Question 1

Government-imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Accepted Answer

A)  the Pigovian method of pollution control.
B)  a command-and-control approach to pollution reduction.
C)  a Coasian solution to pollution reduction.
D)  a tradable emission allowance system of pollution control.E) B) and D)
F) B) and C)

Question 2

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Accepted Answer

A) True 
 B)False

Question 3

Alternative approaches for reducing carbon dioxide emissions are

Accepted Answer

A)  carbon taxes and carbon scrubbing.
B)  carbon trading and carbon subsidies.
C)  carbon taxes and tradable emission allowances.
D)  burning low carbon coal and deforestation.E) B) and C)
F) C) and D)

Question 4

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Accepted Answer

A)  The government uses taxes in order to internalize the externalities caused by pollution.
B)  The government uses subsidies to encourage firms to use new technology that reduces pollution.
C)  The government imposes quantitative limits on the amount of pollution firms are allowed to generate.
D)  The government distributes information to consumers and producers on how to reduce pollution.E) A) and B)
F) C) and D)

Question 5

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

Accepted Answer

A)  an efficient solution can be reached only if property rights are assigned to the victims of the pollution.
B)  an efficient solution can be reached only if property rights are assigned to the polluters.
C)  an efficient solution can be reached regardless of the initial assignment of property rights.
D)  government intervention is critical to reach an efficient solution.E) All of the above
F) None of the above

Question 6

Figure 5-12
  
College education benefits society by producing a more employable workforce, reducing crime, and creating a better informed citizenry. Thus, the marginal social benefits of college education exceed the marginal private benefits for any level of college education. This is illustrated in Figure 5-12.
-Refer to Figure 5-12.One way to obtain the economically efficient amount of college education is for governments to subsidize college education.What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.)

Accepted Answer

A)  P₂-P₀
B)  P₂-P₁
C)  P₀-P₁
D)  P₁E) A) and D)
F) A) and B)

Question 7

Figure 5-3
 m. B) Qn. C) Qₒ. D) Qₒ - Qm." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-3.The efficient output level is

Accepted Answer

A)  Qm.
B)  Qn.
C)  Qₒ.
D)  Qₒ - Qm.E) A) and D)
F) A) and B)

Question 8

Figure 5-6
  
Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities.
-Refer to Figure 5-6.What does D₂ represent?

Accepted Answer

A)  the social welfare curve
B)  the demand curve reflecting marginal social benefits
C)  the demand curve reflecting marginal private benefits
D)  the positive externalities curveE) B) and D)
F) C) and D)

Question 9

Figure 5-9
  
Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market.
-Refer to Figure 5-9.Let's suppose the government imposes a tax of $50 per unit of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

Accepted Answer

A)  It rises by $50 per unit.
B)  It rises by more than $50 per unit.
C)  It rises by less than $50 per unit.
D)  It remains the same because the tax is imposed on producers who create the externality.E) A) and D)
F) All of the above

Question 10

Private producers have no incentive to provide public goods because

Accepted Answer

A)  the government subsidy granted is usually insufficient to enable private producers to make a profit.
B)  production of huge quantities of public goods entails huge fixed costs.
C)  they cannot avoid the tragedy of the commons.
D)  once produced, it will not be possible to exclude those who do not pay for the good.E) B) and D)
F) A) and B)

Question 11

The supply curve of a public good shows

Accepted Answer

A)  the total quantities that all producers are willing and able to supply at each price.
B)  the maximum amount suppliers require to produce each quantity of the good.
C)  the total cost of producing each unit of the good.
D)  the marginal social cost of producing each unit of the good.E) None of the above
F) B) and C)

Question 12

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The market equilibrium price of gasoline is ________ per gallon.

Accepted Answer

A)  $3.00
B)  $3.75
C)  $4.25
D)  $5.00E) B) and C)
F) A) and D)

Question 13

Which of the following is a source of market failure?

Accepted Answer

A)  unforeseen circumstances which leads to the bankruptcy of many firms
B)  a lack of government intervention in a market
C)  incomplete property rights or inability to enforce property rights
D)  an inequitable income distributionE) C) and D)
F) A) and D)

Question 14

When there is a negative externality, the competitive output is greater than the economically efficient output level.

Accepted Answer

A) True 
 B)False

Question 15

For-profit producers will produce only private goods because

Accepted Answer

A)  markets exist for private goods but not for public goods.
B)  the cost of production can be easily determined.
C)  buyers will be willing to pay for the goods since the benefits are excludable.
D)  all external benefits can be internalized using market prices.E) None of the above
F) A) and C)

Question 16

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Accepted Answer

A)  $3.00
B)  $3.75
C)  $4.25
D)  $5.00E) None of the above
F) B) and D)

Question 17

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution.

Accepted Answer

A)  necessary; equitable
B)  necessary; efficient
C)  not necessary; equitable
D)  not necessary; efficientE) A) and B)
F) A) and C)

Question 18

Figure 5-16
  
Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights, and the marginal cost of installing the street lights.
-Refer to Figure 5-16.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

Accepted Answer

A)  The optimal quantity will be installed only if the two parties agree to pay according to their willingness to pay as indicated by their respective demand curves.
B)  Because there are only two consumers, it is likely that private bargaining will result in the optimal quantity being installed.
C)  The optimal quantity will be installed only if the two parties split the cost of installation equally.
D)  The optimal quantity will be installed only if Bree pays for the entire installation cost.E) C) and D)
F) A) and B)

Question 19

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

Accepted Answer

A)  too little of the good will be produced.
B)  too much of the good will be produced.
C)  a deadweight loss will occur that is equal to the area under the demand curve for the good.
D)  economic surplus is maximized.E) A) and B)
F) All of the above

Question 20

Medical research that results in a cure for a serious disease produces positive externalities.What is the impact of this positive externality on economic efficiency?

Accepted Answer

A)  At the market equilibrium, less than the economically efficient quantity of medical research is produced.
B)  A deadweight loss occurs because at the market equilibrium the marginal social cost of medical research is greater than the marginal social benefit.
C)  At the market equilibrium, more than the economically efficient quantity of medical research is produced.
D)  A deadweight loss occurs because at the market equilibrium the marginal social cost equals the marginal social benefit.E) A) and B)
F) A) and C)

Exam 5: Externalities, Environmental Policy, and Public Goods

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

Correct Answer
verified

The supply curve of a public good shows

Correct Answer
verified

Government-imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Correct Answer
verified

Figure 5-13 Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The market equilibrium price of gasoline is ________ per gallon.

Correct Answer
verified

For-profit producers will produce only private goods because

Correct Answer
verified

Private producers have no incentive to provide public goods because

Correct Answer
verified

When there is a negative externality, the competitive output is greater than the economically efficient output level.

Correct Answer
verified

Figure 5-13 Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Correct Answer
verified

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₂ represent?

Correct Answer
verified

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

Correct Answer
verified

Correct Answer
verified

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem, government action is to achieve an amount of pollution.

Correct Answer
verified

Medical research that results in a cure for a serious disease produces positive externalities.What is the impact of this positive externality on economic efficiency?

Correct Answer
verified

Correct Answer
verified

Alternative approaches for reducing carbon dioxide emissions are

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3.The efficient output level is

Correct Answer
verified

Correct Answer
verified

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Correct Answer
verified

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Correct Answer
verified

Which of the following is a source of market failure?

Correct Answer
verified

Exam 5: Externalities, Environmental Policy, and Public Goods

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

Correct AnswerverifiedShow Answer

The supply curve of a public good shows

Correct AnswerverifiedShow Answer

Government-imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Correct AnswerverifiedShow Answer

Figure 5-13 Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The market equilibrium price of gasoline is ________ per gallon.

Correct AnswerverifiedShow Answer

For-profit producers will produce only private goods because

Correct AnswerverifiedShow Answer

Private producers have no incentive to provide public goods because

Correct AnswerverifiedShow Answer

When there is a negative externality, the competitive output is greater than the economically efficient output level.

Correct AnswerverifiedShow Answer

Figure 5-13 Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Correct AnswerverifiedShow Answer

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₂ represent?

Correct AnswerverifiedShow Answer

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution.

Correct AnswerverifiedShow Answer

Medical research that results in a cure for a serious disease produces positive externalities.What is the impact of this positive externality on economic efficiency?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Alternative approaches for reducing carbon dioxide emissions are

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3.The efficient output level is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Correct AnswerverifiedShow Answer

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Correct AnswerverifiedShow Answer

Which of the following is a source of market failure?

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

Correct Answer
verified

Correct Answer
verified

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem, government action is to achieve an amount of pollution.

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