Question 1

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) None of the above

Question 2

An optimal tax on pollution would result in which of the following?

Accepted Answer

A)   Producers will choose not to produce any pollution.
B)   Producers will internalize the cost of the pollution.
C)   Producers will maximize production.
D)   The value to consumers at market equilibrium will exceed the social cost of production.E) A) and B)
F) B) and C)

Question 3

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.E) A) and D)
F) A) and B)

Question 4

Table 10-3
 
-Refer to Table 10-3. The market equilibrium quantity of output is

Accepted Answer

A)   3 units.
B)   4 units.
C)   5 units.
D)   6 units.E) None of the above
F) B) and C)

Question 5

Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

Accepted Answer

A)   Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke.
B)   Mary pays Cathy $16 so that Mary can smoke.
C)   Mary pays Cathy $14 so that Mary can smoke.
D)   Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke.E) A) and D)
F) B) and C)

Question 6

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

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.E) B) and C)
F) A) and D)

Question 7

To produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, which increases the yields of these fields at no additional cost to the farmer. What might be a reasonable private solution to this externality, and how might the solution be reached?

Accepted Answer

One solution would be to have one person...

Question 8

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) C) and D)

Question 9

Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When a positive externality exists, the...

Question 10

Economists believe that the optimal level of pollution is zero.

Accepted Answer

A) True 
 B)False

Question 11

By allowing an income-tax deduction for charitable contributions, the government

Accepted Answer

A)   encourages a private solution to a particular positive-externality problem.
B)   discourages a private solution to a particular positive-externality problem.
C)   encourages a private solution to a particular negative-externality problem.
D)   discourages a private solution to a particular negative-externality problem.E) B) and C)
F) A) and D)

Question 12

Which of the following would not be considered a negative externality?

Accepted Answer

A)   Smelter, Inc. creates steel and pollution.
B)   Your friend buys a new puppy that barks every night.
C)   You have an adverse reaction to a medication your doctor prescribed for you.
D)   Your neighbor plays loud music that you dislike through stereo speakers set up on his deck.E) B) and C)
F) A) and D)

Question 13

Corrective taxes differ from most taxes in that corrective taxes

Accepted Answer

A)   reduce economic efficiency.
B)   do not raise revenue for the government.
C)   do not cause deadweight losses.
D)   always result in a high burden on sellers of goods to which the corrective tax applies.E) B) and C)
F) None of the above

Question 14

Figure 10-14 
-Refer to Figure 10-14. Which of the following statements is correct?

Accepted Answer

A)   To induce firms to internalize the externality in this market, the government should impose a tax measured by P2 - P0.
B)   To induce firms to internalize the externality in this market, the government should offer a subsidy measured by P2 - P0.
C)   To induce firms to internalize the externality in this market, the government should impose a tax measured by P2 - P1.
D)   There is no externality in this market.E) A) and B)
F) A) and C)

Question 15

Corrective taxes

Accepted Answer

A)   encourage consumers to avoid sales taxes by shopping online.
B)   are frequently used to discourage imports.
C)   are less efficient than direct regulation.
D)   give factory owners an economic incentive to reduce pollution.E) B) and C)
F) None of the above

Question 16

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 external cost of antibiotic overuse is represented by

Accepted Answer

A)   Q3 - Q2.
B)   Q5 - Q4.
C)   P3a - P3c.
D)   P4a - P4b.E) B) and D)
F) C) and D)

Question 17

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is an example of a positive externality?

Accepted Answer

A)   Sue not catching the flu because she got a flu vaccine
B)   Mary not catching the flu from Sue because Sue got a flu vaccine
C)   Sue catching the flu because she did not get a flu vaccine
D)   Mary catching the flu from Sue because Sue did not get a flu vaccineE) A) and C)
F) C) and D)

Question 19

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Accepted Answer

A) True 
 B)False

Question 20

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. What is the socially optimal quantity of plastic?

Accepted Answer

A)   200 units
B)   450 units
C)   500 units
D)   650 unitsE) A) and D)
F) A) and C)

Exam 10: Externalities

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Correct Answer
verified

Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

Correct Answer
verified

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
verified

Corrective taxes differ from most taxes in that corrective taxes

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

An optimal tax on pollution would result in which of the following?

Correct Answer
verified

When negative externalities are present in a market

Correct Answer
verified

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Correct Answer
verified

Correct Answer
verified
One solution would be to have one person...
View Answer

Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Correct Answer
verified
When a positive externality exists, the...
View Answer

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

Correct Answer
verified

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. What is the socially optimal quantity of plastic?

Correct Answer
verified

Corrective taxes

Correct Answer
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By allowing an income-tax deduction for charitable contributions, the government

Correct Answer
verified

Table 10-3 -Refer to Table 10-3. The market equilibrium quantity of output is

Correct Answer
verified

Which of the following is an example of a positive externality?

Correct Answer
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Which of the following would not be considered a negative externality?

Correct Answer
verified

Figure 10-14 -Refer to Figure 10-14. Which of the following statements is correct?

Correct Answer
verified

Economists believe that the optimal level of pollution is zero.

Correct Answer
verified

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 external cost of antibiotic overuse is represented by

Correct Answer
verified

Exam 10: Externalities

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Correct AnswerverifiedShow Answer

Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

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

Corrective taxes differ from most taxes in that corrective taxes

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

An optimal tax on pollution would result in which of the following?

Correct AnswerverifiedShow Answer

When negative externalities are present in a market

Correct AnswerverifiedShow Answer

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedOne solution would be to have one person...View AnswerShow Answer

Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Correct Answerverified When a positive externality exists, the...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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. What is the socially optimal quantity of plastic?

Correct AnswerverifiedShow Answer

Corrective taxes

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By allowing an income-tax deduction for charitable contributions, the government

Correct AnswerverifiedShow Answer

Table 10-3 -Refer to Table 10-3. The market equilibrium quantity of output is

Correct AnswerverifiedShow Answer

Which of the following is an example of a positive externality?

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Which of the following would not be considered a negative externality?

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Figure 10-14 -Refer to Figure 10-14. Which of the following statements is correct?

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Economists believe that the optimal level of pollution is zero.

Correct AnswerverifiedShow 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 external cost of antibiotic overuse is represented by

Correct AnswerverifiedShow Answer

Correct Answer
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One solution would be to have one person...
View Answer

Correct Answer
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When a positive externality exists, the...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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