Question 1

Which of the following statements is not correct?

Accepted Answer

A)   Private markets tend to over-produce products with negative externalities.
B)   Private markets tend to under-produce products with positive externalities.
C)   Private parties can bargain to efficient outcomes even in the presence of externalities.
D)   Private parties are usually more successful in achieving efficient outcomes than government policies.E) B) and D)
F) A) and D)

Question 2

Corrective taxes

Accepted Answer

A)   encourage consumers to avoid sales taxes by shopping online.
B)   are frequently used to discourage imports.
C)   are less efficient than direct regulation.
D)   give factory owners an economic incentive to reduce pollution.E) B) and D)
F) B) and C)

Question 3

Which of the following is not correct?

Accepted Answer

A)   Markets allocate scarce resources with the forces of supply and demand.
B)   The equilibrium of supply and demand is typically an efficient allocation of resources.
C)   Governments can sometimes improve market outcomes.
D)   Externalities cannot be positive.E) C) and D)
F) B) and C)

Question 4

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

Question 5

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 external benefit of smokestack scrubber installation is represented by

Accepted Answer

A)   Q3 - Q2.
B)   Q5 - Q4.
C)   P3a - P3b.
D)   P4a - P4b.E) C) and D)
F) All of the above

Question 6

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 7

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

Accepted Answer

A)   an opportunity cost.
B)   an implicit cost.
C)   a sunk cost.
D)   a transaction cost.E) A) and D)
F) C) and D)

Question 8

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Accepted Answer

A)   relies on moral codes to reduce the pollution externality.
B)   relies on the Coase Theorem.
C)   discriminates against foreigners.
D)   relies on incentives to reduce the pollution externality.E) B) and D)
F) B) and C)

Question 9

Table 10-3 
-Refer to Table 10-3. The social value of the 4th unit of output that is produced is

Accepted Answer

A)   $10.
B)   $16.
C)   $26.
D)   $30.E) A) and B)
F) A) and C)

Question 10

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Accepted Answer

A) True 
 B)False

Question 11

Figure 10-12 
-Refer to Figure 10-12. An alternative label for the quantity  WOULD BE

Accepted Answer

The answer of Figure 10-12 
-Refer to Figure 10-12. An...

Question 12

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Accepted Answer

A) True 
 B)False

Question 13

Figure 10-19 
-Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value"are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1)  Private value and social value decrease by $1.00 with each additional unit of the good that is consumed, and (2)  private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 59th unit of the good is produced and consumed, social well-being increases by

Accepted Answer

A)   $28.00.
B)   $31.40.
C)   $33.60.
D)   $36.00.E) A) and B)
F) None of the above

Question 14

The term market failure refers to

Accepted Answer

A)   a market that fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand.
C)   ruthless competition among firms.
D)   a firm that is forced out of business because of losses.E) A) and B)
F) B) and C)

Question 15

Figure 10-19 
-Refer to Figure 10-19. The socially optimal quantity of output is

Accepted Answer

A)   58 units.
B)   73 units.
C)   between 73 and 94 units.
D)   94 units.E) All of the above
F) C) and D)

Question 16

What is the difference between command-and-control policies and market-based policies toward externalities?

Accepted Answer

A)   Command-and-control policies provide incentives for private decision makers to solve the problems on their own, whereas market-based policies regulate behavior directly.
B)   Command-and-control policies rely on taxes, whereas market-based policies rely on quotas.
C)   Command-and-control policies regulate behavior directly, whereas market-based policies provide incentives for private decision makers to change their behavior.
D)   Command-and-control policies are efficient, whereas market-based policies are inefficient.E) A) and B)
F) None of the above

Question 17

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Accepted Answer

For each college degree, the s...

Question 18

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 19

Figure 10-16 
-Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. In the absence of a pollution permit system, the quantity of pollution would be

Accepted Answer

A)   25
B)   50
C)   75
D)   100E) A) and B)
F) None of the above

Question 20

A negative 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) B) and C)

Exam 10: Externalities

Which of the following statements is not correct?

Correct Answer
verified

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

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

Table 10-3 -Refer to Table 10-3. The social value of the 4th unit of output that is produced is

Correct Answer
verified

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Correct Answer
verified

Figure 10-16 -Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. In the absence of a pollution permit system, the quantity of pollution would be

Correct Answer
verified

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

Correct Answer
verified

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Correct Answer
verified

Corrective taxes

Correct Answer
verified

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

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 external benefit of smokestack scrubber installation is represented by

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Correct Answer
verified
For each college degree, the s...
View Answer

What is the difference between command-and-control policies and market-based policies toward externalities?

Correct Answer
verified

The term market failure refers to

Correct Answer
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Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity WOULD BE

Correct Answer
verified

Correct Answer
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Figure 10-19 -Refer to Figure 10-19. The socially optimal quantity of output is

Correct Answer
verified

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Correct Answer
verified

Exam 10: Externalities

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

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

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

Table 10-3 -Refer to Table 10-3. The social value of the 4th unit of output that is produced is

Correct AnswerverifiedShow Answer

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Correct AnswerverifiedShow Answer

Figure 10-16 -Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. In the absence of a pollution permit system, the quantity of pollution would be

Correct AnswerverifiedShow Answer

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

Correct AnswerverifiedShow Answer

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Correct AnswerverifiedShow Answer

Corrective taxes

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

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 external benefit of smokestack scrubber installation is represented by

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Correct AnswerverifiedFor each college degree, the s...View AnswerShow Answer

What is the difference between command-and-control policies and market-based policies toward externalities?

Correct AnswerverifiedShow Answer

The term market failure refers to

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity WOULD BE

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-19 -Refer to Figure 10-19. The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Correct AnswerverifiedShow Answer

Correct Answer
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For each college degree, the s...
View Answer

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