Question 1

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500,then the

Accepted Answer

A)  marginal benefit of a ton of cement will equal $4,000. 
B)  total cost of producing a ton of cement is $7,500. 
C)  marginal external cost of producing a ton of cement is $500. 
D)  marginal external cost of producing a ton of cement is $7,500. 
E)  marginal external cost of producing a ton of cement is $4,000. 
A)  marginal benefit of a ton of cement will equal $4,000. 
B)  total cost of producing a ton of cement is $7,500. 
C)  marginal external cost of producing a ton of cement is $500. 
D)  marginal external cost of producing a ton of cement is $7,500. 
E)  marginal external cost of producing a ton of cement is $4,000.

Question 2

If the production of a good causes pollution (an external cost),is the unregulated competitive market equilibrium of that product efficient?

Accepted Answer

The presence of pollution means that the

Question 3

What is the Coase theorem? What conditions need to be present for this theorem to work?

Accepted Answer

The Coase theorem states that if propert

Question 4

The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are

Accepted Answer

A)  inefficient. 
B)  efficient. 
C)  inequitable. 
D)  illegal. 
E)  unnecessary. 
A)  inefficient. 
B)  efficient. 
C)  inequitable. 
D)  illegal. 
E)  unnecessary.

Question 5

If a product has an external benefit,how does its marginal private benefit compare to its marginal social benefit?

Accepted Answer

A)  Marginal private benefit is less than marginal social benefit. 
B)  Marginal private benefit is greater than marginal social benefit. 
C)  At low quantities, marginal private benefit is less than marginal social benefit but at high quantities, marginal private benefit is greater than marginal social benefit. 
D)  At low quantities, marginal private benefit is greater than marginal social benefit but at high quantities, marginal private benefit is less than marginal social benefit. 
E)  Marginal private benefit cannot be compared to marginal social benefit. 
A)  Marginal private benefit is less than marginal social benefit. 
B)  Marginal private benefit is greater than marginal social benefit. 
C)  At low quantities, marginal private benefit is less than marginal social benefit but at high quantities, marginal private benefit is greater than marginal social benefit. 
D)  At low quantities, marginal private benefit is greater than marginal social benefit but at high quantities, marginal private benefit is less than marginal social benefit. 
E)  Marginal private benefit cannot be compared to marginal social benefit.

Question 6

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

Accepted Answer

A)  removing property rights 
B)  subsidizing production 
C)  marketable permits 
D)  running a lottery 
E)  imposing Coasian taxes 
A)  removing property rights 
B)  subsidizing production 
C)  marketable permits 
D)  running a lottery 
E)  imposing Coasian taxes

Question 7

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

A)  exceeds; above the efficient quantity 
B)  exceeds; below the efficient quantity 
C)  is below; above the efficient quantity 
D)  is below; below the efficient quantity 
E)  equals; efficient 
A)  exceeds; above the efficient quantity 
B)  exceeds; below the efficient quantity 
C)  is below; above the efficient quantity 
D)  is below; below the efficient quantity 
E)  equals; efficient

Question 8

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

Accepted Answer

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

Question 9

To ensure all students are protected from getting the flu this year,your school offers free flu shots.What type of externality exists in this example?

Accepted Answer

A)  negative consumption externality 
B)  positive consumption externality 
C)  positive production externality 
D)  negative production externality 
E)  neutral externality. 
A)  negative consumption externality 
B)  positive consumption externality 
C)  positive production externality 
D)  negative production externality 
E)  neutral externality.

Question 10

Marginal private cost

Accepted Answer

A)  is always zero if there is an external cost. 
B)  equals the marginal social cost only if the marginal external cost is positive. 
C)  is the cost of producing an additional unit of a good or service that is paid by the producer of that good or service. 
D)  the cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service. 
E)  the cost of producing an additional unit of a good or service that is paid by the entire society. 
A)  is always zero if there is an external cost. 
B)  equals the marginal social cost only if the marginal external cost is positive. 
C)  is the cost of producing an additional unit of a good or service that is paid by the producer of that good or service. 
D)  the cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service. 
E)  the cost of producing an additional unit of a good or service that is paid by the entire society.

Question 11

To eliminate the inefficiency resulting from pollution that creates an external cost,the government can impose a pollution tax on producers that is equal to the

Accepted Answer

A)  MSB. 
B)  MC. 
C)  marginal external cost. 
D)  MSC. 
E)  price. 
A)  MSB. 
B)  MC. 
C)  marginal external cost. 
D)  MSC. 
E)  price.

Question 12

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Accepted Answer

A)  The size of marginal external benefit must be accurately determined. 
B)  The government must produce the product. 
C)  Private production and private consumption must both be directly subsidized. 
D)  The quantity demanded must be decreased to the efficient amount. 
E)  Private production without the subsidy must be prohibited. 
A)  The size of marginal external benefit must be accurately determined. 
B)  The government must produce the product. 
C)  Private production and private consumption must both be directly subsidized. 
D)  The quantity demanded must be decreased to the efficient amount. 
E)  Private production without the subsidy must be prohibited.

Question 13

If a product has zero external costs,then

Accepted Answer

A)  marginal social cost equals marginal private cost. 
B)  marginal social cost is greater than marginal private cost. 
C)  marginal social cost is less than marginal private cost. 
D)  marginal social cost equals zero. 
E)  We need more information to determine the relationship between marginal private cost and marginal social cost. 
A)  marginal social cost equals marginal private cost. 
B)  marginal social cost is greater than marginal private cost. 
C)  marginal social cost is less than marginal private cost. 
D)  marginal social cost equals zero. 
E)  We need more information to determine the relationship between marginal private cost and marginal social cost.

Question 14

Suppose two neighborhoods with 10 homes each in Buffalo,New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000,the external cost of the dump is

Accepted Answer

A)  $400,000. 
B)  $1,300,000. 
C)  $900,000. 
D)  $500,000. 
E)  $90,000. 
A)  $400,000. 
B)  $1,300,000. 
C)  $900,000. 
D)  $500,000. 
E)  $90,000.

Question 15

The additional benefit that Marvin gets from being vaccinated against the flu is known as the

Accepted Answer

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

Question 16

Explain the difference between a negative production externality and a negative consumption externality.

Accepted Answer

A negative production externality occurs

Question 17

-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city.If the marginal external cost is $10 per ton at every quantity of steel produced,the equilibrium quantity when the steel industry is unregulated is ________ tons per week.

Accepted Answer

A)  5 
B)  15 
C)  20 
D)  25 
E)  10 
A)  5 
B)  15 
C)  20 
D)  25 
E)  10

Question 18

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.The government imposes the pollution tax shown in the above figure.What quantity is produced after the pollution tax is imposed?

Accepted Answer

A)  zero pounds 
B)  80 million pounds 
C)  160 million pounds 
D)  more than 160 million pounds 
E)  more than 80 million pounds and less than 160 million pounds. 
A)  zero pounds 
B)  80 million pounds 
C)  160 million pounds 
D)  more than 160 million pounds 
E)  more than 80 million pounds and less than 160 million pounds.

Question 19

-The figure above shows the market for college education.Left to itself without any government intervention,a competitive market would create a deadweight loss equal to

Accepted Answer

A)  zero. 
B)  the area d. 
C)  the area a + c. 
D)  the area b + c. 
E)  the area b + d. 
A)  zero. 
B)  the area d. 
C)  the area a + c. 
D)  the area b + c. 
E)  the area b + d.

Question 20

For a product with an external cost,the supply curve

Accepted Answer

A)  represents the various quantities people can buy. 
B)  is the same as the marginal private cost curve. 
C)  is the same as the marginal social cost curve. 
D)  is the same as the marginal external cost curve. 
E)  is undefined. 
A)  represents the various quantities people can buy. 
B)  is the same as the marginal private cost curve. 
C)  is the same as the marginal social cost curve. 
D)  is the same as the marginal external cost curve. 
E)  is undefined.

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500,then the

If the production of a good causes pollution (an external cost),is the unregulated competitive market equilibrium of that product efficient?

What is the Coase theorem? What conditions need to be present for this theorem to work?

The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are

If a product has an external benefit,how does its marginal private benefit compare to its marginal social benefit?

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

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

To ensure all students are protected from getting the flu this year,your school offers free flu shots.What type of externality exists in this example?

Marginal private cost

To eliminate the inefficiency resulting from pollution that creates an external cost,the government can impose a pollution tax on producers that is equal to the

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

If a product has zero external costs,then

Suppose two neighborhoods with 10 homes each in Buffalo,New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000,the external cost of the dump is

The additional benefit that Marvin gets from being vaccinated against the flu is known as the

Explain the difference between a negative production externality and a negative consumption externality.

-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city.If the marginal external cost is $10 per ton at every quantity of steel produced,the equilibrium quantity when the steel industry is unregulated is ________ tons per week.

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.The government imposes the pollution tax shown in the above figure.What quantity is produced after the pollution tax is imposed?

-The figure above shows the market for college education.Left to itself without any government intervention,a competitive market would create a deadweight loss equal to

For a product with an external cost,the supply curve

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

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500,then the

If the production of a good causes pollution (an external cost),is the unregulated competitive market equilibrium of that product efficient?

What is the Coase theorem? What conditions need to be present for this theorem to work?

The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are

If a product has an external benefit,how does its marginal private benefit compare to its marginal social benefit?

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

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

To ensure all students are protected from getting the flu this year,your school offers free flu shots.What type of externality exists in this example?

Marginal private cost

To eliminate the inefficiency resulting from pollution that creates an external cost,the government can impose a pollution tax on producers that is equal to the

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

If a product has zero external costs,then

Suppose two neighborhoods with 10 homes each in Buffalo,New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000,the external cost of the dump is

The additional benefit that Marvin gets from being vaccinated against the flu is known as the

Explain the difference between a negative production externality and a negative consumption externality.

-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city.If the marginal external cost is $10 per ton at every quantity of steel produced,the equilibrium quantity when the steel industry is unregulated is ________ tons per week.

-The figure above shows the market for the chemical hydrogen sulfide,the production of which creates an external cost.The government imposes the pollution tax shown in the above figure.What quantity is produced after the pollution tax is imposed?

-The figure above shows the market for college education.Left to itself without any government intervention,a competitive market would create a deadweight loss equal to

For a product with an external cost,the supply curve

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