Question 1

Externalities can be corrected by each of the following except

Accepted Answer

A)   self-interest.
B)   moral codes and social sanctions.
C)   charity.
D)   normal market adjustments.E) C) and D)
F) None of the above

Question 2

According to the Coase theorem,whatever the initial distribution of rights,the interested parties can bargain to an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 3

Table 10-3
The following table shows the marginal 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 $54,and for Firm A to eliminate a second unit of pollution it would cost an additional $67.
 
-Refer to Table 10-3.If the government charged a fee of $84 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   7
B)   8
C)   9
D)   10E) B) and D)
F) B) and C)

Question 4

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 5

Corrective taxes are more efficient than regulations for keeping the environment clean.

Accepted Answer

A) True 
 B)False

Question 6

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) All of the above
F) None of the above

Question 7

A technology spillover is a type of negative externality.

Accepted Answer

A) True 
 B)False

Question 8

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,the socially optimal quantity of antibiotics is represented by point

Accepted Answer

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

Question 9

When one firm sells its pollution permit to another firm,

Accepted Answer

A)   both firms benefit.
B)   the total amount of pollution remains the same.
C)   the total amount of pollution decreases.
D)   Both a and b are correct.E) None of the above
F) All of the above

Question 10

Honey producers provide a positive externality to orchards because

Accepted Answer

A)   the honey producers get more honey.
B)   the orchard owner frequently gets stung by the honey producer's bees.
C)   the orchard owner does not have to purchase bees to pollinate his flowers.
D)   the honey producers have to rent access to the orchard grounds.E) C) and D)
F) B) and C)

Question 11

Despite the appealing logic of the Coase theorem,private actors often fail to resolve on their own the problems caused by externalities.

Accepted Answer

A) True 
 B)False

Question 12

If education produces positive externalities,we would expect

Accepted Answer

A)   the government to tax education.
B)   the government to subsidize education.
C)   people to realize the benefits,which would increase the demand for education.
D)   colleges to relax admission requirements.E) None of the above
F) B) and C)

Question 13

Which of the following require firms to pay to pollute?

Accepted Answer

A)   (i) only
B)   both (i) and (ii) 
C)   (iii) only
D)   both (ii) and (iii) E) C) and D)
F) None of the above

Question 14

An externality exists whenever

Accepted Answer

A)   the economy cannot benefit from government intervention.
B)   markets are not able to reach equilibrium.
C)   a firm sells its product in a foreign market.
D)   a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives payment for that effect.E) A) and B)
F) None of the above

Question 15

Suppose that smoking creates a negative externality.If the government does not interfere in the cigarette market,then

Accepted Answer

A)   the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked.
B)   the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked.
C)   the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked.
D)   There is not enough information to answer the question.E) B) and D)
F) All of the above

Question 16

Since externalities tend to keep markets from reaching a socially optimal equilibrium,government action

Accepted Answer

A)   is always needed because private solutions can never be attained.
B)   is needed when private solutions fail to arise.
C)   will be needed only to correct for positive externalities.
D)   will be needed only to correct for negative externalities.E) B) and D)
F) B) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If the production of computer chips yields greater technology spillovers than the production of potato chips,the government should

Accepted Answer

A)   encourage the production of computer chips with subsidies.
B)   discourage the production of potato chips with taxes.
C)   encourage the production of potato chips with subsidies.
D)   discourage the production of computer chips with taxes.E) A) and B)
F) A) and C)

Question 19

Table 10-4
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 10-4.If the government charged a fee of $101 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   9
B)   12
C)   15
D)   16E) All of the above
F) A) and B)

Question 20

Figure 10-9   
-Refer to Figure 10-9.Which graph represents a market with a positive externality?

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)

Exam 10: Externalities

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct Answer
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Correct Answer
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Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with a positive externality?

Correct Answer
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According to the Coase theorem,whatever the initial distribution of rights,the interested parties can bargain to an efficient outcome.

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

An externality exists whenever

Correct Answer
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If education produces positive externalities,we would expect

Correct Answer
verified

If the production of computer chips yields greater technology spillovers than the production of potato chips,the government should

Correct Answer
verified

Externalities can be corrected by each of the following except

Correct Answer
verified

A technology spillover is a type of negative externality.

Correct Answer
verified

Despite the appealing logic of the Coase theorem,private actors often fail to resolve on their own the problems caused by externalities.

Correct Answer
verified

Correct Answer
verified

Honey producers provide a positive externality to orchards because

Correct Answer
verified

Since externalities tend to keep markets from reaching a socially optimal equilibrium,government action

Correct Answer
verified

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Correct Answer
verified

When one firm sells its pollution permit to another firm,

Correct Answer
verified

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,the socially optimal quantity of antibiotics is represented by point

Correct Answer
verified

Suppose that smoking creates a negative externality.If the government does not interfere in the cigarette market,then

Correct Answer
verified

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

Correct Answer
verified

Which of the following require firms to pay to pollute?

Correct Answer
verified

Exam 10: Externalities

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with a positive externality?

Correct AnswerverifiedShow Answer

According to the Coase theorem,whatever the initial distribution of rights,the interested parties can bargain to an efficient outcome.

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

An externality exists whenever

Correct AnswerverifiedShow Answer

If education produces positive externalities,we would expect

Correct AnswerverifiedShow Answer

If the production of computer chips yields greater technology spillovers than the production of potato chips,the government should

Correct AnswerverifiedShow Answer

Externalities can be corrected by each of the following except

Correct AnswerverifiedShow Answer

A technology spillover is a type of negative externality.

Correct AnswerverifiedShow Answer

Despite the appealing logic of the Coase theorem,private actors often fail to resolve on their own the problems caused by externalities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Honey producers provide a positive externality to orchards because

Correct AnswerverifiedShow Answer

Since externalities tend to keep markets from reaching a socially optimal equilibrium,government action

Correct AnswerverifiedShow Answer

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Correct AnswerverifiedShow Answer

When one firm sells its pollution permit to another firm,

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,the socially optimal quantity of antibiotics is represented by point

Correct AnswerverifiedShow Answer

Suppose that smoking creates a negative externality.If the government does not interfere in the cigarette market,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following require firms to pay to pollute?

Correct AnswerverifiedShow Answer

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