Question 1

In the figure above,when the market is unregulated and in equilibrium,marginal social cost ________ marginal benefit,and the quantity of chemical produced 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

Question 2

Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution.If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution,then

Accepted Answer

A)  Firm B sells its permits to Firm A for a price above $6,000. 
B)  Firm A sells its permits to Firm B for a price below $6,000. 
C)  Firm A sells its permits to Firm B for a price above $6,000. 
D)  Firm B sells its permits to Firm A for a price below $6,000. 
E)  neither Firm A nor Firm B sells permits because neither has extra permits.

Question 3

A private cost is a cost of production that is

Accepted Answer

A)  borne by the producer of a good. 
B)  measured in marginal terms. 
C)  borne by someone other than the producer of a good. 
D)  measured in total terms. 
E)  the same as an external cost.

Question 4

-The table above gives the private costs and external costs of producing paper.
a.Complete the table by finding the marginal social cost at each level of production.
b.If the market is competitive and is left unregulated and 400 tons of paper are produced,what is the price of a ton of paper?
c.If the government imposes a tax equal to the external cost at each level of production,what price would be charged if 400 tons are produced?

Accepted Answer

The answer of 
-The table above gives the private costs...

Question 5

-The figure above shows an education market in which the government is providing households with vouchers.In total,how much do the schools receive for a student?

Accepted Answer

A)  $4,000 
B)  $8,000 
C)  $12,000 
D)  $16,000 
E)  $20,000

Question 6

When a forest is logged,it is possible for the logging to create "soil runoff," a situation in which the soil,no longer protected by trees,erodes and silts a river miles downstream from the logging area.Is soil runoff created by logging in Montana that ruins a river an example of a private cost to the lumbering company or an external cost?

Accepted Answer

The answer of When a forest is logged,it is possible...

Question 7

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

Accepted Answer

The answer of Use the idea of external costs to...

Question 8

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).
-In the figure above,suppose the government provides vouchers worth $15,000 per student per year.Then the market equilibrium occurs at a tuition of ________ a year and ________ million students.

Accepted Answer

A)  $10,000; 15 
B)  $25,000; 15 
C)  $15,000; 15 
D)  $15,000; 7.5 
E)  $20,000; 20

Question 9

The government can overcome the inefficiency created by a good with an external benefit by using

Accepted Answer

A)  public provision. 
B)  marketable permits. 
C)  taxes. 
D)  emission charges. 
E)  None of the above answers is correct.

Question 10

Explain the difference between marginal social benefit and marginal external benefit.

Accepted Answer

The answer of Explain the difference between marginal social benefit...

Question 11

In the figure above,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 12

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.

Question 13

-The figure above shows the market for college education in the United States.The efficient quantity of college education is ________ students per year.

Accepted Answer

A)  10 million 
B)  12 million 
C)  17 million 
D)  18 million 
E)  14 million

Question 14

The existence of marginal external benefits for a product like higher education creates a deadweight loss for society because,without government intervention,________ would be consumed and ________ would be produced.

Accepted Answer

A)  more than the efficient amount; more than the efficient amount 
B)  more than the efficient amount; less than the efficient amount 
C)  less than the efficient amount; more than the efficient amount 
D)  less than the efficient amount; less than the efficient amount 
E)  the efficient amount; the efficient amount

Question 15

When Ronald takes another economics class,other people in society benefit.The benefit to these other people is called the marginal ________ benefit of the class.

Accepted Answer

A)  social 
B)  private 
C)  external 
D)  Coasian 
E)  extra

Question 16

If producing a good or a service creates pollution,then

Accepted Answer

A)  an unregulated competitive market produces an efficient output. 
B)  the industry's supply curve includes the extra cost of pollution. 
C)  at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price. 
D)  at the unregulated, competitive market equilibrium quantity, marginal social benefit and marginal social cost are equal. 
E)  at the unregulated, competitive market equilibrium quantity, marginal social benefit is less than the equilibrium price.

Question 17

"If production of a good creates an external cost,then,when production is such that the marginal private costs are equal to the marginal private benefits,the market outcome will be inefficient." Explain whether this assertion is correct or incorrect.

Accepted Answer

The answer of "If production of a good creates an...

Question 18

The difference between private cost and social cost is that

Accepted Answer

A)  social cost only considers the external cost borne by society. 
B)  social cost only considers the cost borne by people other than the producer. 
C)  private cost only considers the cost borne by producers of the good. 
D)  social cost also includes any external benefit whereas private cost excludes all external benefits. 
E)  there is no difference; the terms refer to the same cost.

Question 19

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

Accepted Answer

The answer of Explain the difference between a positive production...

Question 20

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.At 10 concerts,the

Accepted Answer

A)  marginal private cost equals the marginal external cost. 
B)  marginal social cost equals $60,000. 
C)  marginal private cost is more than $40,000. 
D)  marginal external cost equals $60,000. 
E)  marginal external cost equals $80,000.

Exam 10: Externalities

In the figure above,when the market is unregulated and in equilibrium,marginal social cost marginal benefit,and the quantity of chemical produced is .