Question 1

Since restored historic buildings convey a positive externality,local governments may choose to

Accepted Answer

A)   regulate the demolition of them.
B)   provide tax breaks to owners who restore them.
C)   increase property taxes in historic areas.
D)   Both a and b are correct.E) B) and C)
F) C) and D)

Question 2

Table 10-1
The following table shows the private value,private cost,and external cost for various quantities of output in a market.
 
-Refer to Table 10-1.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Accepted Answer

A)   $2
B)   $3
C)   $9
D)   $10E) B) and C)
F) None of the above

Question 3

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Accepted Answer

The Coase ...

Question 4

When the social cost curve is above a product's supply curve,

Accepted Answer

A)   the government has intervened in the market.
B)   a negative externality exists in the market.
C)   a positive externality exists in the market.
D)   the distribution of resources is unfair.E) A) and D)
F) A) and C)

Question 5

A positive externality arises when a person engages in an activity that has

Accepted Answer

A)   an adverse effect on a bystander who is not compensated by the person who causes the effect.
B)   an adverse effect on a bystander who is compensated by the person who causes the effect.
C)   a beneficial effect on a bystander who pays the person who causes the effect.
D)   a beneficial effect on a bystander who does not pay the person who causes the effect.E) A) and B)
F) A) and C)

Question 6

Figure 10-12 
-Refer to Figure 10-12.The graph,as drawn,could apply to the market for

Accepted Answer

A)   automobiles.
B)   aluminum.
C)   robots.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 7

Tradable pollution permits

Accepted Answer

A)   have prices that are set by the government.
B)   will be more valuable to firms that can reduce pollution only at high costs.
C)   are likely to create a higher level of total pollution.
D)   are less desirable than corrective taxes in reducing pollution.E) A) and B)
F) A) and C)

Question 8

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill,the policy would be considered

Accepted Answer

A)   a subsidy.
B)   a regulation.
C)   a corrective tax.
D)   an application of the Coase theorem.E) B) and C)
F) None of the above

Question 9

Figure 10-15 
-Refer to Figure 10-15.The supply of pollution permits is

Accepted Answer

A)   elastic and represented by line A.
B)   inelastic and represented by line A.
C)   elastic and represented by line F
D)   inelastic and represented by line F.E) A) and B)
F) A) and C)

Question 10

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) All of the above
F) A) and B)

Question 11

Figure 10-9   
-Refer to Figure 10-9.Which graph represents a market with no externality?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 12

Figure 10-10 
-Refer to Figure 10-10.An increase in output from 120 units to 160 units would

Accepted Answer

A)   move the market from a socially efficient outcome to a socially inefficient outcome.
B)   increase the external cost per unit of output.
C)   increase total economic well-being.
D)   be an action of which a benevolent social planner would approve.E) All of the above
F) A) and D)

Question 13

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 D)
F) B) and C)

Question 14

Some environmentalists argue that we should protect the environment as much as possible,regardless of cost.Which of the following is not a likely outcome of pursuing such a course of action?

Accepted Answer

A)   lower levels of nutrition,health care,and housing
B)   a lower standard of living
C)   slowing or reversing technological advancement
D)   the elimination of all pollutionE) C) and D)
F) None of the above

Question 15

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Accepted Answer

A) True 
 B)False

Question 16

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs.Suppose that the federal government gives grants to these researchers equal to the their per-unit production externality.What is the relationship between the equilibrium quantity of university research and the socially optimal quantity of university research produced?

Accepted Answer

A)   The equilibrium quantity is greater than the socially optimal quantity.
B)   They are equal.
C)   The equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) B) and C)
F) A) and D)

Question 17

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Accepted Answer

A)   reduced purchasing power for Americans.
B)   reduced work incentives.
C)   depressed economic activity.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 18

Figure 10-11 th unit of output,private value exceeds private cost. B)  260th unit of output,private value exceeds external value. C)  300th unit of output,private value exceeds social value. D)  300th unit of output,private cost exceeds social value." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-11.On the

Accepted Answer

A)   260th unit of output,private value exceeds private cost.
B)   260th unit of output,private value exceeds external value.
C)   300th unit of output,private value exceeds social value.
D)   300th unit of output,private cost exceeds social value.E) All of the above
F) C) and D)

Question 19

The tax on gasoline causes deadweight losses,as is the case with all taxes.

Accepted Answer

A) True 
 B)False

Question 20

Table 10-4
 
-Refer to Table 10-4.Taking into account private and external costs,total surplus in the market equilibrium amounts to

Accepted Answer

A)   $15.
B)   $17.
C)   $18.
D)   $20.E) None of the above
F) All of the above

Exam 10: Externalities

A positive externality arises when a person engages in an activity that has

Correct Answer
verified

Figure 10-12 -Refer to Figure 10-12.The graph,as drawn,could apply to the market for

Correct Answer
verified

Since restored historic buildings convey a positive externality,local governments may choose to

Correct Answer
verified

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Correct Answer
verified
The Coase ...
View Answer

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Correct Answer
verified

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct Answer
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Correct Answer
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Figure 10-10 -Refer to Figure 10-10.An increase in output from 120 units to 160 units would

Correct Answer
verified

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

Correct Answer
verified

When the social cost curve is above a product's supply curve,

Correct Answer
verified

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

Correct Answer
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The tax on gasoline causes deadweight losses,as is the case with all taxes.

Correct Answer
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Figure 10-11 -Refer to Figure 10-11.On the

Correct Answer
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Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with no externality?

Correct Answer
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Figure 10-15 -Refer to Figure 10-15.The supply of pollution permits is

Correct Answer
verified

Some environmentalists argue that we should protect the environment as much as possible,regardless of cost.Which of the following is not a likely outcome of pursuing such a course of action?

Correct Answer
verified

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill,the policy would be considered

Correct Answer
verified

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Correct Answer
verified

Table 10-4 -Refer to Table 10-4.Taking into account private and external costs,total surplus in the market equilibrium amounts to

Correct Answer
verified

Tradable pollution permits

Correct Answer
verified

Exam 10: Externalities

A positive externality arises when a person engages in an activity that has

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12.The graph,as drawn,could apply to the market for

Correct AnswerverifiedShow Answer

Since restored historic buildings convey a positive externality,local governments may choose to

Correct AnswerverifiedShow Answer

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Correct AnswerverifiedThe Coase ...View AnswerShow Answer

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Correct AnswerverifiedShow Answer

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-10 -Refer to Figure 10-10.An increase in output from 120 units to 160 units would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the social cost curve is above a product's supply curve,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The tax on gasoline causes deadweight losses,as is the case with all taxes.

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11.On the

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with no externality?

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15.The supply of pollution permits is

Correct AnswerverifiedShow Answer

Some environmentalists argue that we should protect the environment as much as possible,regardless of cost.Which of the following is not a likely outcome of pursuing such a course of action?

Correct AnswerverifiedShow Answer

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill,the policy would be considered

Correct AnswerverifiedShow Answer

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Correct AnswerverifiedShow Answer

Table 10-4 -Refer to Table 10-4.Taking into account private and external costs,total surplus in the market equilibrium amounts to

Correct AnswerverifiedShow Answer

Tradable pollution permits

Correct AnswerverifiedShow Answer

Correct Answer
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The Coase ...
View Answer

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