) the production of a slice of pizza 
D) the cleanup of a large lake 
E) the consumption of a can of Mountain Dew 
A) a ton of coal burned in a power plant to produce electricity 
B) a car accident that crowds a major Los Angeles freeway 
C) the production of a slice of pizza 
D) the cleanup of a large lake 
E) the consumption of a can of Mountain Dew

Question 19

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

Accepted Answer

A) the price and marginal private benefit 
B) the economically efficient output 
C) the price and the marginal social benefit 
D) the size of the deadweight loss 
E) the size of the external benefit and the price 
A) the price and marginal private benefit 
B) the economically efficient output 
C) the price and the marginal social benefit 
D) the size of the deadweight loss 
E) the size of the external benefit and the price

Question 20

A marketable permit

Accepted Answer

A) allows firms to pollute all they want without any cost. 
B) allows firms to buy and sell the right to pollute at government controlled prices. 
C) eliminates pollution by setting the price of pollution permits above the marginal cost of polluting. 
D) allows firms to buy and sell the right to pollute. 
E) is the Coase theorem solution to pollution. 
A) allows firms to pollute all they want without any cost. 
B) allows firms to buy and sell the right to pollute at government controlled prices. 
C) eliminates pollution by setting the price of pollution permits above the marginal cost of polluting. 
D) allows firms to buy and sell the right to pollute. 
E) is the Coase theorem solution to pollution.

Why does the existence of an external benefit lead to the production of less than the efficient quantity?

List and briefly define the three methods government can use to cope with an external cost,such as pollution.

The sum of the marginal private benefit and the marginal external benefit derived from eco-tourism in British Columbia is called the

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.If the government assesses the marginal external cost correctly,what is the amount of the pollution tax that eliminates the inefficiency?

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a that equals the of the pollution.

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.At 10 concerts,the

When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

The benefit that Joan gets from eating cherries is an example of

Jacob pays $5,000 to paint his house because pollution from a nearby factory damaged the paint.To the factory,the $5,000 cost is

Which of the following is the best example of a transactions cost?

Externalities

Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would

Transactions costs are the

When the government uses a private subsidy in a market with an external benefit,to reach the efficient quantity of production,the subsidy must be equal to the marginal

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the number of students going to college is and the efficient number of students is .

Which of the following is an example of an external benefit?

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

A marketable permit

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 9: Externalities: Pollution, education, and Health Care

Why does the existence of an external benefit lead to the production of less than the efficient quantity?

List and briefly define the three methods government can use to cope with an external cost,such as pollution.

The sum of the marginal private benefit and the marginal external benefit derived from eco-tourism in British Columbia is called the

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.If the government assesses the marginal external cost correctly,what is the amount of the pollution tax that eliminates the inefficiency?

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a ________ that equals the ________ of the pollution.

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.At 10 concerts,the

When using pollution charges to improve efficiency in a market with an external cost,regulators attempt to set the pollution charge equal to the

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service

The benefit that Joan gets from eating cherries is an example of

Jacob pays $5,000 to paint his house because pollution from a nearby factory damaged the paint.To the factory,the $5,000 cost is

Which of the following is the best example of a transactions cost?

Externalities

Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would

Transactions costs are the

When the government uses a private subsidy in a market with an external benefit,to reach the efficient quantity of production,the subsidy must be equal to the marginal

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the number of students going to college is ________ and the efficient number of students is ________.

Which of the following is an example of an external benefit?

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

A marketable permit

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Suppose a firm pollutes a river when it produces a product.To achieve the efficient amount of output,a government could impose a that equals the of the pollution.

-The figure above shows the market for college education in the United States.If the government does not intervene in this market,the number of students going to college is and the efficient number of students is .