Question 1

Which of the following is true?

Accepted Answer

A)  MSB = MB + Marginal external benefit 
B)  MB = Marginal external benefit - MSB 
C)  MB = Marginal external benefit + MSC 
D)  MSB = Marginal external cost - marginal external benefit 
E)  MSB = MB + Marginal external benefit - Marginal external cost 
A)  MSB = MB + Marginal external benefit 
B)  MB = Marginal external benefit - MSB 
C)  MB = Marginal external benefit + MSC 
D)  MSB = Marginal external cost - marginal external benefit 
E)  MSB = MB + Marginal external benefit - Marginal external cost

Question 2

Marginal social benefit equals

Accepted Answer

A)  marginal external benefit. 
B)  marginal private benefit. 
C)  marginal private benefit minus marginal external benefit. 
D)  marginal private benefit plus marginal external benefit. 
E)  marginal external benefit minus marginal private benefit. 
A)  marginal external benefit. 
B)  marginal private benefit. 
C)  marginal private benefit minus marginal external benefit. 
D)  marginal private benefit plus marginal external benefit. 
E)  marginal external benefit minus marginal private benefit.

Question 3

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 4

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

Accepted Answer

A)  insufficient legal power to enforce the controls 
B)  obtaining enough data to determine how much the tax or pollution charge will be 
C)  In some situations, there is no known way to control the external costs. 
D)  political lobbying and voter disagreement 
E)  The Coase theorem points out that taxes and pollution charges work only in the short run and not in the long run. 
A)  insufficient legal power to enforce the controls 
B)  obtaining enough data to determine how much the tax or pollution charge will be 
C)  In some situations, there is no known way to control the external costs. 
D)  political lobbying and voter disagreement 
E)  The Coase theorem points out that taxes and pollution charges work only in the short run and not in the long run.

Question 5

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.At what level should tuition be set to ensure the efficient number of students?

Accepted Answer

A)  $10,000 
B)  $5,000 
C)  $20,000 
D)  $25,000 
E)  $15,000 
A)  $10,000 
B)  $5,000 
C)  $20,000 
D)  $25,000 
E)  $15,000

Question 6

Why does government provide educational opportunities in the form of vouchers,private subsidies,and public provision?

Accepted Answer

Education generates external benefits.Wi

Question 7

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is ________ units and the equilibrium price is ________ per unit.

Accepted Answer

A)  8; $150 
B)  8; $300 
C)  10; $250 
D)  10; $100 
E)  10; $150 
A)  8; $150 
B)  8; $300 
C)  10; $250 
D)  10; $100 
E)  10; $150

Question 8

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

Accepted Answer

A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  the marginal external cost. 
E)  the marginal social cost. 
A)  the marginal cost. 
B)  represented by the demand curve. 
C)  represented by the supply curve. 
D)  the marginal external cost. 
E)  the marginal social cost.

Question 9

Why does an external cost lead to inefficient overproduction?

Accepted Answer

If there is an external cost,then the ma

Question 10

When production of a good results in an external cost,the unregulated competitive market equilibrium quantity is

Accepted Answer

A)  the efficient level of output. 
B)  greater than the efficient level of output. 
C)  not zero but is less than the efficient level of output. 
D)  unattainable. 
E)  zero. 
A)  the efficient level of output. 
B)  greater than the efficient level of output. 
C)  not zero but is less than the efficient level of output. 
D)  unattainable. 
E)  zero.

Question 11

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is ________ because health care generates ________.

Accepted Answer

A)  efficient; positive external benefits 
B)  inefficient; positive external benefits 
C)  inefficient; positive external costs 
D)  efficient; positive external costs 
E)  inefficient; public goods 
A)  efficient; positive external benefits 
B)  inefficient; positive external benefits 
C)  inefficient; positive external costs 
D)  efficient; positive external costs 
E)  inefficient; public goods

Question 12

Which of the following actions would most likely have an external benefit?

Accepted Answer

A)  eating a peanut butter sandwich 
B)  throwing trash out your car window as you drive to class 
C)  sleeping 
D)  attending college 
E)  developing a better marketing strategy for Honda 
A)  eating a peanut butter sandwich 
B)  throwing trash out your car window as you drive to class 
C)  sleeping 
D)  attending college 
E)  developing a better marketing strategy for Honda

Question 13

If an external benefit is present in the consumption of a good or service,then

Accepted Answer

A)  there can be no external cost. 
B)  the marginal social benefit is greater than the marginal private benefit. 
C)  the marginal social benefit is equal to the marginal private benefit. 
D)  the marginal private benefit is equal to the marginal social benefit plus the marginal external benefit. 
E)  the marginal external benefit is equal to the marginal private benefit minus the marginal social benefit. 
A)  there can be no external cost. 
B)  the marginal social benefit is greater than the marginal private benefit. 
C)  the marginal social benefit is equal to the marginal private benefit. 
D)  the marginal private benefit is equal to the marginal social benefit plus the marginal external benefit. 
E)  the marginal external benefit is equal to the marginal private benefit minus the marginal social benefit.

Question 14

If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000,she will attend college if the cost of attendance is no more than

Accepted Answer

A)  $55,000. 
B)  $45,000. 
C)  $40,000. 
D)  $25,000. 
E)  $15,000. 
A)  $55,000. 
B)  $45,000. 
C)  $40,000. 
D)  $25,000. 
E)  $15,000.

Question 15

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

Accepted Answer

A)  gain in efficiency from the illustrated subsidy. 
B)  remaining deadweight loss when there is the illustrated subsidy. 
C)  deadweight loss when there is not the illustrated subsidy. 
D)  equilibrium with the illustrated subsidy. 
E)  loss in efficiency from the illustrated subsidy. 
A)  gain in efficiency from the illustrated subsidy. 
B)  remaining deadweight loss when there is the illustrated subsidy. 
C)  deadweight loss when there is not the illustrated subsidy. 
D)  equilibrium with the illustrated subsidy. 
E)  loss in efficiency from the illustrated subsidy.

Question 16

-The figure above shows the market for annual influenza immunizations the United States.The marginal external benefit associated with immunizing 14 million people is ________ per person per year.

Accepted Answer

A)  $40 
B)  $20 
C)  $90 
D)  $30 
E)  $60 
A)  $40 
B)  $20 
C)  $90 
D)  $30 
E)  $60

Question 17

Public provision

Accepted Answer

A)  is the production of a good by the government by giving funds to private producers. 
B)  lowers the marginal cost of producing the good. 
C)  means the good is produced by a public authority that receives the most of its revenue from the government. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct. 
A)  is the production of a good by the government by giving funds to private producers. 
B)  lowers the marginal cost of producing the good. 
C)  means the good is produced by a public authority that receives the most of its revenue from the government. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct.

Question 18

Discuss the difference between a private cost and a social cost.

Accepted Answer

A private cost is the cost of producing

Question 19

In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then at the equilibrium,marginal social cost would ________ marginal benefit,and the quantity of chemical produced would be ________.

Accepted Answer

A)  exceed; above the efficient quantity 
B)  exceed; below the efficient quantity 
C)  be below; above the efficient quantity 
D)  be below; below the efficient quantity 
E)  equal; efficient 
A)  exceed; above the efficient quantity 
B)  exceed; below the efficient quantity 
C)  be below; above the efficient quantity 
D)  be below; below the efficient quantity 
E)  equal; efficient

Question 20

If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output,which of the following occurs?
i.The supply curve shifts leftward.
ii.The price increases.
iii.The quantity produced decreases.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i, ii, and iii

Which of the following is true?

Marginal social benefit equals

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

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

Why does government provide educational opportunities in the form of vouchers,private subsidies,and public provision?

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is units and the equilibrium price is per unit.

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

Why does an external cost lead to inefficient overproduction?

When production of a good results in an external cost,the unregulated competitive market equilibrium quantity is

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is because health care generates .

Which of the following actions would most likely have an external benefit?

If an external benefit is present in the consumption of a good or service,then

If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000,she will attend college if the cost of attendance is no more than

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

-The figure above shows the market for annual influenza immunizations the United States.The marginal external benefit associated with immunizing 14 million people is ________ per person per year.

Public provision

Discuss the difference between a private cost and a social cost.

In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then at the equilibrium,marginal social cost would marginal benefit,and the quantity of chemical produced would be .

If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output,which of the following occurs? i.The supply curve shifts leftward. ii.The price increases. iii.The quantity produced decreases.

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

Which of the following is true?

Marginal social benefit equals

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

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

Why does government provide educational opportunities in the form of vouchers,private subsidies,and public provision?

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is ________ units and the equilibrium price is ________ per unit.

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

Why does an external cost lead to inefficient overproduction?

When production of a good results in an external cost,the unregulated competitive market equilibrium quantity is

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is ________ because health care generates ________.

Which of the following actions would most likely have an external benefit?

If an external benefit is present in the consumption of a good or service,then

If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000,she will attend college if the cost of attendance is no more than

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

-The figure above shows the market for annual influenza immunizations the United States.The marginal external benefit associated with immunizing 14 million people is ________ per person per year.

Public provision

Discuss the difference between a private cost and a social cost.

In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then at the equilibrium,marginal social cost would ________ marginal benefit,and the quantity of chemical produced would be ________.

If a pollution tax in a market with an external cost changes the market so that it produces the efficient level of output,which of the following occurs? i.The supply curve shifts leftward. ii.The price increases. iii.The quantity produced decreases.

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

-The figure above shows the market for a good with an external benefit.If the market is competitive and the government takes no action,the equilibrium quantity is units and the equilibrium price is per unit.

-The figure above shows the market for annual influenza immunizations the United States.The market equilibrium with no government intervention is because health care generates .

In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then at the equilibrium,marginal social cost would marginal benefit,and the quantity of chemical produced would be .