Question 1

-The figure above shows the marginal social cost of generating electricity and the marginal private cost. For 4 billion kilowatts, what is the marginal external cost?

Accepted Answer

A) $0.12 
B) $0.08 
C) $0.04 
D) $0.00 
E) $0.20

Question 2

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.

Question 3

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.

Question 4

If the government taxes an industry that creates pollution, the tax i. decreases the pollution.
Ii. increases the price of the product produced by the firms.
Iii. decreases the quantity of the good produced.

Accepted Answer

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

Question 5

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.

Question 6

When the government uses a private subsidy in a market with an external benefit, to reach the efficient quantity of production, the subsidy must be equal to the marginal

Accepted Answer

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

Question 7

In the figure, the unregulated market equilibrium occurs at a price of ________ a ton and quantity of ________ tons.

Accepted Answer

A) $100; 4,000 
B) $150; 2,000 
C) $150; 4,000 
D) $225; 4,000 
E) $100; 2,000

Question 8

Externalities

Accepted Answer

A) can be either benefits or costs. 
B) always create extra social costs. 
C) always make society better off. 
D) cannot be expressed in dollar amounts. 
E) are always part of private costs or private benefits.

Question 9

A cost that arises from the production or consumption that falls on someone other than the producer or consumer is called

Accepted Answer

A) a negative benefit. 
B) a public choice impact. 
C) a positive externality. 
D) a negative externality. 
E) a private good.

Question 10

When studying pollution and the environment, economists

Accepted Answer

A) have no role to play. 
B) concentrate on the physical aspects of the environment. 
C) emphasize costs and benefits. 
D) attempt to reduce pollution at all costs. 
E) think pollution is good if it occurs when production takes place.

Question 11

The production of a good or service by an authority that receives the most of its revenue from the government is referred to as

Accepted Answer

A) public provision. 
B) private subsidies. 
C) vouchers. 
D) copyrights. 
E) Coasian production.

Question 12

Which of the following is NOT an example of a good with an external cost?

Accepted Answer

A) electricity generation that produces carbon dioxide emissions that contribute toward global warming 
B) logging that pollutes a nearby river 
C) Jess smoking near her non-smoking roommate 
D) Ahmed works at a bank and he gets a flu shot each fall. 
E) noise pollution from aircraft

Question 13

In the figure above, if a pollution tax is imposed that is equal to the marginal external cost of pollution, then when the market is in equilibrium, the deadweight loss is ________ thousand per month.

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

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.

Question 16

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Marginal social cost } \
\text { (dollars per course) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { students }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { private benefit }
\end{array} & \begin{array} { c } 
\text { Marginal social } \
\text { benefit }
\end{array} \
\hline 100 & 4,500 & 20 & 60 \
80 & 4,000 & 40 & 80 \
60 & 3,500 & 60 & 100 \
40 & 3,000 & 80 & 120 \
20 & 2,500 & 100 & 140 \
\hline
\end{array}$$
-The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC)in Concord, California.
a. When 4,500 students attend DVC, what does the marginal external benefit equal?
b. If the market is competitive and left without government intervention, what is the quantity of students that will attend DVC and what will be the price of a course?
c. What is the efficient quantity of students attending DVC?
d. If the government can set the price per course, in order to have the efficient quantity of students attending DVC, what should the government set as the price?

Accepted Answer

The answer of \[\begin{array} { c c c c }...

Question 17

-The figure above shows the market for college education in the United States. If the government does not intervene in this market, the number of students going to college is ________ and the efficient number of students is ________.

Accepted Answer

A) 13 million students per year; 16 million students per year 
B) 14 million students per year; 16 million students per year 
C) 10 million students per year; 14 million students per year 
D) 10 million students per year; 13 million students per year 
E) 14 million students per year; 10 million students per year

Question 18

-The figure above illustrates the gasoline market. There is no external benefit from gasoline. If this market is left unregulated and no pollution tax is imposed, the equilibrium quantity of gasoline is

Accepted Answer

A) 0 gallons. 
B) 5 million gallons. 
C) 10 million gallons. 
D) 20 million gallons. 
E) 15 million gallons.

Question 19

Suppose unregulated production of pesticides results in an equilibrium price and quantity of $400 and 1,000 tons per day, respectively, and a marginal external cost of $10 a ton.
a. If the government were to eliminate the external cost by using pollution charges, what should the pollution charge be set at?
b. If the government were to eliminate the external cost by using taxes, what should the tax equal?
c. Would the government actions described above affect the quantity of pesticides produced?
 If yes, how?
 If no, why not?

Accepted Answer

The answer of Suppose unregulated production of pesticides results in...

Question 20

-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.

Exam 9: Externalities: Pollution, Education, and Health Care