Question 1

Suppose a new market for tradable pollution permits is created. As long as there is a free market for the pollution rights, the final allocation will be __________ , regardless of the initial allocation of permits.

Accepted Answer

The answer of Suppose a new market for tradable pollution...

Question 2

Table 10-1
The following table shows the private value, private cost, and external cost for various quantities of output in a market. 
-Refer to Table 10-1. What is the equilibrium quantity of output in the market?

Accepted Answer

A)  2 units
B)  3 units
C)  4 units
D)  5 unitsE) B) and D)
F) None of the above

Question 3

​Figure 10-20. ​ 
-Refer to Figure 10-20. The graph depicts the market for fertilizer. Without any government regulation, what is the equilibrium price of fertilizer?

Accepted Answer

A)  $​100
B)  $200
C)  $250
D)  ​$300E) A) and D)
F) A) and C)

Question 4

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-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.E) All of the above
F) B) and D)

Question 5

Government can be used to solve externality problems that are too costly for private parties to solve.

Accepted Answer

A) True 
 B)False

Question 6

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)  100E) B) and D)
F) C) and D)

Question 7

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.E) B) and C)
F) A) and C)

Question 8

Tradable pollution permits

Accepted Answer

A)  are widely viewed as a cost-effective way to reduce pollution.
B)  have helped reduce carbon emissions in Canada.
C)  have helped reduce sulfur dioxide emissions in the United States.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 9

Which of the following statements is true of both pollution permits and corrective taxes?

Accepted Answer

A)  Both policies internalize the externality of pollution.
B)  Both policies require firms to pay for their pollution.
C)  Both policies lead to the establishment of an equilibrium price of pollution.
D)  All of the above are correct.E) C) and D)
F) B) and C)

Question 10

In some cases, selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

Accepted Answer

A)  it is hard to estimate the market demand curve and thus charge the "right" corrective tax.
B)  selling pollution permits create a net increase in pollution.
C)  Corrective taxes distort incentives.
D)  Corrective taxes provide greater flexibility to firms that can reduce pollution at a low cost.E) A) and B)
F) A) and C)

Question 11

At any given quantity, the cost of the marginal seller is the height of the __________.

Accepted Answer

The answer of At any given quantity, the cost of...

Question 12

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Accepted Answer

The new demand curve...

Question 13

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Accepted Answer

The Coase ...

Question 14

Figure 10-12 
-Refer to Figure 10-12. An alternative label for the quantity  would be

Accepted Answer

A)    .
B)    .
C)    .
D)    .E) B) and D)
F) A) and C)

Question 15

A dentist shares an office building with a radio station. The electrical current from the dentist's drill causes static in the radio broadcast, causing the radio station to lose $10,000 in profits. The radio station could put up a shield at a cost of $30,000; the dentist could buy a new drill that causes less interference for $6,000. Either would restore the radio station's lost profits. What is the economically efficient outcome?

Accepted Answer

A)  The radio station puts up a shield, which it pays for.
B)  The radio station puts up a shield, which the dentist pays for.
C)  Neither the radio station nor the dentist purchase additional equipment.
D)  The dentist gets a new drill; it does not matter who pays for it.E) C) and D)
F) None of the above

Question 16

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. 
-Refer to Figure 10-13. If 250 units of plastics are produced and consumed, then the

Accepted Answer

A)  social optimum has been reached.
B)  market equilibrium has been reached.
C)  negative externality associated with plastics has been eliminated.
D)  positive externality associated with plastics has been eliminated.E) A) and D)
F) A) and C)

Question 17

When externalities exist, buyers and sellers

Accepted Answer

A)  neglect the external effects of their actions, but the market equilibrium is still efficient.
B)  do not neglect the external effects of their actions, and the market equilibrium is efficient.
C)  neglect the external effects of their actions, and the market equilibrium is not efficient.
D)  do not neglect the external effects of their actions, and the market equilibrium is not efficient.E) A) and C)
F) A) and D)

Question 18

If a sawmill creates too much noise for local residents,

Accepted Answer

A)  noise restrictions will force residents to move out of the area.
B)  a sense of social responsibility will cause owners of the mill to reduce noise levels.
C)  the government can raise economic well-being through noise-control regulations.
D)  the government should avoid intervening because the market will allocate resources efficiently.E) C) and D)
F) B) and D)

Question 19

Suppose that candy producers create a positive externality equal to $1 per pound of candy. Further suppose that the government offers a $1-per-pound subsidy to the producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of candy?

Accepted Answer

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

Question 20

Figure 10-2. The graph depicts the market for plastic. 
-Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, how much plastic will be produced?

Accepted Answer

A)  200
B)  500
C)  650
D)  900E) None of the above
F) A) and B)

Exam 10: Externalities

Figure 10-20. -Refer to Figure 10-20. The graph depicts the market for fertilizer. Without any government regulation, what is the equilibrium price of fertilizer?

Correct Answer
verified

Which of the following statements is true of both pollution permits and corrective taxes?

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct Answer
verified

Suppose that candy producers create a positive externality equal to $1 per pound of candy. Further suppose that the government offers a $1-per-pound subsidy to the producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of candy?

Correct Answer
verified

Government can be used to solve externality problems that are too costly for private parties to solve.

Correct Answer
verified

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Correct Answer
verified
The new demand curve...
View Answer

When technology spillover occurs,

Correct Answer
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At any given quantity, the cost of the marginal seller is the height of the __________.

Correct Answer
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Table 10-1 The following table shows the private value, private cost, and external cost for various quantities of output in a market. -Refer to Table 10-1. What is the equilibrium quantity of output in the market?

Correct Answer
verified

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
verified

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity would be

Correct Answer
verified

Tradable pollution permits

Correct Answer
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Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Correct Answer
verified
The Coase ...
View Answer

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13. If 250 units of plastics are produced and consumed, then the

Correct Answer
verified

If a sawmill creates too much noise for local residents,

Correct Answer
verified

When externalities exist, buyers and sellers

Correct Answer
verified

In some cases, selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

Correct Answer
verified

Correct Answer
verified

Suppose a new market for tradable pollution permits is created. As long as there is a free market for the pollution rights, the final allocation will be __________ , regardless of the initial allocation of permits.

Correct Answer
verified

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, how much plastic will be produced?

Correct Answer
verified

Exam 10: Externalities

​Figure 10-20. ​ -Refer to Figure 10-20. The graph depicts the market for fertilizer. Without any government regulation, what is the equilibrium price of fertilizer?

Correct AnswerverifiedShow Answer

Which of the following statements is true of both pollution permits and corrective taxes?

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-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

Suppose that candy producers create a positive externality equal to $1 per pound of candy. Further suppose that the government offers a $1-per-pound subsidy to the producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of candy?

Correct AnswerverifiedShow Answer

Government can be used to solve externality problems that are too costly for private parties to solve.

Correct AnswerverifiedShow Answer

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Correct AnswerverifiedThe new demand curve...View AnswerShow Answer

When technology spillover occurs,

Correct AnswerverifiedShow Answer

At any given quantity, the cost of the marginal seller is the height of the __________.

Correct AnswerverifiedShow Answer

Table 10-1 The following table shows the private value, private cost, and external cost for various quantities of output in a market. -Refer to Table 10-1. What is the equilibrium quantity of output in the market?

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

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity would be

Correct AnswerverifiedShow Answer

Tradable pollution permits

Correct AnswerverifiedShow Answer

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Correct AnswerverifiedThe Coase ...View AnswerShow Answer

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13. If 250 units of plastics are produced and consumed, then the

Correct AnswerverifiedShow Answer

If a sawmill creates too much noise for local residents,

Correct AnswerverifiedShow Answer

When externalities exist, buyers and sellers

Correct AnswerverifiedShow Answer

In some cases, selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a new market for tradable pollution permits is created. As long as there is a free market for the pollution rights, the final allocation will be __________ , regardless of the initial allocation of permits.

Correct AnswerverifiedShow Answer

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, how much plastic will be produced?

Correct AnswerverifiedShow Answer

Figure 10-20. -Refer to Figure 10-20. The graph depicts the market for fertilizer. Without any government regulation, what is the equilibrium price of fertilizer?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The new demand curve...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The Coase ...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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