Question 1

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. C

Question 2

Figure 10-15 
-Refer to Figure 10-15.Which graph illustrates a corrective tax?

Accepted Answer

A)   the left graph
B)   the right graph
C)   both graphs
D)   neither graph

Question 3

When technology spillover occurs,

Accepted Answer

A)   it is the government's responsibility to own firms that are engaged in high-tech research.
B)   a firm's research yields technological knowledge that can then be used by society as a whole.
C)   those firms engaged in technology research should be taxed by the government.
D)   firms invest in the latest production technology and the cost of that technology "spills over" to the prices consumers must pay for the product.

Question 4

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 5

The concept of external benefit is associated with a negative externality,but not with a positive externality.

Accepted Answer

A) True 
 B)False

Question 6

Flu shots provide a positive externality.Suppose that the market for vaccinations is perfectly competitive.Without government intervention in the vaccination market,which of the following statements is correct?

Accepted Answer

A)   At the current output level,the marginal social benefit exceeds the marginal private benefit.
B)   The current output level is inefficiently low.
C)   A per-shot subsidy could turn an inefficient situation into an efficient one.
D)   All of the above are correct.

Question 7

Figure 10-16 
-Refer to Figure 10-16.This graph shows the market for pollution when permits are issued to firms and traded in the marketplace.In the absence of a pollution permit system,the quantity of pollution would be

Accepted Answer

A)   25
B)   50
C)   75
D)   100

Question 8

Table 10-3
 
-Refer to Table 10-3.The socially optimal quantity of output is

Accepted Answer

A)   3 units.
B)   4 units.
C)   5 units.
D)   6 units.

Question 9

Table 10-5
The following table shows the marginal costs for each of four firms (A,B,C,and D) to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $54,and for Firm A to eliminate a second unit of pollution it would cost an additional $67.
 
-Refer to Table 10-5.If the government charged a fee of $84 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   7
B)   8
C)   9
D)   10

Question 10

Figure 10-10 
-Refer to Figure 10-10.A decrease in output from 160 units to 120 units would

Accepted Answer

A)   move the market from a socially efficient outcome to a socially inefficient outcome.
B)   reduce the external cost per unit of output.
C)   increase total economic well-being.
D)   not be an action of which a benevolent social planner would approve. C

Question 11

When the social cost curve is above a product's supply curve,

Accepted Answer

A)   the government has intervened in the market.
B)   a negative externality exists in the market.
C)   a positive externality exists in the market.
D)   the distribution of resources is unfair.

Question 12

Figure 10-19 
-Refer to Figure 10-19.Note that the lines labeled "Demand" and "Social Value"are parallel.Also,the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of the good that is consumed,and (2) private cost increases by $1.40 with each additional unit of the good that is produced.Thus,when the 74th unit of the good is produced and consumed,social well-being

Accepted Answer

A)   decreases by $2.40.
B)   decreases by $1.60.
C)   increases by $1.00.
D)   increases by $1.40.

Question 13

In some cases,tradable pollution permits may be better than a corrective tax because

Accepted Answer

A)   pollution permits allow for a market solution while a corrective tax does not.
B)   pollution permits generate more revenue for the government than a corrective tax.
C)   pollution permits are never preferred over a corrective tax.
D)   the government can set a maximum level of pollution using permits.

Question 14

A command-and-control policy is another term for a

Accepted Answer

A)   pollution permit.
B)   government regulation.
C)   corrective tax.
D)   Both a and b are correct.

Question 15

The proposition that if private parties can bargain without cost over the allocation of resources,they can solve the problem of externalities on their own,is called

Accepted Answer

A)   the Pigovian theorem.
B)   a corrective tax.
C)   the externality theorem.
D)   the Coase theorem. D

Question 16

Corrective taxes are more efficient than regulations for keeping the environment clean.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $15 per-shot subsidy to producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots 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 18

An externality arises when a person engages in an activity that influences the well-being of

Accepted Answer

A)   buyers in the market for that activity and yet neither pays nor receives any compensation for that effect.
B)   sellers in the market for that activity and yet neither pays nor receives any compensation for that effect.
C)   bystanders in the market for that activity and yet neither pays nor receives any compensation for that effect.
D)   Both (a) and (b) are correct.

Question 19

A negative externality

Accepted Answer

A)   is a cost to a bystander.
B)   is a cost to the buyer.
C)   is a cost to the seller.
D)   exists with all market transactions.

Question 20

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

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

Correct Answer
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C

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a corrective tax?

Correct Answer
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When technology spillover occurs,

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

Correct Answer
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The concept of external benefit is associated with a negative externality,but not with a positive externality.

Correct Answer
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Flu shots provide a positive externality.Suppose that the market for vaccinations is perfectly competitive.Without government intervention in the vaccination market,which of the following statements is correct?

Correct Answer
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Figure 10-16 -Refer to Figure 10-16.This graph shows the market for pollution when permits are issued to firms and traded in the marketplace.In the absence of a pollution permit system,the quantity of pollution would be

Correct Answer
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Table 10-3 -Refer to Table 10-3.The socially optimal quantity of output is

Correct Answer
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Figure 10-10 -Refer to Figure 10-10.A decrease in output from 160 units to 120 units would

Correct Answer
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C

When the social cost curve is above a product's supply curve,

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In some cases,tradable pollution permits may be better than a corrective tax because

Correct Answer
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A command-and-control policy is another term for a

Correct Answer
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The proposition that if private parties can bargain without cost over the allocation of resources,they can solve the problem of externalities on their own,is called

Correct Answer
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D

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $15 per-shot subsidy to producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct Answer
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An externality arises when a person engages in an activity that influences the well-being of

Correct Answer
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A negative externality

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When correcting for an externality,command-and-control policies are always preferable to market-based policies.

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Exam 10: Externalities

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

Correct AnswerverifiedC

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a corrective tax?

Correct AnswerverifiedShow Answer

When technology spillover occurs,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The concept of external benefit is associated with a negative externality,but not with a positive externality.

Correct AnswerverifiedShow Answer

Flu shots provide a positive externality.Suppose that the market for vaccinations is perfectly competitive.Without government intervention in the vaccination market,which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 10-16 -Refer to Figure 10-16.This graph shows the market for pollution when permits are issued to firms and traded in the marketplace.In the absence of a pollution permit system,the quantity of pollution would be

Correct AnswerverifiedShow Answer

Table 10-3 -Refer to Table 10-3.The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-10 -Refer to Figure 10-10.A decrease in output from 160 units to 120 units would

Correct AnswerverifiedC

When the social cost curve is above a product's supply curve,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In some cases,tradable pollution permits may be better than a corrective tax because

Correct AnswerverifiedShow Answer

A command-and-control policy is another term for a

Correct AnswerverifiedShow Answer

The proposition that if private parties can bargain without cost over the allocation of resources,they can solve the problem of externalities on their own,is called

Correct AnswerverifiedD

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $15 per-shot subsidy to producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct AnswerverifiedShow Answer

An externality arises when a person engages in an activity that influences the well-being of

Correct AnswerverifiedShow Answer

A negative externality

Correct AnswerverifiedShow Answer

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Correct AnswerverifiedShow Answer

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C

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C

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D

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