Question 1

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 2

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Accepted Answer

A) True 
 B)False

Question 3

In many cases the Coase theorem does not work well because

Accepted Answer

A)  there are too few parties at the negotiation table.
B)  the government does not know about the Coase theorem.
C)  transaction costs are too high.
D)  transaction costs are too low.E) C) and D)
F) All of the above

Question 4

Figure 10-4 4,then total economic well-being would be maximized if output A) decreased to Q1. B) decreased to Q2. C) decreased to Q3. D) stayed at Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.If this market is currently producing at Q4,then total economic well-being would be maximized if output

Accepted Answer

A)  decreased to Q1.
B)  decreased to Q2.
C)  decreased to Q3.
D)  stayed at Q4.E) C) and D)
F) None of the above

Question 5

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) A) and B)
F) None of the above

Question 6

When the government uses a command-and-control policy to solve an externality,it

Accepted Answer

A)  is usually the most effective policy option available.
B)  creates policies that directly regulate behavior.
C)  usually involves taxing the consumption of a commodity.
D)  typically refers to the Coase theorem to structure the policy.E) A) and D)
F) All of the above

Question 7

Figure 10-12 
-Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

Accepted Answer

A)  social cost
B)  social value
C)  private cost
D)  private valueE) All of the above
F) None of the above

Question 8

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Accepted Answer

Pigovian taxes allow markets to coordina...

Question 9

Suppose that a negative externality is created by the production of good X.Which of the following statements is correct?

Accepted Answer

A)  The social cost of producing good X includes the private cost plus the cost to bystanders of the externality.
B)  The increased social cost can be graphed as a decrease in demand.
C)  The market equilibrium quantity will be the socially optimal quantity as long as the government does not interfere.
D)  Both a and b are correct.E) A) and D)
F) All of the above

Question 10

The difference between social cost and private cost is a measure of the

Accepted Answer

A)  loss in profit to the seller as the result of a negative externality.
B)  cost of an externality.
C)  cost reduction when the negative externality is eliminated.
D)  cost incurred by the government when it intervenes in the market.E) B) and D)
F) B) and C)

Exam 10: Externalities

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

Correct Answer
verified

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Correct Answer
verified
Pigovian taxes allow markets to coordina...
View Answer

Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₄,then total economic well-being would be maximized if output

Correct Answer
verified

The difference between social cost and private cost is a measure of the

Correct Answer
verified

Suppose that a negative externality is created by the production of good X.Which of the following statements is correct?

Correct Answer
verified

Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

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

In many cases the Coase theorem does not work well because

Correct Answer
verified

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Correct Answer
verified

When the government uses a command-and-control policy to solve an externality,it

Correct Answer
verified

Exam 10: Externalities

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

Correct AnswerverifiedShow Answer

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Correct AnswerverifiedPigovian taxes allow markets to coordina...View AnswerShow Answer

Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q4,then total economic well-being would be maximized if output

Correct AnswerverifiedShow Answer

The difference between social cost and private cost is a measure of the

Correct AnswerverifiedShow Answer

Suppose that a negative externality is created by the production of good X.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

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

In many cases the Coase theorem does not work well because

Correct AnswerverifiedShow Answer

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Correct AnswerverifiedShow Answer

When the government uses a command-and-control policy to solve an externality,it

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Pigovian taxes allow markets to coordina...
View Answer

Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₄,then total economic well-being would be maximized if output

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified