A) private economic actors sometimes can reach a bargain that produces an efficient outcome.
B) private economic actors always can reach a bargain that makes everyone better off.
C) private solutions cannot be very effective.
D) corrective taxes cannot be very effective.
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A) A tax would move the market in Panel (b) and the market in Panel (c) closer to the socially optimal outcome.
B) A subsidy would move the market in Panel (b) and the market in Panel (c) closer to the socially optimal outcome.
C) A tax would move the market in Panel (b) closer to the socially optimal outcome, but a subsidy would move the market in Panel (c) closer to the socially optimal outcome.
D) A subsidy would move the market in Panel (b) closer to the socially optimal outcome, but a tax would move the market in Panel (c) closer to the socially optimal outcome.
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A) Both corrective taxes and pollution permits move the market toward the social optimum.
B) Corrective taxes move the market toward the social optimum, but pollution permits do not move the market toward the social optimum.
C) Pollution permits move the market toward the social optimum, but corrective taxes do not move the market toward the social optimum.
D) Neither corrective taxes nor pollution permits move the market toward the social optimum.
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A) cost of $6.
B) cost of $8.
C) benefit of $6.
D) benefit of $8.
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A) The groundwater pollution reduces the cost of large-scale pork production.
B) The economic impact of a large-scale pork production facility is localized in a small geographic area.
C) The pollution has the potential for creating a health risk for water users in the region surrounding the pork production facility.
D) Consumers will not reap the benefits of lower production cost from large-scale pork production.
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A) $75
B) $87
C) $90
D) $106
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A) the after-subsidy equilibrium quantity of rain barrels will be less than the socially optimal quantity of rain barrels.
B) the after-subsidy equilibrium quantity of rain barrels will be more than the socially optimal quantity of rain barrels.
C) the after-subsidy equilibrium quantity of rain barrels will equal the socially optimal quantity of rain barrels.
D) market incentives will be distorted and move the allocation of resources away from the social optimum.
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A) producers will be affected but consumers will not.
B) producers will supply too much of the product.
C) demand will be too high.
D) the market will still maximize total benefits.
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A) subsidies
B) patent protection
C) industrial policy
D) taxes
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A) They are equal.
B) The equilibrium quantity is greater than the socially optimal quantity.
C) The equilibrium quantity is less than the socially optimal quantity.
D) There is not enough information to answer the question.
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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.
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A) The social cost of producing good X includes the private cost plus the cost to bystanders of the externality.
B) The increased social cost can be graphed as a decrease in demand.
C) The market equilibrium quantity will be the socially optimal quantity as long as the government does not interfere.
D) Both a and b are correct.
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A) 3 units.
B) 4 units.
C) 5 units.
D) 6 units.
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A) Firm A will buy all of Firm B's pollution permits. Each one will cost between $100 and $200.
B) Firm B will buy all of Firm A's pollution permits. Each one will cost between $100 and $200.
C) Both firms will use their own pollution permits.
D) Firm A will buy some of Firm B's pollution permits. Each one will cost less than $100.
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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.
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A) the government controls the price of permits.
B) firms that can reduce pollution only at high cost will be willing to pay the most for the pollution permits.
C) the value of pollution-saving technology will be lower than the market value of a pollution permit.
D) the Coase theorem is no longer applicable as a solution to reducing pollution.
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A) 100 units
B) 200 units
C) 250 units
D) 300 units
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