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Exam 17: Externalities

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Question 61

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When the production of a good has an external cost, the

A) marginal social cost curve lies below the marginal private cost curve.
B) marginal social benefit curve lies above the marginal private benefit curve.
C) equilibrium quantity in an unregulated, competitive market has a marginal social cost greater than the marginal social benefit.
D) equilibrium quantity in an unregulated, competitive market has a marginal social cost less than the marginal social benefit.

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Question 62

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-In the above table, the efficient level of output is

A) 2,000 units.
B) 3,000 units.
C) 4,000 units.
D) 5,000 units.

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Question 63

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Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the

-The above figure shows the marginal benefits and marginal costs of a college education. If colleges receive a $5,000 subsidy, then enrollment equals

-The above figure shows the marginal private benefit and marginal social cost of a college education. A $10,000 subsidy to colleges results in a college charging tuition of

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If the waterway is owned by a water ski club and the Coase theorem applies, then the factory will produce ________ tons of chemicals a week.

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, with no government involvement and if the colleges are competitive, how many students are enrolled?

If the government assigns private property rights to a common resource, then the

-In the above figure, if the market is competitive and unregulated

If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit

-The table above provides information about the marginal private benefit of education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the market for education is competitive and unregulated, the equilibrium quantity of education will be ________ and the tuition will be ________.

-The above figure shows the marginal benefits and marginal costs of a college education. If no subsidies are paid, enrollment equals

The Coase theorem applies when property rights are given

The marginal social cost is the cost of producing an additional unit of a good or service that falls on people other than the producer of the good or service.

-In the above figure, if the market is competitive and unregulated, then at the equilibrium amount of output the marginal social benefit is

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, what is the deadweight loss in the market?

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. According to the Coase Theorem, if the transactions costs are low and there are only a few people involved, the output will equal ________ tons of paper if ________ own the lake.

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. In a private market with no government intervention, the equilibrium will be