Question 1

The underlying assumptions of the Coase Theorem are that transactions are costless and that damages are accessible and can be measured.

Accepted Answer

A) True 
 B)False

Question 2

Use the following graph of the refined petroleum market to answer the questions below.
 
-Which area represents the net gain to society? Should the reduction in output from QC to QE take place? Why or why not?

Accepted Answer

Area D represents the net gain to societ...

Question 3

According to the Coase Theorem

Accepted Answer

A)   efficiency can result only if producers hold the property rights
B)   an efficient outcome is possible as long as property rights are assigned
C)   efficiency is not possible in the presence of an environmental externality
D)   none of the above

Question 4

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the competitive price level is

Accepted Answer

A)   PC = $18
B)   PC = $20
C)   PC = $25
D)   PC = $40

Question 5

Nonexcludability refers to the possibility that the benefits of consumption can be shared.

Accepted Answer

A) True 
 B)False

Question 6

The study conducted by Greenpeace China of the Pearl River Delta (PRD) region indicates that progress is being made to improve water quality.

Accepted Answer

A) True 
 B)False

Question 7

If property rights are held by the producer of an externality-generating good, then bargaining will continue as long as MEC > ρ > Mπ, where ρ represents the payment offered to the producer not to pollute.

Accepted Answer

A) True 
 B)False

Question 8

According to the Coase Theorem, assignment of property rights will permit bargaining that leads to an efficient solution only in the absence of externalities.

Accepted Answer

A) True 
 B)False

Question 9

The Coase Theorem assumes

Accepted Answer

A)   transactions are costless
B)   damages are accessible and measureable
C)   both (a)  and (b) 
D)   none of the above

Question 10

If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 - 0.2QD and p2 = 250 - 0.5QD, then the market demand function would be P = 350 - 0.7QD.

Accepted Answer

A) True 
 B)False  True

Question 11

Property rights are the set of valid claims to a good or resource that allow its use and the transfer of ownership through a sale.

Accepted Answer

A) True 
 B)False

Question 12

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the price at the efficient equilibrium is

Accepted Answer

A)   PE = $18
B)   PE = $22.50
C)   PE = $20
D)   PE = $40 B

Question 13

At QC, the maximum payment recreational users of the river would be willing to pay the producer for a unit change in output is

Accepted Answer

A)   DG
B)   DEH
C)   EH
D)   none of the above

Question 14

An external effect that generates costs to a third party is called

Accepted Answer

A)   free-ridership
B)   a positive externality
C)   a negative externality
D)   a marginal private cost

Question 15

If a good has the characteristic of nonrivalness, it means that

Accepted Answer

A)   the good is publicly provided
B)   it is impossible to prevent others from sharing the benefits of consumption
C)   the benefits linked to consumption are indivisible
D)   none of the above

Question 16

Environmental pollution can be characterized as a market failure that distorts the classical market outcome.

Accepted Answer

A) True 
 B)False  True

Question 17

The original 'long box' packaging of CD's is an example of

Accepted Answer

A)   a positive production externality
B)   a negative production externality
C)   an envirotech industry
D)   a negative consumption externality

Question 18

If we define the relevant market as "environmental quality," then the market failure is due to the presence of a negative externality.

Accepted Answer

A) True 
 B)False

Question 19

The reduction in damages to the environment from changing output from QC to QE is

Accepted Answer

A)   EH
B)   DG
C)   DEHG
D)   DGH

Question 20

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the firm's M π\piπ  function must be

Accepted Answer

A)   M π\piπ  = 20 - 0.8Q
B)   PE = $22.50
C)   M π\piπ  = 0.3Q
D)   M π\piπ  = 20 - 0.1Q

Exam 3: Modeling Market Failure

The underlying assumptions of the Coase Theorem are that transactions are costless and that damages are accessible and can be measured.

Correct AnswerverifiedShow Answer

Use the following graph of the refined petroleum market to answer the questions below. -Which area represents the net gain to society? Should the reduction in output from QC to QE take place? Why or why not?

Correct AnswerverifiedArea D represents the net gain to societ...View AnswerShow Answer

According to the Coase Theorem

Correct AnswerverifiedShow Answer

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the competitive price level is

Correct AnswerverifiedShow Answer

Nonexcludability refers to the possibility that the benefits of consumption can be shared.

Correct AnswerverifiedShow Answer

The study conducted by Greenpeace China of the Pearl River Delta (PRD) region indicates that progress is being made to improve water quality.

Correct AnswerverifiedShow Answer

If property rights are held by the producer of an externality-generating good, then bargaining will continue as long as MEC > ρ > Mπ, where ρ represents the payment offered to the producer not to pollute.

Correct AnswerverifiedShow Answer

According to the Coase Theorem, assignment of property rights will permit bargaining that leads to an efficient solution only in the absence of externalities.

Correct AnswerverifiedShow Answer

The Coase Theorem assumes

Correct AnswerverifiedShow Answer

If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 - 0.2QD and p2 = 250 - 0.5QD, then the market demand function would be P = 350 - 0.7QD.

Correct AnswerverifiedTrue

Property rights are the set of valid claims to a good or resource that allow its use and the transfer of ownership through a sale.

Correct AnswerverifiedShow Answer

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the price at the efficient equilibrium is

Correct AnswerverifiedB

At QC, the maximum payment recreational users of the river would be willing to pay the producer for a unit change in output is

Correct AnswerverifiedShow Answer

An external effect that generates costs to a third party is called

Correct AnswerverifiedShow Answer

If a good has the characteristic of nonrivalness, it means that

Correct AnswerverifiedShow Answer

Environmental pollution can be characterized as a market failure that distorts the classical market outcome.

Correct AnswerverifiedTrue

The original 'long box' packaging of CD's is an example of

Correct AnswerverifiedShow Answer

If we define the relevant market as "environmental quality," then the market failure is due to the presence of a negative externality.

Correct AnswerverifiedShow Answer

The reduction in damages to the environment from changing output from QC to QE is

Correct AnswerverifiedShow Answer

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the firm's M π\piπ function must be

Correct AnswerverifiedShow Answer

Correct Answer
verified

Use the following graph of the refined petroleum market to answer the questions below. -Which area represents the net gain to society? Should the reduction in output from Q_C to Q_E take place? Why or why not?

Correct Answer
verified
Area D represents the net gain to societ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 - 0.2Q_D and p2 = 250 - 0.5Q_D, then the market demand function would be P = 350 - 0.7Q_D.

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified
B

At Q_C, the maximum payment recreational users of the river would be willing to pay the producer for a unit change in output is

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

The reduction in damages to the environment from changing output from Q_C to Q_E is

Correct Answer
verified

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the firm's M $\pi$ function must be

Correct Answer
verified