Question 1

Table 10-4
The following table shows the total costs for each of four firms (A,B,C,and D) to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $46,and for Firm A to eliminate two units of pollution,it would cost a total of $103.
 
-Refer to Table 10-4.If the government charged a fee of $93 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   5
B)   6
C)   12
D)   16

Question 2

Which of the following statements is correct?

Accepted Answer

A)   Because a clean environment is a public good,a feasible goal is to eliminate all pollution,regardless of the cost.
B)   Rich countries usually have cleaner environments than poor countries because a clean environment is like other normal goods in that it has a positive income elasticity.
C)   Clean water and clean air are priceless goods.
D)   All of the above are correct.

Question 3

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.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Accepted Answer

A)   2
B)   3
C)   9
D)   10

Question 4

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 5

Figure 10-4 1. B)  Q2. C)  Q3. D)  Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.Without government intervention,the equilibrium quantity would be

Accepted Answer

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

Question 6

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.

Question 7

Figure 10-11 
-Refer to Figure 10-11.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)   100

Question 8

Most economists prefer corrective taxes to regulation to correct the pollution problem because:

Accepted Answer

A)   the market-based solution is less costly to society.
B)   the market-based solution can result in a greater reduction in pollution.
C)   the market-based solution raises revenue for the government.
D)   all of the above.

Question 9

One reason that private solutions to externalities do not always work is that

Accepted Answer

A)   government intervention negates the benefits of positive externalities.
B)   some people benefit from externalities.
C)   interested parties incur costs in the bargaining process.
D)   charities are not well organized.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

When negative externalities are present in a market

Accepted Answer

A)   private costs will be greater than social costs.
B)   social costs will be greater than private costs.
C)   only government regulation will solve the problem.
D)   the market will not be able to reach any equilibrium.

Question 12

If an externality is present in a market,economic efficiency may be enhanced by

Accepted Answer

A)   increased competition.
B)   weakening property rights.
C)   better informed market participants.
D)   government intervention.

Question 13

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 14

Figure 10-4 2,then total economic well-being would increase if output A)  increased beyond Q4. B)  decreased to Q1. C)  increased to Q3. D)  stayed at Q2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.If this market is currently producing at Q2,then total economic well-being would increase if output

Accepted Answer

A)   increased beyond Q4.
B)   decreased to Q1.
C)   increased to Q3.
D)   stayed at Q2.

Question 15

Many charities like the Sierra Club are established to deal with externalities.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that Company A's railroad cars pass through Farmer B's corn fields.The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops.There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks.The grease costs $1,200.Suppose that the farmer has the right to compensation for any damage that his crops suffer.Assume that there are no transaction costs.Which of the following characterizes the efficient outcome?

Accepted Answer

A)   The railroad will continue to operate but will pay the farmer $1,500 in damages.
B)   The railroad will purchase the grease for $1,200 and pay the farmer nothing because no crop damage will occur.
C)   The farmer will incur $1,500 in damages to his crops.
D)   The farmer will pay the railroad $1,200 to purchase the grease so that no crop damage will occur.

Question 17

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 18

Because there are positive externalities from higher education,

Accepted Answer

A)   private markets will under-supply college classes.
B)   private markets will over-supply college classes.
C)   the government should impose a tax on college students.
D)   government intervention cannot improve the market for college classes.

Question 19

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be 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.

Question 20

Markets are often inefficient when negative externalities are present because

Accepted Answer

A)   private costs exceed social costs at the private market solution.
B)   externalities cannot be corrected without government regulation.
C)   social costs exceed private costs at the private market solution.
D)   production externalities lead to consumption externalities.

Exam 10: Externalities

Internalizing a positive externality will cause the demand curve to

Correct Answer
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When negative externalities are present in a market

Correct Answer
verified

Because there are positive externalities from higher education,

Correct Answer
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Most economists prefer corrective taxes to regulation to correct the pollution problem because:

Correct Answer
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Correct Answer
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All externalities

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

Correct Answer
verified

Many charities like the Sierra Club are established to deal with externalities.

Correct Answer
verified

One reason that private solutions to externalities do not always work is that

Correct Answer
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Figure 10-4 -Refer to Figure 10-4.Without government intervention,the equilibrium quantity would be

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

Correct Answer
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Figure 10-11 -Refer to Figure 10-11.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
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Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₂,then total economic well-being would increase if output

Correct Answer
verified

When an externality is present,the market equilibrium is

Correct Answer
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Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Correct Answer
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Markets are often inefficient when negative externalities are present because

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.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

If an externality is present in a market,economic efficiency may be enhanced by

Correct Answer
verified

Exam 10: Externalities

Internalizing a positive externality will cause the demand curve to

Correct AnswerverifiedShow Answer

When negative externalities are present in a market

Correct AnswerverifiedShow Answer

Because there are positive externalities from higher education,

Correct AnswerverifiedShow Answer

Most economists prefer corrective taxes to regulation to correct the pollution problem because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All externalities

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Many charities like the Sierra Club are established to deal with externalities.

Correct AnswerverifiedShow Answer

One reason that private solutions to externalities do not always work is that

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.Without government intervention,the equilibrium quantity would be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11.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 10-4 -Refer to Figure 10-4.If this market is currently producing at Q2,then total economic well-being would increase if output

Correct AnswerverifiedShow Answer

When an externality is present,the market equilibrium is

Correct AnswerverifiedShow Answer

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Correct AnswerverifiedShow Answer

Markets are often inefficient when negative externalities are present because

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.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If an externality is present in a market,economic efficiency may be enhanced by

Correct AnswerverifiedShow Answer

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Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₂,then total economic well-being would increase if output

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