Question 1

Table 10-3
 
-Refer to Table 10-3.The table represents a market in which

Accepted Answer

A)  there is no externality. 
B)  there is a positive externality. 
C)  there is a negative externality. 
D)  The answer cannot be determined from inspection of the table.

Question 2

Which of the following is NOT a way of internalizing technology spillovers?

Accepted Answer

A)  subsidies 
B)  patent protection 
C)  industrial policy 
D)  taxes

Question 3

When he was a candidate for president,Barack Obama proposed which of the following as a means of combating climate change?

Accepted Answer

A)  a "cap and trade" system in which the government would give away permits to emit carbon 
B)  a "cap and trade" system in which the government would auction permits to emit carbon 
C)  a tax on carbon emissions 
D)  a government mandate to switch from gasoline-powered vehicles to vehicles powered by natural gas

Question 4

Nancy loves to landscape her yard,but her neighbor Lee places a low value on his landscaping.When Lee's grass is neglected and gets long,Nancy will mow it for Lee.This is an example of

Accepted Answer

A)  a situation in which the Coase theorem fails to explain the lawn mowing arrangement. 
B)  an improper allocation of resources. 
C)  a private solution to a negative externality problem. 
D)  an exploitation of a common resource.

Question 5

Suppose that cookie producers create a positive externality equal to $2 per dozen.What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Accepted Answer

A)  They are equal. 
B)  The equilibrium quantity is greater than the socially optimal quantity. 
C)  The equilibrium quantity is less than the socially optimal quantity. 
D)  There is not enough information to answer the question.

Question 6

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs.Suppose that the federal government gives grants to these researchers equal to the their per-unit production externality.What is the relationship between the equilibrium quantity of university research and the socially optimal quantity of university research produced?

Accepted Answer

A)  The equilibrium quantity is greater than the socially optimal quantity. 
B)  They are equal. 
C)  The equilibrium quantity is less than the socially optimal quantity. 
D)  There is not enough information to answer the question.

Question 7

When externalities are present,reaching an efficient outcome is especially difficult when the number of interested parties is large.

Accepted Answer

A) True 
 B)False

Question 8

Figure 10-12
 
-Refer to Figure 10-12.The graph,as drawn,could apply to the market for

Accepted Answer

A)  automobiles. 
B)  aluminum. 
C)  robots. 
D)  All of the above are correct.

Question 9

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Accepted Answer

A) True 
 B)False

Question 10

Figure 10-9

-Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Accepted Answer

A)  Panel (a). 
B)  Panel (b). 
C)  Panel (c). 
D)  Both (b) and (c) are correct.

Question 11

Table 10-4
 
-Refer to Table 10-4.Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

Accepted Answer

A)  a tax of $2 per unit of output 
B)  a subsidy of $2 per unit of output 
C)  a tax of $7 per unit of output 
D)  a subsidy of $7 per unit of output

Question 12

Figure 10-10
 
-Refer to Figure 10-10.The socially optimal quantity of output is

Accepted Answer

A)  120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by the seller of the 120th unit. 
B)  120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit. 
C)  160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit. 
D)  160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit.

Question 13

The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves,without government intervention,regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that elementary education creates a positive externality.If the government does not subsidize education,then

Accepted Answer

A)  the equilibrium quantity of education will be equal to the socially optimal quantity of education. 
B)  the equilibrium quantity of education will be greater than the socially optimal quantity of education. 
C)  the equilibrium quantity of education will be less than the socially optimal quantity of education. 
D)  There is not enough information to answer the question.

Question 15

The Golden Rule is an example of a private solution for

Accepted Answer

A)  subsidizing higher education. 
B)  internalizing externalities. 
C)  increasing production. 
D)  reducing scarcity.

Question 16

Figure 10-9

-Refer to Figure 10-9.Which graph represents a market with a positive externality?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Both (b) and (c) are correct.

Question 17

A corrective tax is also known as:

Accepted Answer

A)  a command-and-control regulation. 
B)  a Coase tax. 
C)  a Pigovian tax. 
D)  a Smithian tax.

Question 18

A positive externality occurs when

Accepted Answer

A)  Jack receives a benefit from John's consumption of a certain good. 
B)  Jack receives personal benefits from his own consumption of a certain good. 
C)  Jack's benefit exceeds John's benefit when they each consume the same good. 
D)  Jack's receives a loss from John's consumption of a certain good.

Question 19

Markets are often inefficient when negative externalities are present because

Accepted Answer

A)  private costs exceed social costs at the private market solution. 
B)  externalities cannot be corrected without government regulation. 
C)  social costs exceed private costs at the private market solution. 
D)  production externalities lead to consumption externalities.

Question 20

The Coase theorem states that

Accepted Answer

A)  under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present. 
B)  government intervention is always required to reach an efficient outcome when an externality is present. 
C)  government intervention cannot lead to an efficient outcome when an externality is present. 
D)  only negative externalities can be resolved using government intervention.

Exam 10: Externalities.

Table 10-3 -Refer to Table 10-3.The table represents a market in which

Which of the following is NOT a way of internalizing technology spillovers?

When he was a candidate for president,Barack Obama proposed which of the following as a means of combating climate change?

Nancy loves to landscape her yard,but her neighbor Lee places a low value on his landscaping.When Lee's grass is neglected and gets long,Nancy will mow it for Lee.This is an example of

Suppose that cookie producers create a positive externality equal to $2 per dozen.What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

When externalities are present,reaching an efficient outcome is especially difficult when the number of interested parties is large.

Figure 10-12 -Refer to Figure 10-12.The graph,as drawn,could apply to the market for

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Figure 10-9 -Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Table 10-4 -Refer to Table 10-4.Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

Figure 10-10 -Refer to Figure 10-10.The socially optimal quantity of output is

The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves,without government intervention,regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

Suppose that elementary education creates a positive externality.If the government does not subsidize education,then

The Golden Rule is an example of a private solution for

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with a positive externality?

A corrective tax is also known as:

A positive externality occurs when

Markets are often inefficient when negative externalities are present because

The Coase theorem states that