Question 1

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

Accepted Answer

A)   decreased to Q1.
B)   decreased to Q2.
C)   decreased to Q3.
D)   stayed at Q4.E) A) and C)
F) B) and D)

Question 2

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 D)
F) B) and C)

Question 3

Since almost all forms of transportation produce some type of pollution,

Accepted Answer

A)   the government should ban all transportation.
B)   the government should ban all pollution.
C)   society has to weigh the cost and benefits when deciding how much pollution to allow.
D)   refrain from intervening because the market can best solve this problem.E) None of the above
F) A) and C)

Question 4

Two types of private solutions to the problem of externalities are

Accepted Answer

A)   charities and the Golden Rule.
B)   charities and subsidies.
C)   the Golden Rule and taxes.
D)   taxes and subsidies.E) None of the above
F) A) and B)

Question 5

When externalities are present in a market,the well-being of market participants

Accepted Answer

A)   and market bystanders are both directly affected.
B)   and market bystanders are both indirectly affected.
C)   is directly affected,and market bystanders are indirectly affected.
D)   is indirectly affected,and market bystanders are directly affected.E) B) and C)
F) None of the above

Question 6

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 railroad is not liable for any damage caused to the crops.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.E) All of the above
F) B) and C)

Question 7

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Accepted Answer

A)   a "cap and trade" system in which the government would give away permits to emit carbon.
B)   an expansion of regulations on carbon emissions.
C)   stricter enforcement of existing regulations on carbon emissions.
D)   a tax on carbon emissions.E) A) and B)
F) B) and C)

Question 8

Figure 10-5 3 - P1. B)  The marginal cost of the negative externality is measured by P3 - P2. C)  The marginal cost of the negative externality is measured by P3 - P1. D)  The marginal cost of the negative externality is measured by P3 - P0." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-5.Which of the following statements is correct?

Accepted Answer

A)   The marginal benefit of the positive externality is measured by P3 - P1.
B)   The marginal cost of the negative externality is measured by P3 - P2.
C)   The marginal cost of the negative externality is measured by P3 - P1.
D)   The marginal cost of the negative externality is measured by P3 - P0.E) B) and C)
F) None of the above

Question 9

Research into new technologies conveys neither negative externalities nor positive externalities.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following policies is not an example of a command-and-control policy?

Accepted Answer

A)   subsidies
B)   Pigovian taxes
C)   tradable pollution permits
D)   None of the above is an example of a command-and-control policy.E) None of the above
F) A) and D)

Question 11

Which of the following statements about the Coase theorem is true?

Accepted Answer

A)   Underlying the results of the Coase theorem is the idea that private parties can bargain without cost over the allocation of resources.
B)   The Coase theorem asserts that private solutions to externalities invariably lead to inefficient allocations of resources.
C)   The Coase theorem applies to negative externalities,but not to positive externalities.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 12

Figure 10-19 
-Refer to Figure 10-19.How many units of the good are produced in a market equilibrium?

Accepted Answer

A)   fewer than 58
B)   58
C)   73
D)   94E) All of the above
F) A) and D)

Question 13

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

Accepted Answer

A) True 
 B)False

Question 14

When the government reduces my income tax by $0.30 for every $1.00 that I contribute to a charity,the government is effectively

Accepted Answer

A)   alleviating the negative externalities that are associated with charitable giving.
B)   imposing a negative externality on those who do not pay income taxes.
C)   encouraging a private solution to a positive-externality problem.
D)   encouraging a private solution to a negative-externality problem.E) None of the above
F) A) and B)

Question 15

Which of the following statements is not correct?

Accepted Answer

A)   Corrective taxes can be used to place a price on the right to pollute.
B)   Corrective taxes allocate pollution to those producers who face the highest cost of reducing pollution.
C)   Corrective taxes provide incentives to develop cleaner technologies.
D)   Corrective taxes require the government to set a target level of pollution.E) A) and B)
F) A) and C)

Question 16

Table 10-6
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 10-6.Suppose there is presently no pollution fee,and the government wishes to eliminate exactly 11 units of pollution.Which of the following fees per unit of pollution would achieve that goal?

Accepted Answer

A)   $60
B)   $70
C)   $76
D)   $88E) None of the above
F) A) and C)

Question 17

Figure 10-11 th unit is equal to the cost incurred by the seller of the 160th unit. B)  160 units,since the value to society of the 160th unit is equal to the cost incurred by the seller of the 160th unit. C)  280 units,since the value to the buyer of the 280th unit is equal to the cost incurred by the seller of the 280th unit. D)  280 units,since the value to society of the 280th unit is equal to the cost incurred by the seller of the 280th unit." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-11.The socially optimal quantity of output is

Accepted Answer

A)   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.
B)   160 units,since the value to society of the 160th unit is equal to the cost incurred by the seller of the 160th unit.
C)   280 units,since the value to the buyer of the 280th unit is equal to the cost incurred by the seller of the 280th unit.
D)   280 units,since the value to society of the 280th unit is equal to the cost incurred by the seller of the 280th unit.E) A) and C)
F) All of the above

Question 18

In a market with positive externalities,the market equilibrium quantity maximizes the welfare of society as a whole.

Accepted Answer

A) True 
 B)False

Question 19

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 C)

Question 20

Two firms,A and B,each currently dump 20 tons of chemicals into the local river.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river.The government gives each firm 10 pollution permits,which it can either use or sell to the other firm.It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river,and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river.After the two firms buy or sell pollution permits from each other,we would expect that

Accepted Answer

A)   Firm A will no longer pollute,and Firm B will not reduce its pollution at all.
B)   Firm B will no longer pollute,and Firm A will not reduce its pollution at all.
C)   Firm A will dump 10 tons of pollution into the river,and Firm B will dump 10 tons of pollution into the river.
D)   Firm A will increase its pollution and Firm B will reduce its pollution.E) B) and D)
F) C) and D)

Exam 10: Externalities

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

Correct Answer
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The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

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Which of the following policies is not an example of a command-and-control policy?

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Figure 10-19 -Refer to Figure 10-19.How many units of the good are produced in a market equilibrium?

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Figure 10-5 -Refer to Figure 10-5.Which of the following statements is correct?

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Figure 10-11 -Refer to Figure 10-11.The socially optimal quantity of output is

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Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₄,then total economic well-being would be maximized if output

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Which of the following statements about the Coase theorem is true?

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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

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In a market with positive externalities,the market equilibrium quantity maximizes the welfare of society as a whole.

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Two types of private solutions to the problem of externalities are

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When the government reduces my income tax by $0.30 for every $1.00 that I contribute to a charity,the government is effectively

Correct Answer
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Which of the following statements is not correct?

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Research into new technologies conveys neither negative externalities nor positive externalities.

Correct Answer
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Since almost all forms of transportation produce some type of pollution,

Correct Answer
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Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Correct Answer
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When externalities are present in a market,the well-being of market participants

Correct Answer
verified

Exam 10: Externalities

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

Correct AnswerverifiedShow Answer

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

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Which of the following policies is not an example of a command-and-control policy?

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Figure 10-19 -Refer to Figure 10-19.How many units of the good are produced in a market equilibrium?

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Figure 10-5 -Refer to Figure 10-5.Which of the following statements is correct?

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Figure 10-11 -Refer to Figure 10-11.The socially optimal quantity of output is

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Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q4,then total economic well-being would be maximized if output

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Which of the following statements about the Coase theorem is true?

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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

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In a market with positive externalities,the market equilibrium quantity maximizes the welfare of society as a whole.

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Two types of private solutions to the problem of externalities are

Correct AnswerverifiedShow Answer

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When the government reduces my income tax by $0.30 for every $1.00 that I contribute to a charity,the government is effectively

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Which of the following statements is not correct?

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Research into new technologies conveys neither negative externalities nor positive externalities.

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Since almost all forms of transportation produce some type of pollution,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Correct AnswerverifiedShow Answer

When externalities are present in a market,the well-being of market participants

Correct AnswerverifiedShow Answer

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Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₄,then total economic well-being would be maximized if output

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