Question 1

Table 10-4
 nd unit of output that is produced is A)  $7. B)  $23. C)  $30. D)  $38." class="answers-bank-image d-inline" rel="preload" >
-Refer to Table 10-4.The social cost of the 2nd unit of output that is produced is

Accepted Answer

A)   $7.
B)   $23.
C)   $30.
D)   $38.E) A) and D)
F) B) and C)

Question 2

In what sense do externalities cause the "invisible hand" of the marketplace to fail?

Accepted Answer

A)   Externalities lead to government intervention in markets,which exacerbates the problems associated with externalities.
B)   Externalities result in prices that are too high for many consumers to pay.
C)   Markets fail to produce the maximum total benefit to society when positive or negative externalities are present.
D)   Markets produce too little of a good when positive or negative externalities are present.E) A) and D)
F) A) and C)

Question 3

An example of a private solution to externalities is charities.The government encourages this private solution by allowing .

Accepted Answer

tax deduct...

Question 4

Scenario 10-3
Suppose the equation for the demand curve in a market is  ,where  is the quantity demanded and  is the price.Also,suppose the equation for the supply curve in the same market is  ,where  is the quantity supplied.
-Refer to Scenario 10-3.What are the market equilibrium quantity and price?

Accepted Answer

The market equilibri...

Question 5

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Accepted Answer

A) True 
 B)False

Question 6

Table 10-2
The following table shows the private value,private cost,and social value for a market with a positive externality.
 
-Refer to Table 10-2.What is the equilibrium quantity of output in this market?

Accepted Answer

A)   3 units
B)   4 units
C)   5 units
D)   6 unitsE) C) and D)
F) A) and B)

Question 7

The Golden Rule is an example of a private solution for

Accepted Answer

A)   subsidizing higher education.
B)   internalizing externalities.
C)   increasing production.
D)   reducing scarcity.E) A) and C)
F) A) and B)

Question 8

Suppose that flower gardens create a positive externality equal to $1 per plant.What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

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) A) and B)
F) C) and D)

Question 9

Suppose that electricity producers create a negative externality equal to $5 per unit.Further suppose that the government impose a $5 per-unit tax on the producers.What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Accepted Answer

A)   They are equal.
B)   The after-tax equilibrium quantity is greater than the socially optimal quantity.
C)   The after-tax equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) None of the above
F) A) and B)

Question 10

When producers operate in a market characterized by negative externalities,a tax that forces them to internalize the externality will

Accepted Answer

A)   give sellers the incentive to account for the external effects of their actions.
B)   increase demand.
C)   increase the amount of the commodity exchanged in market equilibrium.
D)   restrict the producers' ability to take the costs of the externality into account when deciding how much to supply.E) A) and D)
F) A) and C)

Question 11

Figure 10-8 
-Refer to Figure 10-8.What is the socially-optimal quantity of output in this market?

Accepted Answer

A)   8 units
B)   Between 8 and 10 units
C)   10 units
D)   More than 10 unitsE) All of the above
F) None of the above

Question 12

When an externality is present,the market equilibrium is

Accepted Answer

A)   efficient,and the equilibrium maximizes the total benefit to society as a whole.
B)   efficient,but the equilibrium does not maximize the total benefit to society as a whole.
C)   inefficient,but the equilibrium maximizes the total benefit to society as a whole.
D)   inefficient,and the equilibrium does not maximize the total benefit to society as a whole.E) None of the above
F) B) and C)

Question 13

Which of the following is NOT an example of a negative externality?

Accepted Answer

A)   air pollution from a manufacturing plant.
B)   disrupted sleep from a neighbor's loud music.
C)   an illness caused by secondhand cigarette smoke.
D)   a decrease in your property value from neglecting your lawn and garden.E) C) and D)
F) All of the above

Question 14

Which of the following statements is correct?

Accepted Answer

A)   Automotive manufacturers prefer stricter fuel economy regulations to higher gasoline taxes.
B)   Higher gasoline taxes have provided a market-based incentive for Europeans to buy more fuel-efficient vehicles.
C)   Higher gasoline taxes have had no effect on the U.S.demand for gasoline because the demand for gasoline is perfectly inelastic.
D)   Fuel efficiency regulations are more effective than gasoline taxes in reducing the demand for gasoline in the United States and Europe.E) A) and B)
F) A) and C)

Question 15

Which of the following helped reduce sulfur dioxide emissions,a leading cause of acid rain? (i) 
Corrective taxes
(ii) 
Tradable pollution permits
(iii) 
Amendments to the Clean Air Act

Accepted Answer

A)   (i) only
B)   both (i) and (ii) 
C)   (iii) only
D)   both (ii) and (iii) E) A) and B)
F) A) and C)

Question 16

Which of the following statements is not correct?

Accepted Answer

A)   Patents help internalize the externalities associated with technological advances.
B)   Economists typically prefer regulations to corrective taxes because regulations provide more incentives for firms to seek continued reductions in pollution.
C)   Allowing firms to trade pollution permits will lower the total cost of reducing pollution.
D)   A big impediment to implementing the Coase theorem in many cases is high transactions costs.E) None of the above
F) A) and B)

Question 17

Figure 10-12 
-Refer to Figure 10-12.An alternative label for the line labeled "Supply" would be

Accepted Answer

A)   private value.
B)   external value.
C)   private cost.
D)   external cost.E) A) and B)
F) A) and D)

Question 18

Figure 10-19 
-Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

Accepted Answer

A)   benefit of $15.
B)   benefit of $36.
C)   cost of $15.
D)   cost of $36.E) A) and D)
F) A) and C)

Question 19

Which of the following statements is correct?

Accepted Answer

A)   Taxes are more difficult to administer than regulations.
B)   Taxes provide incentives for firms to adopt new methods to reduce negative externalities.
C)   Command-and-control policies provide incentives for private decisionmakers to solve their problems on their own.
D)   Corrective taxes distort incentives.E) A) and B)
F) A) and C)

Question 20

The term market failure refers to

Accepted Answer

A)   a market that fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand.
C)   ruthless competition among firms.
D)   a firm that is forced out of business because of losses.sE) None of the above
F) A) and B)

Exam 10: Externalities

Which of the following helped reduce sulfur dioxide emissions,a leading cause of acid rain? (i) Corrective taxes (ii) Tradable pollution permits (iii) Amendments to the Clean Air Act

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When an externality is present,the market equilibrium is

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The term market failure refers to

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Scenario 10-3 Suppose the equation for the demand curve in a market is ,where is the quantity demanded and is the price.Also,suppose the equation for the supply curve in the same market is ,where is the quantity supplied. -Refer to Scenario 10-3.What are the market equilibrium quantity and price?

Correct AnswerverifiedThe market equilibri...View AnswerShow Answer

Figure 10-12 -Refer to Figure 10-12.An alternative label for the line labeled "Supply" would be

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Suppose that flower gardens create a positive externality equal to $1 per plant.What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

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When producers operate in a market characterized by negative externalities,a tax that forces them to internalize the externality will

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Table 10-2 The following table shows the private value,private cost,and social value for a market with a positive externality. -Refer to Table 10-2.What is the equilibrium quantity of output in this market?

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Which of the following statements is correct?

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Which of the following statements is not correct?

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Figure 10-8 -Refer to Figure 10-8.What is the socially-optimal quantity of output in this market?

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Suppose that electricity producers create a negative externality equal to $5 per unit.Further suppose that the government impose a $5 per-unit tax on the producers.What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

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In what sense do externalities cause the "invisible hand" of the marketplace to fail?

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An example of a private solution to externalities is charities.The government encourages this private solution by allowing .

Correct Answerverifiedtax deduct...View AnswerShow Answer

Which of the following is NOT an example of a negative externality?

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The patent system gives firms greater incentive to engage in research and other activities that advance technology.

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Table 10-4 -Refer to Table 10-4.The social cost of the 2nd unit of output that is produced is

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The Golden Rule is an example of a private solution for

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Which of the following statements is correct?

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Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

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The market equilibri...
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tax deduct...
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Table 10-4 -Refer to Table 10-4.The social cost of the 2^nd unit of output that is produced is

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