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Explain the difference between an internal cost and an external cost.Give an example of each for a car.

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Internal costs are the costs paid by ind...

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Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: -If property rights over the river are assigned to Smith,then: A) Smith will force Jones to close the factory. B) Smith will pay Jones up to $75 per day to install the filter. C) Smith will pay Jones up to $125 to install the filter. D) Jones will install a filter and pay Smith at least $75 per day. E) Jones will install a filter. -If property rights over the river are assigned to Smith,then:


A) Smith will force Jones to close the factory.
B) Smith will pay Jones up to $75 per day to install the filter.
C) Smith will pay Jones up to $125 to install the filter.
D) Jones will install a filter and pay Smith at least $75 per day.
E) Jones will install a filter.

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Which good is nonrival?


A) sharing a pizza with your family
B) swimming in a public pool
C) driving in a city
D) listening to public radio
E) visiting the post office

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The Coase theorem suggests that private parties:


A) will never be able to negotiate to correct a negative externality.
B) can always negotiate to correct a negative externality.
C) can negotiate to correct a negative externality if barriers to negotiation are low.
D) can negotiate to correct a negative externality if the government passes a law allowing them to do so.
E) can never negotiate to correct a negative externality if there are more than two parties involved.

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Club goods are:


A) nonrival,like public goods,and excludable,like private goods.
B) nonrival,like private goods,and excludable,like common-resource goods.
C) nonrival,like common-resource goods,and excludable,like public goods.
D) rival,like private goods,and nonexcludable,like public goods.
E) rival,like common-resource goods,and nonexcludable,like private goods.

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Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: -If property rights over the river are assigned to Jones,then: A) Jones will force Smith to close his resort. B) Smith will pay Jones up to $75 per day to install the filter. C) Smith will pay Jones up to $125 to install the filter. D) Jones will install a filter and pay Smith at least $75 per day. E) Jones will not install a filter. -If property rights over the river are assigned to Jones,then:


A) Jones will force Smith to close his resort.
B) Smith will pay Jones up to $75 per day to install the filter.
C) Smith will pay Jones up to $125 to install the filter.
D) Jones will install a filter and pay Smith at least $75 per day.
E) Jones will not install a filter.

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When people elect to spend more years in school,this results in a __________ externality because there are __________ associated with this decision.


A) negative; internal costs
B) negative; external costs
C) positive; external benefits
D) positive; external costs
E) positive; internal benefits

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Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: -A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence.The accompanying table identifies the annual profit received by each party in the event there is,or there is not,a fence.If there is no fence,one can be installed and maintained at an annual cost of $25,000. If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop,then the: A) rancher will choose to close his ranch. B) farmer will not allow the rancher to stay in business. C) rancher will pay to build the fence. D) rancher will choose to compensate the farmer for damages. E) rancher will be indifferent toward neither building the fence nor compensating the farmer for damages. -A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence.The accompanying table identifies the annual profit received by each party in the event there is,or there is not,a fence.If there is no fence,one can be installed and maintained at an annual cost of $25,000. Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort.At present,Jones is not filtering the water that he dumps into the river.There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river.Jones and Smith have each assessed the situation and come up with the following data: -A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence.The accompanying table identifies the annual profit received by each party in the event there is,or there is not,a fence.If there is no fence,one can be installed and maintained at an annual cost of $25,000. If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop,then the: A) rancher will choose to close his ranch. B) farmer will not allow the rancher to stay in business. C) rancher will pay to build the fence. D) rancher will choose to compensate the farmer for damages. E) rancher will be indifferent toward neither building the fence nor compensating the farmer for damages. If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop,then the:


A) rancher will choose to close his ranch.
B) farmer will not allow the rancher to stay in business.
C) rancher will pay to build the fence.
D) rancher will choose to compensate the farmer for damages.
E) rancher will be indifferent toward neither building the fence nor compensating the farmer for damages.

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If government regulation forces firms in an industry to internalize the externality,then the:


A) supply curve shifts to the left.
B) supply curve shifts to the right.
C) demand curve shifts to the left.
D) demand curve shifts to the right.
E) supply curve and the demand curve shift to the left.

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Externalities are minimized if:


A) private property rights are well established.
B) the government owns all of the productive resources.
C) there are no private goods.
D) there are no public goods.
E) there are no free-riders.

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A good that is rival and nonexcludable is defined as a:


A) private good.
B) public good.
C) common-resource good.
D) club good.
E) government good.

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Refer to the accompanying figure to answer the questions that follow. Refer to the accompanying figure to answer the questions that follow. -The figure best illustrates what type of market? A) The good produced creates a positive externality. B) The good produced creates a negative externality. C) The good produced is a club good. D) The good produced is a public good. E) Firms in this industry have been given a subsidy to encourage more production. -The figure best illustrates what type of market?


A) The good produced creates a positive externality.
B) The good produced creates a negative externality.
C) The good produced is a club good.
D) The good produced is a public good.
E) Firms in this industry have been given a subsidy to encourage more production.

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Refer to the accompanying figure to answer the questions that follow. Refer to the accompanying figure to answer the questions that follow. -At the market equilibrium,price is equal to __________ units of the good are produced. A) $18 and 70 B) $14 and 70 C) $12 and 50 D) $14 and 50 E) $18 and 50 -At the market equilibrium,price is equal to __________ units of the good are produced.


A) $18 and 70
B) $14 and 70
C) $12 and 50
D) $14 and 50
E) $18 and 50

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The personal decisions of consumers and firms are based on:


A) external costs.
B) social cost.
C) internal costs.
D) third-party costs.
E) public-good costs.

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Clean air becomes polluted because:


A) it is a private good.
B) no one owns the air.
C) it is a club good.
D) the air is owned by private corporations.
E) the air is owned by the government.

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Which rule would not protect fish populations?


A) limiting the length of the fishing season
B) limiting the number of fish that can be caught
C) not allowing female fish to be caught
D) not allowing young fish to be caught
E) catching any fish except males

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If government regulation forces firms in an industry to internalize the externality,then we can expect the equilibrium price of the good to __________ and the equilibrium quantity to __________.


A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
E) increase; remain unchanged

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Consider the accompanying figure to answer the questions that follow. Consider the accompanying figure to answer the questions that follow. -A positive externality exists and the government does not intervene.Which point best identifies the market equilibrium? A) A B) B C) C D) D E) either C or D -A positive externality exists and the government does not intervene.Which point best identifies the market equilibrium?


A) A
B) B
C) C
D) D
E) either C or D

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Externalities exist because:


A) owners of private property have an incentive to maintain their property.
B) owners of private property have little incentive to protect their property.
C) owners of private property are not able to trade with others.
D) property rights are not clearly defined.
E) there is too much private ownership of property.

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To maximize social welfare,the optimal quantity of a public good to provide should be determined through the use of:


A) private markets.
B) the judicial system.
C) public survey.
D) cost-benefit analysis.
E) the political process.

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