Question 1

Suppose Julie plants a beautiful garden in her front yard.The benefits of the garden to Julie and to her neighbors equals the

Accepted Answer

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

Question 2

Vouchers given to consumers

Accepted Answer

A)  increase the demand for a good. 
B)  decrease the demand for a good. 
C)  increase the supply of a good. 
D)  decrease the supply of a good. 
E)  increase both the demand for the good and the supply of the good. 
A)  increase the demand for a good. 
B)  decrease the demand for a good. 
C)  increase the supply of a good. 
D)  decrease the supply of a good. 
E)  increase both the demand for the good and the supply of the good.

Question 3

Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?

Accepted Answer

A)  removing property rights 
B)  subsidizing production 
C)  marketable permits 
D)  lottery 
E)  vouchers 
A)  removing property rights 
B)  subsidizing production 
C)  marketable permits 
D)  lottery 
E)  vouchers

Question 4

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

Accepted Answer

A)  $250 thousand 
B)  $125 thousand 
C)  $150 thousand 
D)  $50 thousand 
E)  zero 
A)  $250 thousand 
B)  $125 thousand 
C)  $150 thousand 
D)  $50 thousand 
E)  zero

Question 5

Marginal social cost is the

Accepted Answer

A)  price a consumer pays for one more unit of a good. 
B)  cost a producer incurs producing one more unit of a good. 
C)  cost of producing one more unit of a good that falls on someone other than the producer. 
D)  sum of the cost a producer incurs from producing one more unit of a good plus the cost of producing one more unit of a good that falls on someone other than the producer. 
E)  same as marginal cost only if there is an external cost when the good is produced. 
A)  price a consumer pays for one more unit of a good. 
B)  cost a producer incurs producing one more unit of a good. 
C)  cost of producing one more unit of a good that falls on someone other than the producer. 
D)  sum of the cost a producer incurs from producing one more unit of a good plus the cost of producing one more unit of a good that falls on someone other than the producer. 
E)  same as marginal cost only if there is an external cost when the good is produced.

Question 6

A problem with pollution charges or taxes as a solution to pollution is that

Accepted Answer

A)  people don't want the government to regulate industry. 
B)  the necessary information about the polluting industry is costly and usually unavailable. 
C)  taxes are already too high. 
D)  pollution would still continue. 
E)  the producers do not want the property right to their pollution. 
A)  people don't want the government to regulate industry. 
B)  the necessary information about the polluting industry is costly and usually unavailable. 
C)  taxes are already too high. 
D)  pollution would still continue. 
E)  the producers do not want the property right to their pollution.

Question 7

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 100 billion kilowatt hours are produced is

Accepted Answer

A)  0¢ per kilowatt. 
B)  5¢ per kilowatt. 
C)  10¢ per kilowatt. 
D)  15¢ per kilowatt. 
E)  20¢ per kilowatt. 
A)  0¢ per kilowatt. 
B)  5¢ per kilowatt. 
C)  10¢ per kilowatt. 
D)  15¢ per kilowatt. 
E)  20¢ per kilowatt.

Question 8

The Coase theorem deals with the problem of pollution by

Accepted Answer

A)  giving the government regulatory power over polluters. 
B)  making all polluters stop polluting. 
C)  establishing and enforcing private property rights. 
D)  having the government take over ownership of all polluting processes. 
E)  allowing the government to set the proper emission charge. 
A)  giving the government regulatory power over polluters. 
B)  making all polluters stop polluting. 
C)  establishing and enforcing private property rights. 
D)  having the government take over ownership of all polluting processes. 
E)  allowing the government to set the proper emission charge.

Question 9

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 10

-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 11

Education has an external benefit.So to achieve the efficient level of education,an education voucher must equal the difference between the

Accepted Answer

A)  marginal (private) cost and the marginal social benefit. 
B)  marginal (private) benefit and the marginal social benefit. 
C)  marginal social benefit and the marginal (private) cost. 
D)  dollar price and marginal (private) cost. 
E)  marginal (private) cost and the marginal social cost. 
A)  marginal (private) cost and the marginal social benefit. 
B)  marginal (private) benefit and the marginal social benefit. 
C)  marginal social benefit and the marginal (private) cost. 
D)  dollar price and marginal (private) cost. 
E)  marginal (private) cost and the marginal social cost.

Question 12

If a good has an external cost,then the marginal private cost curve

Accepted Answer

A)  lies below then the marginal social cost curve. 
B)  lies above the marginal social cost curve. 
C)  lies below the horizontal axis. 
D)  is the same as the marginal external cost curve. 
E)  is undefined because the firms' costs are not equal to the social costs. 
A)  lies below then the marginal social cost curve. 
B)  lies above the marginal social cost curve. 
C)  lies below the horizontal axis. 
D)  is the same as the marginal external cost curve. 
E)  is undefined because the firms' costs are not equal to the social costs.

Question 13

The marginal social cost of producing a good or service is the

Accepted Answer

A)  cost of producing an additional unit borne by the producer. 
B)  cost of producing an additional unit borne by people other than the producer. 
C)  sum of the marginal private cost and the marginal external cost. 
D)  same as marginal external cost. 
E)  sum of the marginal private cost and the marginal external cost minus the marginal social benefit. 
A)  cost of producing an additional unit borne by the producer. 
B)  cost of producing an additional unit borne by people other than the producer. 
C)  sum of the marginal private cost and the marginal external cost. 
D)  same as marginal external cost. 
E)  sum of the marginal private cost and the marginal external cost minus the marginal social benefit.

Question 14

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10,what is the marginal social cost?

Accepted Answer

A)  $0.20 
B)  $3.00 
C)  $0.03 
D)  $0.40 
E)  None of the above answers is correct. 
A)  $0.20 
B)  $3.00 
C)  $0.03 
D)  $0.40 
E)  None of the above answers is correct.

Question 15

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

Accepted Answer

A)  20 million per year. 
B)  exactly 10 million per year. 
C)  between 15 and 20 million per year. 
D)  less than 10 million per year. 
E)  more than 10 million and less than 15 million. 
A)  20 million per year. 
B)  exactly 10 million per year. 
C)  between 15 and 20 million per year. 
D)  less than 10 million per year. 
E)  more than 10 million and less than 15 million.

Question 16

If the government provides a subsidy to producers,what is the effect of this policy in a supply and demand diagram?

Accepted Answer

A)  The demand curve shifts leftward and the price rises. 
B)  The supply curve shifts rightward and the price falls. 
C)  The supply curve shifts leftward and the price falls. 
D)  The supply curve shifts leftward and the price rises. 
E)  The demand curve shifts rightward and the price rises. 
A)  The demand curve shifts leftward and the price rises. 
B)  The supply curve shifts rightward and the price falls. 
C)  The supply curve shifts leftward and the price falls. 
D)  The supply curve shifts leftward and the price rises. 
E)  The demand curve shifts rightward and the price rises.

Question 17

Explain the process by which a private subsidy corrects an external benefit.

Accepted Answer

If a good or service has an external ben

Question 18

Which of the following best describes an externality?

Accepted Answer

A)  something that is external to the economy 
B)  a sales tax on a good in addition to the market price 
C)  an effect of a transaction felt by someone other than the buyer or seller 
D)  anything produced in other countries 
E)  a change from what is normal 
A)  something that is external to the economy 
B)  a sales tax on a good in addition to the market price 
C)  an effect of a transaction felt by someone other than the buyer or seller 
D)  anything produced in other countries 
E)  a change from what is normal

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

-Use the figure above to answer this question.Explain what the marginal social cost curve and the marginal external cost mean.In the figure,if the market is competitive and unregulated,what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

Accepted Answer

@#IMG-DLM& The marginal social cost curve shows th

Suppose Julie plants a beautiful garden in her front yard.The benefits of the garden to Julie and to her neighbors equals the

Vouchers given to consumers

Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

Marginal social cost is the

A problem with pollution charges or taxes as a solution to pollution is that

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 100 billion kilowatt hours are produced is

The Coase theorem deals with the problem of pollution by

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

-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?

Education has an external benefit.So to achieve the efficient level of education,an education voucher must equal the difference between the

If a good has an external cost,then the marginal private cost curve

The marginal social cost of producing a good or service is the

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10,what is the marginal social cost?

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

If the government provides a subsidy to producers,what is the effect of this policy in a supply and demand diagram?

Explain the process by which a private subsidy corrects an external benefit.

Which of the following best describes an externality?

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

-Use the figure above to answer this question.Explain what the marginal social cost curve and the marginal external cost mean.In the figure,if the market is competitive and unregulated,what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 10: Externalities

Suppose Julie plants a beautiful garden in her front yard.The benefits of the garden to Julie and to her neighbors equals the

Vouchers given to consumers

Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

Marginal social cost is the

A problem with pollution charges or taxes as a solution to pollution is that

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal external cost when 100 billion kilowatt hours are produced is

The Coase theorem deals with the problem of pollution by

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

-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?

Education has an external benefit.So to achieve the efficient level of education,an education voucher must equal the difference between the

If a good has an external cost,then the marginal private cost curve

The marginal social cost of producing a good or service is the

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10,what is the marginal social cost?

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

If the government provides a subsidy to producers,what is the effect of this policy in a supply and demand diagram?

Explain the process by which a private subsidy corrects an external benefit.

Which of the following best describes an externality?

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

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters