Question 1

Figure 10-6
 
-Refer to Figure 10-6.Which price represents the equilibrium price of the product in this market?

Accepted Answer

A)   P
B)   P'
C)   Either P or P'. It is necessary to know whether the externality is positive or negative to determine which of these is the equilibrium price.
D)   Some price between P and P'. The equilibrium price depends on the negotiating skills of the interested parties.

Question 2

Use a graph to illustrate the quantity of pollution that would be emitted (a)after a corrective tax has been imposed and (b)after tradable pollution permits have been imposed.Could these two quantities ever be equivalent?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Yes,these two quantities coul...

Question 3

Figure 10-4
 
-Refer to Figure 10-4.The socially optimal quantity would be

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.

Question 4

Figure 10-9

-Refer to Figure 10-9.Which graph represents a market with no externality?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   None of the above is correct.

Question 5

Figure 10-4
 
-Refer to Figure 10-4.This market is characterized by

Accepted Answer

A)   government intervention.
B)   a positive externality.
C)   a negative externality.
D)   None of the above is correct.

Question 6

Two firms,A and B,each currently emit 100 tons of chemicals into the air.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air.The government gives each firm 40 pollution permits,which it can either use or sell to the other firm.It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air,and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air.After the two firms buy or sell pollution permits from each other,we would expect that Firm A will emit

Accepted Answer

A)   20 fewer tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.
B)   100 fewer tons of pollution into the air, and Firm B will emit 20 fewer tons of pollution into the air.
C)   50 fewer tons of pollution into the air, and Firm B will emit 50 fewer tons of pollution into the air.
D)   20 more tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.

Question 7

Internalizing a positive externality will cause the demand curve to

Accepted Answer

A)   shift to the right.
B)   shift to the left.
C)   become more elastic.
D)   remain unchanged.

Question 8

Two firms,A and B,each currently dump 50 tons of chemicals into the local river.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river.The government will sell 40 pollution permits for $75 each.It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river,and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river.Neither firm produces any less output,but they both conform to the law.It is likely that between the cost of permits and the cost of additional pollution abatement,

Accepted Answer

A)   Firm B will spend $3,500.
B)   Firm A will spend $4,000.
C)   Firm A will spend $4,500.
D)   Firm B will spend $3,000.

Question 9

Table 10-3
 
-Refer to Table 10-3.Taking into account private and external costs,the maximum total surplus that can be achieved in this market is

Accepted Answer

A)   $18.
B)   $38.
C)   $46.
D)   $55.

Question 10

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 11

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)   900

Question 12

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Accepted Answer

A)   reduced purchasing power for Americans.
B)   reduced work incentives.
C)   depressed economic activity.
D)   All of the above are correct.

Question 13

In markets,the invisible hand allocates resources efficiently

Accepted Answer

A)   in all cases.
B)   when the buyers and sellers are the only interested parties.
C)   when there are positive externalities, but not when there are negative externalities.
D)   when there are negative externalities, but not when there are positive externalities.

Question 14

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 15

All externalities

Accepted Answer

A)   cause markets to fail to allocate resources efficiently.
B)   cause equilibrium prices to be too high.
C)   benefit producers at the expense of consumers.
D)   cause equilibrium prices to be too low.

Question 16

Corrective taxes are unlike most other taxes because they

Accepted Answer

A)   distort incentives.
B)   move the allocation of resources away from the social optimum.
C)   raise revenue for the government.
D)   move the allocation of resources closer to the social optimum.

Question 17

In Singapore,littering fines are strictly enforced.This is an example of a policy that

Accepted Answer

A)   relies on moral codes to reduce the pollution externality.
B)   relies on the Coase Theorem.
C)   discriminates against foreigners.
D)   relies on incentives to reduce the pollution externality.

Question 18

One drawback to industrial policy is that

Accepted Answer

A)   technology spillovers are too expensive to control.
B)   measuring the size of spillovers from different markets is difficult.
C)   spillovers often occur in industries that produce undesirable products for society.
D)   positive side effects are often outweighed by negative side effects.

Question 19

Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Externalities.

Correct Answer
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Figure 10-4 -Refer to Figure 10-4.The socially optimal quantity would be

Correct Answer
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Internalizing a positive externality will cause the demand curve to

Correct Answer
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In markets,the invisible hand allocates resources efficiently

Correct Answer
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All externalities

Correct Answer
verified

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Correct Answer
verified

Correct Answer
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Table 10-3 -Refer to Table 10-3.Taking into account private and external costs,the maximum total surplus that can be achieved in this market is

Correct Answer
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Corrective taxes are unlike most other taxes because they

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

Correct Answer
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Figure 10-6 -Refer to Figure 10-6.Which price represents the equilibrium price of the product in this market?

Correct Answer
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In Singapore,littering fines are strictly enforced.This is an example of a policy that

Correct Answer
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When technology spillover occurs,

Correct Answer
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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
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One drawback to industrial policy is that

Correct Answer
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Figure 10-4 -Refer to Figure 10-4.This market is characterized by

Correct Answer
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Use a graph to illustrate the quantity of pollution that would be emitted (a)after a corrective tax has been imposed and (b)after tradable pollution permits have been imposed.Could these two quantities ever be equivalent?

Correct Answer
verified
Yes,these two quantities coul...
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Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with no externality?

Correct Answer
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Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

Correct Answer
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Exam 10: Externalities.

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Figure 10-4 -Refer to Figure 10-4.The socially optimal quantity would be

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Internalizing a positive externality will cause the demand curve to

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In markets,the invisible hand allocates resources efficiently

Correct AnswerverifiedShow Answer

All externalities

Correct AnswerverifiedShow Answer

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 10-3 -Refer to Table 10-3.Taking into account private and external costs,the maximum total surplus that can be achieved in this market is

Correct AnswerverifiedShow Answer

Corrective taxes are unlike most other taxes because they

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?

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

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Figure 10-6 -Refer to Figure 10-6.Which price represents the equilibrium price of the product in this market?

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In Singapore,littering fines are strictly enforced.This is an example of a policy that

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When technology spillover occurs,

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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?

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One drawback to industrial policy is that

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Figure 10-4 -Refer to Figure 10-4.This market is characterized by

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Use a graph to illustrate the quantity of pollution that would be emitted (a)after a corrective tax has been imposed and (b)after tradable pollution permits have been imposed.Could these two quantities ever be equivalent?

Correct Answerverified Yes,these two quantities coul...View AnswerShow Answer

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with no externality?

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Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

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Yes,these two quantities coul...
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