Question 1

When a particular negative externality affects a very large number of people, it is likely that

Accepted Answer

A)   government will not find it worthwhile to impose a corrective tax.
B)   private solutions to the problem will dominate any attempt by government to alleviate the problem.
C)   the solution to externalities suggested by the Coase theorem will work very well.
D)   the solution to externalities suggested by the Coase theorem will not work.E) C) and D)
F) A) and C)

Question 2

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

The answer of Figure 10-12 
-Refer to Figure 10-12. An...

Question 4

Which of the following statements is not correct?

Accepted Answer

A)   Tradable pollution permits have an advantage over corrective taxes if the government is uncertain as to the optimal size of the tax necessary to reduce pollution to a specific level.
B)   Both corrective taxes and tradable pollution permits provide market-based incentives for firms to reduce pollution.
C)   Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution.
D)   Both corrective taxes and tradable pollution permits reduce the cost of environmental protection and thus should increase the public's demand for a clean environment.E) A) and B)
F) None of the above

Question 5

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 6

Firms that are involved in more than one type of business could be evidence of an attempt to

Accepted Answer

A)   increase private profit at the expense of consumers.
B)   internalize some forms of positive externalities.
C)   reduce the impact of government regulations on their business.
D)   increase the private marginal cost of production.E) All of the above
F) A) and C)

Question 7

Figure 10-11 
-Refer to Figure 10-11. "The social value of the last unit produced exceeds the private cost of the last unit produced by $13.50." This statement is correct at which quantity of output?

Accepted Answer

A)   210 units
B)   270 units
C)   330 units
D)   390 unitsE) B) and D)
F) All of the above

Question 8

Figure 10-11 
-Refer to Figure 10-11. On the

Accepted Answer

A)   390th unit of output, private value exceeds private cost.
B)   390th unit of output, private value exceeds external value.
C)   450th unit of output, private value exceeds social value.
D)   450th unit of output, private cost exceeds social value.E) A) and B)
F) A) and C)

Question 9

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Accepted Answer

A)   shift up by an amount equal to the subsidy.
B)   shift down by an amount less than the subsidy.
C)   shift down by an amount equal to the subsidy.
D)   shift down by an amount greater than the subsidy.E) A) and D)
F) B) and D)

Question 10

According to recent research, the gas tax in the United States is lower than the optimal level.

Accepted Answer

A) True 
 B)False

Question 11

A corrective tax

Accepted Answer

A)   causes each factory to reduce pollution by the same amount.
B)   assigns a legal pollution limit for firms.
C)   places a price on the right to pollute.
D)   costs society more than pollution regulations.E) A) and B)
F) B) and C)

Question 12

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0fire extinguisher entails the following:
-a private cost of $10;
-an external cost of $0;
-a private value of $9;
-an external benefit of $3.
-
-Refer to Scenario 10-4. Is the socially-optimal quantity of fire extinguishers less than, equal to, or greater than 500? Explain.

Accepted Answer

For the 500^t^hfire extinguisher, ...

Question 13

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 14

Figure 10-9 
-Refer to Figure 10-9, Panel (b)  and Panel (c) . The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Accepted Answer

A)   Q2.
B)   Q3.
C)   Q4.
D)   Q5.E) B) and D)
F) B) and C)

Question 15

Which of the following statements is correct?

Accepted Answer

A)   Gasoline taxes are an example of an EPA regulation.
B)   Gasoline taxes are higher in many European countries than in the United States.
C)   Gasoline taxes contribute to global warming.
D)   Gasoline taxes are an example of a command-and-control policy.E) All of the above
F) B) and D)

Question 16

Dioxin emission that results from the production of paper is a good example of a negative externality because

Accepted Answer

A)   self-interested paper firms are generally unaware of environmental regulations.
B)   there are fines for producing too much dioxin.
C)   self-interested paper producers will not consider the full cost of the dioxin pollution they create.
D)   toxic emissions are the best example of an externality.E) A) and B)
F) A) and C)

Question 17

Emission controls on automobiles are an example of a

Accepted Answer

A)   corrective tax.
B)   command-and-control policy to increase social efficiency.
C)   policy that reduces pollution by allocating resources through market mechanisms.
D)   policy to reduce congestion on urban freeways.E) All of the above
F) B) and C)

Question 18

Figure 10-11 
-Refer to Figure 10-11. Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is

Accepted Answer

A)   $5,880.
B)   $9,480.
C)   $13,230.
D)   $15,360.E) A) and B)
F) A) and C)

Question 19

If gasoline taxes were significantly increased in the United States, then

Accepted Answer

A)   some of the government regulations that require automakers to produce more fuel-efficient cars would become unnecessary.
B)   other taxes, such as income taxes, could be lowered.
C)   it is likely that roads would become safer and the environment would become cleaner.
D)   All of the above are correct.E) A) and C)
F) B) and D)

Question 20

Industrial policy aims to

Accepted Answer

A)   reduce pollution by requiring factories to reduce their pollution by a certain number of tons per year.
B)   reduce pollution by levying a tax on factories of a certain number of dollars for every ton of pollution that the factory emits.
C)   encourage business firms to subsidize continuing education for their employees.
D)   promote technology-enhancing industries.E) C) and D)
F) None of the above

Exam 10: Externalities

If gasoline taxes were significantly increased in the United States, then

Correct Answer
verified

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Correct Answer
verified

Emission controls on automobiles are an example of a

Correct Answer
verified

Dioxin emission that results from the production of paper is a good example of a negative externality because

Correct Answer
verified

Figure 10-11 -Refer to Figure 10-11. Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is

Correct Answer
verified

Industrial policy aims to

Correct Answer
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Figure 10-11 -Refer to Figure 10-11. "The social value of the last unit produced exceeds the private cost of the last unit produced by $13.50." This statement is correct at which quantity of output?

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

Correct Answer
verified

Correct Answer
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For the 500^t^hfire extinguisher, ...
View Answer

When a particular negative externality affects a very large number of people, it is likely that

Correct Answer
verified

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

Correct Answer
verified

Firms that are involved in more than one type of business could be evidence of an attempt to

Correct Answer
verified

A corrective tax

Correct Answer
verified

According to recent research, the gas tax in the United States is lower than the optimal level.

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

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c) . The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Figure 10-11 -Refer to Figure 10-11. On the

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Firms that can reduce pollution easily would be willing to sell their pollution permits.

Correct Answer
verified

Exam 10: Externalities

If gasoline taxes were significantly increased in the United States, then

Correct AnswerverifiedShow Answer

In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to

Correct AnswerverifiedShow Answer

Emission controls on automobiles are an example of a

Correct AnswerverifiedShow Answer

Dioxin emission that results from the production of paper is a good example of a negative externality because

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11. Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is

Correct AnswerverifiedShow Answer

Industrial policy aims to

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11. "The social value of the last unit produced exceeds the private cost of the last unit produced by $13.50." This statement is correct at which quantity of output?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFor the 500th fire extinguisher, ...View AnswerShow Answer

When a particular negative externality affects a very large number of people, it is likely that

Correct AnswerverifiedShow Answer

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

Correct AnswerverifiedShow Answer

Firms that are involved in more than one type of business could be evidence of an attempt to

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

According to recent research, the gas tax in the United States is lower than the optimal level.

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

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c) . The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11. On the

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Correct AnswerverifiedShow Answer

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For the 500^t^hfire extinguisher, ...
View Answer

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Correct Answer
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The new demand curve...
View Answer

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