Question 1

In an unregulated market with an external benefit,the

Accepted Answer

A)  quantity produced is greater than the efficient quantity. 
B)  price charged is too high for efficiency. 
C)  quantity produced is less than the efficient quantity. 
D)  producer is causing pollution but not paying for it. 
E)  government might impose a tax to help move the market toward the efficient amount of production. 
A)  quantity produced is greater than the efficient quantity. 
B)  price charged is too high for efficiency. 
C)  quantity produced is less than the efficient quantity. 
D)  producer is causing pollution but not paying for it. 
E)  government might impose a tax to help move the market toward the efficient amount of production.

Question 2

The marginal cost of production that is borne by the entire society is called the marginal

Accepted Answer

A)  private cost. 
B)  social cost. 
C)  external cost. 
D)  public cost. 
E)  user cost. 
A)  private cost. 
B)  social cost. 
C)  external cost. 
D)  public cost. 
E)  user cost.

Question 3

Education leads to external benefits because

Accepted Answer

A)  the people who become better educated get better jobs. 
B)  better educated people commit fewer crimes. 
C)  better educated people are less lazy. 
D)  little pollution is created when educating people. 
E)  better educated people are more productive. 
A)  the people who become better educated get better jobs. 
B)  better educated people commit fewer crimes. 
C)  better educated people are less lazy. 
D)  little pollution is created when educating people. 
E)  better educated people are more productive.

Question 4

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.

Question 5

When Keisha receives a flu vaccination,the benefit from her flu shot enjoyed by her friends is the

Accepted Answer

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

Question 6

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 7

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

Accepted Answer

A)  0¢ 
B)  7.5¢ 
C)  10¢ 
D)  15¢ 
E)  2.5¢ 
A)  0¢ 
B)  7.5¢ 
C)  10¢ 
D)  15¢ 
E)  2.5¢

Question 8

A landfill site produces an obnoxious odor.Homes downwind of the site rent for $1000 per month while homes upwind of the site rent for $1500 per month.If the odor is the only detectable difference between two neighborhoods,the difference in the rent is the ________ of the odor.

Accepted Answer

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

Question 9

-The figure above shows the market for polio vaccination in Pakistan.Polio vaccination confers an external benefit because one person's vaccination makes it less likely that other people will catch polio.
a.If the market is competitive and left unregulated,how many doses of vaccine will be administered?
b.If the Melinda and Bill Gates Foundation underwrites the cost of the vaccine by paying for a large fraction of the preparation and delivery cost,what will happen to the number of doses administered? Why?

Accepted Answer

a.If the market is competitive and left

Question 10

MSB equals

Accepted Answer

A)  MC + the marginal external cost. 
B)  MC + the marginal external benefit. 
C)  MB + the marginal external cost. 
D)  MB + the marginal external benefit. 
E)  MB + MC. 
A)  MC + the marginal external cost. 
B)  MC + the marginal external benefit. 
C)  MB + the marginal external cost. 
D)  MB + the marginal external benefit. 
E)  MB + MC.

Question 11

-When young students are hungry,they can be disruptive and inattentive in class.Thus,providing lunch to students has external benefits.The figure above represents the market for school lunches before and after government vouchers are issued.
a.What is the unregulated private market equilibrium?
b.What is the efficient quantity of lunches?
c.What is the amount of the voucher necessary to move the economy to the efficient number of lunches?
d.When vouchers are used,what is the dollar price of the lunch that suppliers receive and what is the dollar price that consumers pay when the voucher is used?

Accepted Answer

a.If the market is left unregulated,4 mi

Question 12

Some policymakers have proposed giving parents of children in poorly performing schools tax dollars to help send their children to private schools.This proposal is an example of

Accepted Answer

A)  vouchers. 
B)  public provision. 
C)  external costs. 
D)  taxes. 
E)  correcting an externality using a government good. 
A)  vouchers. 
B)  public provision. 
C)  external costs. 
D)  taxes. 
E)  correcting an externality using a government good.

Question 13

A marginal external cost of a product is equal to

Accepted Answer

A)  what the producer has to pay to hire resources to produce another unit. 
B)  the cost someone other than the producer incurs when another unit is produced. 
C)  the cost the producer incurs to produce another unit. 
D)  what the consumer must pay when he or she buys the good or service. 
E)  None of these answers describes a marginal external cost. 
A)  what the producer has to pay to hire resources to produce another unit. 
B)  the cost someone other than the producer incurs when another unit is produced. 
C)  the cost the producer incurs to produce another unit. 
D)  what the consumer must pay when he or she buys the good or service. 
E)  None of these answers describes a marginal external cost.

Question 14

When there is a marginal external ________ producers take account only of marginal private cost and produce ________ than the efficient quantity.
A) cost; more
B) cost; less
C) benefit; more
D) benefit; less
E) increase; more

Accepted Answer

The answer of When there is a marginal external ________...

Question 15

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 16

-The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

Accepted Answer

A)  $1,600 
B)  $1,200 
C)  $1,000 
D)  $600 
E)  $400 
A)  $1,600 
B)  $1,200 
C)  $1,000 
D)  $600 
E)  $400

Question 17

-The figure above shows a tax imposed on a good with an external cost.The area of the rectangle abcd equals

Accepted Answer

A)  the MSB. 
B)  the total tax revenue collected by the government. 
C)  the amount of pollution tax per ton. 
D)  the MC. 
E)  the deadweight loss. 
A)  the MSB. 
B)  the total tax revenue collected by the government. 
C)  the amount of pollution tax per ton. 
D)  the MC. 
E)  the deadweight loss.

Question 18

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 education is provided by public colleges,where tuition is set at $10,000 a year.When the market is in equilibrium,the marginal social benefit is ________,the marginal cost is ________,and the number of students enrolled is ________.

Accepted Answer

A)  $25,000; $25,000; efficient 
B)  $25,000; $10,000; inefficient 
C)  $15,000; $25,000; inefficient 
D)  $15,000; $15,000; efficient 
E)  $25,000; $15,000; inefficient 
A)  $25,000; $25,000; efficient 
B)  $25,000; $10,000; inefficient 
C)  $15,000; $25,000; inefficient 
D)  $15,000; $15,000; efficient 
E)  $25,000; $15,000; inefficient

Question 19

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.

Question 20

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal

Accepted Answer

A)  external cost. 
B)  private cost. 
C)  social cost. 
D)  social benefit. 
E)  None of the above answers is correct. 
A)  external cost. 
B)  private cost. 
C)  social cost. 
D)  social benefit. 
E)  None of the above answers is correct.

In an unregulated market with an external benefit,the

The marginal cost of production that is borne by the entire society is called the marginal

Education leads to external benefits because

A marketable permit

When Keisha receives a flu vaccination,the benefit from her flu shot enjoyed by her friends is the

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

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

A landfill site produces an obnoxious odor.Homes downwind of the site rent for $1000 per month while homes upwind of the site rent for $1500 per month.If the odor is the only detectable difference between two neighborhoods,the difference in the rent is the ________ of the odor.

MSB equals

Some policymakers have proposed giving parents of children in poorly performing schools tax dollars to help send their children to private schools.This proposal is an example of

A marginal external cost of a product is equal to

When there is a marginal external producers take account only of marginal private cost and produce than the efficient quantity. A) cost; more B) cost; less C) benefit; more D) benefit; less E) increase; more

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 costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

-The figure above shows a tax imposed on a good with an external cost.The area of the rectangle abcd equals

A marketable permit

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal

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

In an unregulated market with an external benefit,the

The marginal cost of production that is borne by the entire society is called the marginal

Education leads to external benefits because

A marketable permit

When Keisha receives a flu vaccination,the benefit from her flu shot enjoyed by her friends is the

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

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

A landfill site produces an obnoxious odor.Homes downwind of the site rent for $1000 per month while homes upwind of the site rent for $1500 per month.If the odor is the only detectable difference between two neighborhoods,the difference in the rent is the ________ of the odor.

MSB equals

Some policymakers have proposed giving parents of children in poorly performing schools tax dollars to help send their children to private schools.This proposal is an example of

A marginal external cost of a product is equal to

When there is a marginal external ________ producers take account only of marginal private cost and produce ________ than the efficient quantity. A) cost; more B) cost; less C) benefit; more D) benefit; less E) increase; more

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 costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?

-The figure above shows a tax imposed on a good with an external cost.The area of the rectangle abcd equals

A marketable permit

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal

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

When there is a marginal external producers take account only of marginal private cost and produce than the efficient quantity. A) cost; more B) cost; less C) benefit; more D) benefit; less E) increase; more

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.