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The amount an individual pays for insurance on his or her car is an example of a(n) ________ cost.


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

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Refer to the accompanying table,where Q represents the quantity produced,internal cost and social cost are given for various quantities,and P represents the price consumers are willing to pay for various quantities,to answer the following questions. Refer to the accompanying table,where Q represents the quantity produced,internal cost and social cost are given for various quantities,and P represents the price consumers are willing to pay for various quantities,to answer the following questions. -The social optimum occurs where price is ________ and quantity is ________. A) $70; 200 B) $50; 200 C) $60; 300 D) $80; 300 E) $60; 100 -The social optimum occurs where price is ________ and quantity is ________.


A) $70; 200
B) $50; 200
C) $60; 300
D) $80; 300
E) $60; 100

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Ocean beaches are provided by Mother Nature free of charge.Nonetheless,they present an opportunity for cost-benefit analysis regarding a public good.How?

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The public's use of any piece of land in...

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The government has identified a situation where the production of a good is creating a negative externality.The government should enact legislation to require firms to internalize the externality


A) in all such cases.
B) if the benefits of doing so outweigh the costs.
C) as long as it will not increase the price of the good being produced.
D) as long as it will not create unemployment in this industry.
E) as long as there are positive health benefits associated with this policy.

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Are city parks considered public goods? Why or why not?

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City parks are not pure public goods.The...

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Consider the accompanying figure to answer the following questions. Consider the accompanying figure to answer the following questions. -When a positive externality exists,which point best identifies the social optimum? A) A B) B C) C D) D E) either A or D -When a positive externality exists,which point best identifies the social optimum?


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

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Copyright laws exist to


A) eliminate negative externalities.
B) eliminate public goods.
C) limit free-riding.
D) solve the tragedy of the commons.
E) protect consumers.

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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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Group work in a classroom setting creates a free-rider problem.Explain how this is so,and what instructors can do to solve the problem.

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If all members of the group get the same...

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Common resources are


A) overused.
B) underused.
C) optimally used.
D) always owned by the government.
E) never owned by anyone.

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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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Consider a market where production of the good is creating a negative externality.In the market equilibrium,there is a deadweight loss because the


A) internal cost of production is less than the social cost.
B) internal cost of production is not equal to the internal benefit.
C) internal benefit is not equal to the external benefit.
D) social cost is greater than the internal benefit.
E) internal benefit is less than the internal cost.

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What two incentives are associated with common property that can be used to explain the tragedy of the commons?

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The two incentives associated with commo...

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Refer to the accompanying figure to answer the following questions. Refer to the accompanying figure to answer the following questions. -To achieve the social optimum,the government could set a tax equal to ________ per unit sold. A) $6 B) $4 C) $2 D) $3 E) $5 -To achieve the social optimum,the government could set a tax equal to ________ per unit sold.


A) $6
B) $4
C) $2
D) $3
E) $5

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Which of the following is the best definition of a cap-and-trade policy for pollution?


A) The government sets a cap on emissions.Firms are given permits by the government to emit pollutants and have the right to trade the permits with each other.
B) Emissions of a pollutant are capped by the government at the current level,and the good being produced can still be traded in the market.
C) Production of the good is capped by the government at the current level,but the good can still be traded in the market.
D) The number of firms producing a good is capped by the government at the current level,but the good can still be traded in the market.
E) Consumption of the good being produced is capped by the government at the current level,but the good can still be traded in the market.

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A pizza can be divided among two or more people.Why is it nonetheless a rival good?


A) One and only one person conducts the transaction to buy the pizza.
B) One is allowed a limited number of toppings unless one pays extra.
C) A pizzeria has limited seating capacity.
D) In most towns,more than one pizzeria competes for customers' business.
E) Any slice consumed by one person cannot also be consumed by another.

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Which of the following is true of a negative externality?


A) Some costs are borne by a third party.
B) The government can use subsidies to encourage firms to internalize the externality.
C) The government must take over the production of this good so that the externality can be internalized.
D) Some benefits accrue to a third party.
E) Its existence always requires corrective measures by the government.

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According to the Coase theorem,negative externalities can be internalized if


A) property rights are assigned to either party.
B) property rights are assigned to the party who is being damaged.
C) property rights are assigned to the party who is doing the damage.
D) the party causing the damage is forced out of business.
E) the government takes action to solve the problem.

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Consider the following scenario when answering the following questions: 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 following questions: 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 of the following is NOT a club good?


A) satellite TV
B) a timeshare condo
C) a subscribers-only website
D) education
E) toll roads

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