Question 1

What is the rationale behind a marketable emission allowance scheme?

Accepted Answer

A) to create of a market for externalities: the scheme brings together buyers and sellers of marketable permits 
B) to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance 
C) to raise revenue for the government through the sale of emission permits and at the same time set an emissions target 
D) to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance 
A) to create of a market for externalities: the scheme brings together buyers and sellers of marketable permits 
B) to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance 
C) to raise revenue for the government through the sale of emission permits and at the same time set an emissions target 
D) to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

Question 2

Figure 4-9   Figure 4-9 shows a market with a negative externality.
-Refer to Figure 4-9.The private profit maximizing quantity for the firm is

Accepted Answer

A) Qa. 
B) Qb. 
C) Qb - Qd. 
D) Qd. 
A) Qa. 
B) Qb. 
C) Qb - Qd. 
D) Qd.

Question 3

Figure 4-12   Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease.Thus,the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 4-12.
-Refer to Figure 4-12.One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidize these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits?

Accepted Answer

A) PE 
B) (PE - PG) 
C) (PE - PF) 
D) (PF - PG) 
A) PE 
B) (PE - PG) 
C) (PE - PF) 
D) (PF - PG)

Question 4

Figure 4-8   Figure 4-8 shows a market with an externality.The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output.The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 4-8.If,because of an externality,the economically efficient output is Q2 and not the current equilibrium output of Q1,what does S1 represent?

Accepted Answer

A) the market supply curve reflecting external cost 
B) the market supply curve reflecting implicit cost 
C) the market supply curve reflecting social cost 
D) the market supply curve reflecting private cost 
A) the market supply curve reflecting external cost 
B) the market supply curve reflecting implicit cost 
C) the market supply curve reflecting social cost 
D) the market supply curve reflecting private cost

Question 5

Figure 4-10  
-Refer to Figure 4-10.The private profit maximizing output level is

Accepted Answer

A) Qm. 
B) Qn. 
C) Qo. 
D) Qo - Qm. 
A) Qm. 
B) Qn. 
C) Qo. 
D) Qo - Qm.

Question 6

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which

Accepted Answer

A) the sum of consumer surplus and producer surplus is at a maximum. 
B) economic surplus is minimized. 
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. 
D) the sum of consumer surplus and producer surplus is minimized. 
A) the sum of consumer surplus and producer surplus is at a maximum. 
B) economic surplus is minimized. 
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. 
D) the sum of consumer surplus and producer surplus is minimized.

Question 7

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Accepted Answer

A) True 
 B)False

Question 8

Figure 4-4  
-Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

A) If the price of pecans is $3 the output will be economically efficient but there will be a deadweight loss. 
B) If the price of pecans is $9 consumers will purchase more than the economically efficient output. 
C) Both 40,000 pounds and 12,000 pounds are economically inefficient rates of output. 
D) If the price of pecans is $3 producers will sell 12,000 pounds of pecans but this output will be economically inefficient. 
A) If the price of pecans is $3 the output will be economically efficient but there will be a deadweight loss. 
B) If the price of pecans is $9 consumers will purchase more than the economically efficient output. 
C) Both 40,000 pounds and 12,000 pounds are economically inefficient rates of output. 
D) If the price of pecans is $3 producers will sell 12,000 pounds of pecans but this output will be economically inefficient.

Question 9

If equilibrium is achieved in a competitive market

Accepted Answer

A) there is no deadweight loss. 
B) the deadweight loss will be maximized. 
C) the deadweight loss will equal the sum of consumer surplus and producer surplus. 
D) the deadweight loss will be the same as the opportunity cost of the last unit of output sold. 
A) there is no deadweight loss. 
B) the deadweight loss will be maximized. 
C) the deadweight loss will equal the sum of consumer surplus and producer surplus. 
D) the deadweight loss will be the same as the opportunity cost of the last unit of output sold.

Question 10

Briefly explain the command-and-control approach in dealing with an externality such as pollution.Give an example of the U.S.government using the command-and-control approach to deal with the pollution problem.

Accepted Answer

Command-and-control is an approach that

Question 11

Table 4-3
   Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-3.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor supplied?

Accepted Answer

A) 40,000 
B) 570,000 
C) 610,000 
D) 1,180,000 
A) 40,000 
B) 570,000 
C) 610,000 
D) 1,180,000

What is the rationale behind a marketable emission allowance scheme?

Figure 4-9 Figure 4-9 shows a market with a negative externality. -Refer to Figure 4-9.The private profit maximizing quantity for the firm is

Figure 4-10 -Refer to Figure 4-10.The private profit maximizing output level is

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

If equilibrium is achieved in a competitive market

Briefly explain the command-and-control approach in dealing with an externality such as pollution.Give an example of the U.S.government using the command-and-control approach to deal with the pollution problem.

Table 4-3 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-3.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor supplied?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 4: Market Efficiency and Market Failure

What is the rationale behind a marketable emission allowance scheme?

Figure 4-9 Figure 4-9 shows a market with a negative externality. -Refer to Figure 4-9.The private profit maximizing quantity for the firm is

Figure 4-10 -Refer to Figure 4-10.The private profit maximizing output level is

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

If equilibrium is achieved in a competitive market

Briefly explain the command-and-control approach in dealing with an externality such as pollution.Give an example of the U.S.government using the command-and-control approach to deal with the pollution problem.

Table 4-3 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-3.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor supplied?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters