Question 1

If an external benefit is present, then the

Accepted Answer

A)  marginal private benefit curve lies above the marginal private cost curve.
B)  marginal social benefit curve lies above the marginal private benefit curve.
C)  marginal social cost curve lies above the marginal private benefit curve.
D)  marginal social benefit is equal to the marginal social cost.
E)  marginal social benefit curve is the same as the marginal private benefit curve.

Question 2

-The figure above shows the market for private elementary school education in Chicago.There is no external cost of private elementary education.If the government does not intervene in this market, the equilibrium price of private education is

Accepted Answer

A)  $12,000.
B)  $16,000.
C)  $20,000.
D)  $4,000.
E)  $6,000.

Question 3

If the marginal external cost of building a children's playground equals zero, then the
I∙marginal private cost equals the marginal social cost.
Ii∙marginal social cost equals zero.
Iii∙marginal private cost equals zero.

Accepted Answer

A)  i only
B)  ii only
C)  iii only
D)  ii and iii
E)  i and ii

Question 4

For a firm, its labor costs are

Accepted Answer

A)  a marginal benefit.
B)  a private cost.
C)  an external cost.
D)  Both answers A and C are correct.
E)  Both answers A and B are correct.

Question 5

List and briefly define the three methods government can use to cope with an external cost, such as pollution.

Accepted Answer

The three methods are pollution limits, ...

Question 6

The figure above shows the demand for college education (D) , the marginal social benefit of college education (MSB) , and the marginal cost of the private schools (MC) .
-In the figure above, suppose a subsidy is provided to private colleges.What amount of subsidy will ensure the efficient number of students?

Accepted Answer

A)  $10,000
B)  $25,000
C)  $15,000
D)  $5,000
E)  $20,000

Question 7

Transactions costs are the

Accepted Answer

A)  costs of using the Coase theorem.
B)  opportunity costs of conducting a transaction.
C)  external marginal costs of the externality.
D)  reason why taxes cannot affect the inefficiency resulting from an external cost.
E)  external costs when a firm pollutes.

Question 8

Marginal social cost is the

Accepted Answer

A)  price a consumer pays for one more unit of a good.
B)  cost a producer incurs producing one more unit of a good.
C)  cost of producing one more unit of a good that falls on someone other than the producer.
D)  sum of the cost a producer incurs from producing one more unit of a good plus the cost of producing one more unit of a good that falls on someone other than the producer.
E)  same as marginal cost only if there is an external cost when the good is produced.

Question 9

-The figure above shows the market for polio vaccination in Pakistan.Polio vaccination confers an external benefit because one person's vaccination makes it less likely that other people will catch polio.
a∙If the market is competitive and left unregulated, how many doses of vaccine will be administered?
b∙If the Melinda and Bill Gates Foundation underwrites the cost of the vaccine by paying for a large fraction of the preparation and delivery cost, what will happen to the number of doses administered? Why?

Accepted Answer

a∙If the market is competitive and left ...

Question 10

Which of the following is the best example of a transactions cost?

Accepted Answer

A)  the value of the time spent negotiating a contract
B)  the price of a new set of tires
C)  the cost associated with producing a golf club
D)  the price of labor and materials used to produce a house
E)  the price of food

Question 11

When production of a good results in an external cost, the unregulated competitive market equilibrium quantity is

Accepted Answer

A)  the efficient level of output.
B)  greater than the efficient level of output.
C)  not zero but is less than the efficient level of output.
D)  unattainable.
E)  zero.

Question 12

-The above figure shows the market for college education in the United States.With no government intervention, the market equilibrium is at a tuition of ________ and ________ million students per year.

Accepted Answer

A)  16,000; 14
B)  $20,000; 10
C)  $13,000; 10
D)  $13,000; 17
E)  $16,000; 10

Question 13

A marketable permit

Accepted Answer

A)  allows firms to pollute all they want without any cost.
B)  allows firms to buy and sell the right to pollute at government controlled prices.
C)  eliminates pollution by setting the price of pollution permits above the marginal cost of polluting.
D)  allows firms to buy and sell the right to pollute.
E)  is the Coase theorem solution to pollution.

Question 14

If the production of a good creates an external cost, is the supply curve the same as the marginal social cost or the same as the marginal private cost curve or both?

Accepted Answer

The supply curve is always the same as t...

Question 15

Explain the difference between a positive production externality and a positive consumption externality.

Accepted Answer

A positive production externality occurs...

Question 16

-The figure above shows the market for college education in the United States.The marginal external benefit associated with educating 14 million students is ________ per student per year.

Accepted Answer

A)  $16,000
B)  $13,000
C)  $11,000
D)  $5,000
E)  $7,000

Question 17

Which of the following is true?

Accepted Answer

A)   MSC = MC + Marginal external cost.
B)   MC = Marginal external cost - MSC.
C)   MC = Marginal external benefit + MSC.
D)   MSC = Marginal external cost + marginal external benefit.
E)   MSC = Marginal external cost - marginal external benefit.

Question 18

-The figure above shows the market for a good with an external benefit.The efficient level of production is ________ units because ________.

Accepted Answer

A)  8; marginal benefit equals marginal cost
B)  8; marginal cost is less than marginal social benefit
C)  10; marginal cost equals marginal social benefit
D)  10; marginal social benefit exceeds marginal benefit
E)  8; marginal benefit equals the marginal external benefit

Question 19

Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?

Accepted Answer

A)  removing property rights
B)  subsidizing production
C)  marketable permits
D)  lottery
E)  vouchers

Question 20

In the figure above, when the market is unregulated and in equilibrium, the deadweight loss is ________ thousand per month.

Accepted Answer

A)  $250
B)  $125
C)  $150
D)  $50
E)  zero

Exam 10: Externalities

Marginal social cost is the

Correct Answer
verified

Which of the following is the best example of a transactions cost?

Correct Answer
verified

A marketable permit

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

For a firm, its labor costs are

Correct Answer
verified

Transactions costs are the

Correct Answer
verified

If the production of a good creates an external cost, is the supply curve the same as the marginal social cost or the same as the marginal private cost curve or both?

Correct Answer
verified
The supply curve is always the same as t...
View Answer

If the marginal external cost of building a children's playground equals zero, then the I∙marginal private cost equals the marginal social cost. Ii∙marginal social cost equals zero. Iii∙marginal private cost equals zero.

Correct Answer
verified

If an external benefit is present, then the

Correct Answer
verified

List and briefly define the three methods government can use to cope with an external cost, such as pollution.

Correct Answer
verified
The three methods are pollution limits, ...
View Answer

Explain the difference between a positive production externality and a positive consumption externality.

Correct Answer
verified
A positive production externality occurs...
View Answer

-The figure above shows the market for private elementary school education in Chicago.There is no external cost of private elementary education.If the government does not intervene in this market, the equilibrium price of private education is

Correct Answer
verified

Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?

Correct Answer
verified

-The figure above shows the market for college education in the United States.The marginal external benefit associated with educating 14 million students is ________ per student per year.

Correct Answer
verified

When production of a good results in an external cost, the unregulated competitive market equilibrium quantity is

Correct Answer
verified

-The figure above shows the market for a good with an external benefit.The efficient level of production is units because .

Correct Answer
verified

Correct Answer
verified
a∙If the market is competitive and left ...
View Answer

-The above figure shows the market for college education in the United States.With no government intervention, the market equilibrium is at a tuition of and million students per year.

Correct Answer
verified

In the figure above, when the market is unregulated and in equilibrium, the deadweight loss is ________ thousand per month.

Correct Answer
verified

Correct Answer
verified

Exam 10: Externalities

Marginal social cost is the

Correct AnswerverifiedShow Answer

Which of the following is the best example of a transactions cost?

Correct AnswerverifiedShow Answer

A marketable permit

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

For a firm, its labor costs are

Correct AnswerverifiedShow Answer

Transactions costs are the

Correct AnswerverifiedShow Answer

If the production of a good creates an external cost, is the supply curve the same as the marginal social cost or the same as the marginal private cost curve or both?

Correct AnswerverifiedThe supply curve is always the same as t...View AnswerShow Answer

If the marginal external cost of building a children's playground equals zero, then the I∙marginal private cost equals the marginal social cost. Ii∙marginal social cost equals zero. Iii∙marginal private cost equals zero.

Correct AnswerverifiedShow Answer

If an external benefit is present, then the

Correct AnswerverifiedShow Answer

List and briefly define the three methods government can use to cope with an external cost, such as pollution.

Correct AnswerverifiedThe three methods are pollution limits, ...View AnswerShow Answer

Explain the difference between a positive production externality and a positive consumption externality.

Correct AnswerverifiedA positive production externality occurs...View AnswerShow Answer

-The figure above shows the market for private elementary school education in Chicago.There is no external cost of private elementary education.If the government does not intervene in this market, the equilibrium price of private education is

Correct AnswerverifiedShow Answer

Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?

Correct AnswerverifiedShow Answer

-The figure above shows the market for college education in the United States.The marginal external benefit associated with educating 14 million students is ________ per student per year.

Correct AnswerverifiedShow Answer

When production of a good results in an external cost, the unregulated competitive market equilibrium quantity is

Correct AnswerverifiedShow Answer

-The figure above shows the market for a good with an external benefit.The efficient level of production is ________ units because ________.

Correct AnswerverifiedShow Answer

Correct Answerverifieda∙If the market is competitive and left ...View AnswerShow Answer

-The above figure shows the market for college education in the United States.With no government intervention, the market equilibrium is at a tuition of ________ and ________ million students per year.

Correct AnswerverifiedShow Answer

In the figure above, when the market is unregulated and in equilibrium, the deadweight loss is ________ thousand per month.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The supply curve is always the same as t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The three methods are pollution limits, ...
View Answer

Correct Answer
verified
A positive production externality occurs...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

-The figure above shows the market for a good with an external benefit.The efficient level of production is units because .

Correct Answer
verified

Correct Answer
verified
a∙If the market is competitive and left ...
View Answer

-The above figure shows the market for college education in the United States.With no government intervention, the market equilibrium is at a tuition of and million students per year.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified