Question 1

Figure 10-10 th unit is equal to the cost incurred by the seller of the 120th unit. B)  120 units,since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit. C)  160 units,since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit. D)  160 units,since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-10.The socially optimal quantity of output is

Accepted Answer

A)   120 units,since the value to the buyer of the 120th unit is equal to the cost incurred by the seller of the 120th unit.
B)   120 units,since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit.
C)   160 units,since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit.
D)   160 units,since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit.E) All of the above
F) C) and D)

Question 2

A positive externality will cause a market to produce

Accepted Answer

A)   more than is socially desirable.
B)   less than is socially desirable.
C)   the socially optimal equilibrium amount.
D)   more than the same market would produce in the presence of a negative externality.E) None of the above
F) A) and C)

Question 3

An externality

Accepted Answer

A)   results in an equilibrium that does not maximize the total benefits to society.
B)   causes demand to exceed supply.
C)   strengthens the role of the "invisible hand" in the marketplace.
D)   affects buyers but not sellers.E) A) and C)
F) All of the above

Question 4

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 5

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.Suppose there is an external cost of $12 associated with the production of each unit of the good.What is the social cost of producing 30 units of the good?

Accepted Answer

The social cost of p...

Question 6

Figure 10-11 
-Refer to Figure 10-11.The graph represents a market in which

Accepted Answer

A)   there is no externality.
B)   there is a positive externality.
C)   there is a negative externality.
D)   The answer cannot be determined from inspection of the graph.E) None of the above
F) A) and B)

Question 7

That some firms are engaged in more than one type of business is explained,in some cases,by

Accepted Answer

A)   moral injunctions such as the Golden Rule.
B)   the existence of charitable organizations.
C)   government regulations that discourage the internalization of externalities.
D)   the fact that the internalization of externalities sometimes coincides with the self-interest of the relevant parties.E) None of the above
F) A) and B)

Question 8

The difference between a corrective tax and a tradable pollution permit is that

Accepted Answer

A)   a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
B)   a corrective tax creates a more efficient outcome than a permit.
C)   a corrective tax sets the quantity of pollution and a permit sets the price of pollution.
D)   a permit creates a more efficient outcome than a corrective tax.E) None of the above
F) B) and D)

Question 9

Figure 10-9   
-Refer to Figure 10-9,Panel (b) .The market equilibrium quantity is

Accepted Answer

A)   Q2,which is the socially optimal quantity.
B)   Q3,which is the socially optimal quantity.
C)   Q2,and the socially optimal quantity is Q3.
D)   Q3,and the socially optimal quantity is Q2.E) A) and C)
F) None of the above

Question 10

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward.The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2.Is the market equilibrium quantity of restored historic buildings less than,equal to,or greater than 50?

Accepted Answer

The market equilibri...

Question 11

Transaction costs

Accepted Answer

A)   can keep private parties from solving externality problems.
B)   are incurred in the production process due to externalities.
C)   increase when taxes are imposed to correct negative externalities.
D)   are eliminated when the government intervenes in a market with externalities.E) B) and C)
F) None of the above

Question 12

All remedies for externalities share the goal of

Accepted Answer

A)   moving the allocation of resources toward the market equilibrium.
B)   moving the allocation of resources toward the socially optimal equilibrium.
C)   increasing the allocation of resources.
D)   decreasing the allocation of resources.E) A) and B)
F) All of the above

Question 13

Research into new technologies

Accepted Answer

A)   provides positive externalities because it creates knowledge others can use.
B)   results in negative externalities because government funding for research causes less government spending in other areas.
C)   is protected by patent laws,which eliminates the need for government intervention.
D)   should only be funded by the corporations that will receive the profits from the research.E) None of the above
F) All of the above

Question 14

Figure 10-15 
-Refer to Figure 10-15.Which graph illustrates a corrective tax?

Accepted Answer

A)   the left graph
B)   the right graph
C)   both graphs
D)   neither graphE) B) and D)
F) B) and C)

Question 15

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Accepted Answer

A) True 
 B)False

Question 16

With pollution permits,the supply curve for pollution rights is

Accepted Answer

A)   perfectly elastic.
B)   perfectly inelastic.
C)   upward sloping.
D)   downward sloping.E) A) and B)
F) A) and D)

Question 17

According to the Coase Theorem,individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a certain good provides an external benefit.If the private cost of the last unit of the good that was produced is equal to the social value of that unit,then the sum of producer and consumer surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 19

Table 10-4
 nd unit. B)  3rd unit. C)  4th unit. D)  5th unit." class="answers-bank-image d-inline" rel="preload" >
-Refer to Table 10-4.The last unit of output for which private value exceeds social cost is the

Accepted Answer

A)   2nd unit.
B)   3rd unit.
C)   4th unit.
D)   5th unit.E) B) and C)
F) A) and D)

Question 20

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,a government policy that internalized the externality would move the quantity of antibiotics used from point

Accepted Answer

A)   Q2 to point Q3.
B)   Q3 to point Q2.
C)   Q4 to point Q5.
D)   Q5 to point Q4.E) B) and C)
F) A) and D)

Exam 10: Externalities

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Correct Answer
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Transaction costs

Correct Answer
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A positive externality will cause a market to produce

Correct Answer
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Figure 10-10 -Refer to Figure 10-10.The socially optimal quantity of output is

Correct Answer
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The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Correct Answer
verified

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a corrective tax?

Correct Answer
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All remedies for externalities share the goal of

Correct Answer
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That some firms are engaged in more than one type of business is explained,in some cases,by

Correct Answer
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According to the Coase Theorem,individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9,Panel (b) .The market equilibrium quantity is

Correct Answer
verified

With pollution permits,the supply curve for pollution rights is

Correct Answer
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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,a government policy that internalized the externality would move the quantity of antibiotics used from point

Correct Answer
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An externality

Correct Answer
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Research into new technologies

Correct Answer
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The difference between a corrective tax and a tradable pollution permit is that

Correct Answer
verified

Suppose a certain good provides an external benefit.If the private cost of the last unit of the good that was produced is equal to the social value of that unit,then the sum of producer and consumer surplus is maximized.

Correct Answer
verified

Correct Answer
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The market equilibri...
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Figure 10-11 -Refer to Figure 10-11.The graph represents a market in which

Correct Answer
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Table 10-4 -Refer to Table 10-4.The last unit of output for which private value exceeds social cost is the

Correct Answer
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Correct Answer
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The social cost of p...
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Exam 10: Externalities

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Correct AnswerverifiedShow Answer

Transaction costs

Correct AnswerverifiedShow Answer

A positive externality will cause a market to produce

Correct AnswerverifiedShow Answer

Figure 10-10 -Refer to Figure 10-10.The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a corrective tax?

Correct AnswerverifiedShow Answer

All remedies for externalities share the goal of

Correct AnswerverifiedShow Answer

That some firms are engaged in more than one type of business is explained,in some cases,by

Correct AnswerverifiedShow Answer

According to the Coase Theorem,individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) .The market equilibrium quantity is

Correct AnswerverifiedShow Answer

With pollution permits,the supply curve for pollution rights is

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,a government policy that internalized the externality would move the quantity of antibiotics used from point

Correct AnswerverifiedShow Answer

An externality

Correct AnswerverifiedShow Answer

Research into new technologies

Correct AnswerverifiedShow Answer

The difference between a corrective tax and a tradable pollution permit is that

Correct AnswerverifiedShow Answer

Suppose a certain good provides an external benefit.If the private cost of the last unit of the good that was produced is equal to the social value of that unit,then the sum of producer and consumer surplus is maximized.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe market equilibri...View AnswerShow Answer

Figure 10-11 -Refer to Figure 10-11.The graph represents a market in which

Correct AnswerverifiedShow Answer

Table 10-4 -Refer to Table 10-4.The last unit of output for which private value exceeds social cost is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe social cost of p...View AnswerShow Answer

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The market equilibri...
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The social cost of p...
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