Question 1

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover,it should

Accepted Answer

A)   impose a corrective tax on any firm producing a technology spillover.
B)   offer tax credits to consumers who are adversely affected by the new technology.
C)   subsidize producers by an amount equal to the value of the technology spillover.
D)   provide research grants to those firms not currently engaging in research to increase competition in the industry.E) B) and C)
F) None of the above

Question 2

Figure 10-4 3 A)  the marginal consumer values this product less than the social cost of producing it. B)  every consumer values this product less than the social cost of producing it. C)  the cost to society is equal to the value to society. D)  the marginal consumer values this product more than the private cost." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.At Q3

Accepted Answer

A)   the marginal consumer values this product less than the social cost of producing it.
B)   every consumer values this product less than the social cost of producing it.
C)   the cost to society is equal to the value to society.
D)   the marginal consumer values this product more than the private cost.E) A) and C)
F) B) and D)

Question 3

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. 
-Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?

Accepted Answer

A)   "Demand for clean air"
B)   "Demand for pollution rights"
C)   "Supply of pollution permits"
D)   "Tax paid to government"E) A) and C)
F) A) and B)

Question 4

A dentist shares an office building with a radio station.The electrical current from the dentist's drill causes static in the radio broadcast,causing the radio station to lose $10,000 in profits.The radio station could put up a shield at a cost of $30,000; the dentist could buy a new drill that causes less interference for $6,000.Either would restore the radio station's lost profits.What is the economically efficient outcome?

Accepted Answer

A)   The radio station puts up a shield,which it pays for.
B)   The radio station puts up a shield,which the dentist pays for.
C)   Neither the radio station nor the dentist purchase additional equipment.
D)   The dentist gets a new drill; it does not matter who pays for it.E) A) and B)
F) B) and C)

Question 5

A paper plant produces water pollution during the production process.If the government forces the plant to internalize the negative externality,then the

Accepted Answer

A)   supply curve for paper would shift to the right.
B)   supply curve for paper would shift to the left.
C)   demand curve for paper would shift to the right.
D)   demand curve for paper would shift to the left.E) A) and C)
F) None of the above

Question 6

Figure 10-9   
-Refer to Figure 10-9,Panel (c) .The market equilibrium price is

Accepted Answer

A)   P4a.
B)   P4b.
C)   P5.
D)   P4a - P4b.E) All of the above
F) A) and B)

Question 7

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.E) A) and D)
F) C) and D)

Question 8

John lives in an apartment building and gets a $700 benefit from playing his stereo.Mary,who lives next door to John and often loses sleep due to the music coming from John's stereo,bears a $1,000 cost from the noise.At which of the following offers from Mary could both Mary and John benefit from the silencing of John's stereo?

Accepted Answer

A)   $200
B)   $600
C)   $900
D)   $1,100E) B) and D)
F) A) and D)

Question 9

Which of the following statements is correct about a market in which pollution is emitted?

Accepted Answer

A)   Both corrective taxes and pollution permits internalize the externality of pollution.
B)   Corrective taxes internalize the externality of pollution,but pollution permits do not internalize that externality.
C)   Corrective taxes fail to internalize the externality of pollution,but corrective taxes internalize that externality.
D)   Neither corrective taxes nor pollution permits internalize the externality of pollution.E) B) and C)
F) A) and D)

Question 10

Figure 10-9   
-Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Accepted Answer

A)   Q2.
B)   Q3.
C)   Q4.
D)   Q5.E) None of the above
F) A) and C)

Question 11

The supply curve for a product reflects the

Accepted Answer

A)   willingness to pay of the marginal buyer.
B)   quantity buyers will ultimately purchase of the product.
C)   cost to sellers of producing the product.
D)   seller's profit from producing the product.E) None of the above
F) B) and C)

Question 12

For the purpose of protecting the environment,upon which of the following approaches do we rely more and more as time goes by?

Accepted Answer

A)   adherence to the notion of the invisible hand
B)   command-and-control policies
C)   the development and enforcement of regulations
D)   the requirement that decision makers bear the full costs of their actionsE) B) and D)
F) None of the above

Question 13

Figure 10-9   
-Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Accepted Answer

A)   Panel (a) .
B)   Panel (b) .
C)   Panel (c) .
D)   Both (b) and (c) are correct.E) B) and C)
F) A) and B)

Question 14

The Coase theorem asserts that,in the presence of externalities,

Accepted Answer

A)   private economic actors sometimes can reach a bargain that produces an efficient outcome.
B)   private economic actors always can reach a bargain that makes everyone better off.
C)   private solutions cannot be very effective.
D)   corrective taxes cannot be very effective.E) All of the above
F) A) and B)

Question 15

When the production of a good results in a positive externality,the social value curve is

Accepted Answer

A)   below the demand curve,indicating that the total value to society is less than the private benefit.
B)   above the demand curve,indicating that the total value to society is greater than the private benefit.
C)   identical to the demand curve,indicating that the total cost to society is the equal to the private benefit.
D)   above the supply curve,indicating that the total cost to society exceeds the private cost.E) A) and C)
F) C) and D)

Question 16

Figure 10-4 
-Refer to Figure 10-4.Externalities in this market could be internalized if

Accepted Answer

A)   there were a tax on the product.
B)   there were a subsidy for the product.
C)   production were stopped.
D)   the Coase theorem failed.E) A) and B)
F) B) and C)

Question 17

If it is illegal for a biochemical manufacturer to release its waste into a nearby stream,then this is an example of

Accepted Answer

A)   a market-based policy.
B)   a command-and-control policy.
C)   tradable pollution permits.
D)   transaction costs.E) A) and D)
F) C) and D)

Question 18

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

Question 19

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) C) and D)
F) B) and C)

Question 20

Suppose that electricity producers create a negative externality equal to $5 per unit.What is the relationship between the equilibrium quantity and the socially optimal quantity of electricity 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.E) None of the above
F) A) and D)

Exam 10: Externalities

If it is illegal for a biochemical manufacturer to release its waste into a nearby stream,then this is an example of

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Correct Answer
verified

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

Correct Answer
verified

Suppose that electricity producers create a negative externality equal to $5 per unit.What is the relationship between the equilibrium quantity and the socially optimal quantity of electricity to be produced?

Correct Answer
verified

The Coase theorem asserts that,in the presence of externalities,

Correct Answer
verified

For the purpose of protecting the environment,upon which of the following approaches do we rely more and more as time goes by?

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Correct Answer
verified

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover,it should

Correct Answer
verified

Which of the following statements is correct about a market in which pollution is emitted?

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4.At Q₃

Correct Answer
verified

The supply curve for a product reflects the

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4.Externalities in this market could be internalized if

Correct Answer
verified

Correct Answer
verified

When the production of a good results in a positive externality,the social value curve is

Correct Answer
verified

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?

Correct Answer
verified

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

Correct Answer
verified

In markets,the invisible hand allocates resources efficiently

Correct Answer
verified

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9,Panel (c) .The market equilibrium price is

Correct Answer
verified

A paper plant produces water pollution during the production process.If the government forces the plant to internalize the negative externality,then the

Correct Answer
verified

Exam 10: Externalities

If it is illegal for a biochemical manufacturer to release its waste into a nearby stream,then this is an example of

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that electricity producers create a negative externality equal to $5 per unit.What is the relationship between the equilibrium quantity and the socially optimal quantity of electricity to be produced?

Correct AnswerverifiedShow Answer

The Coase theorem asserts that,in the presence of externalities,

Correct AnswerverifiedShow Answer

For the purpose of protecting the environment,upon which of the following approaches do we rely more and more as time goes by?

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Correct AnswerverifiedShow Answer

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover,it should

Correct AnswerverifiedShow Answer

Which of the following statements is correct about a market in which pollution is emitted?

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.At Q3

Correct AnswerverifiedShow Answer

The supply curve for a product reflects the

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.Externalities in this market could be internalized if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the production of a good results in a positive externality,the social value curve is

Correct AnswerverifiedShow Answer

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In markets,the invisible hand allocates resources efficiently

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (c) .The market equilibrium price is

Correct AnswerverifiedShow Answer

A paper plant produces water pollution during the production process.If the government forces the plant to internalize the negative externality,then the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4.At Q₃

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified