Question 1

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own. What name do we use for these types of policies?

Accepted Answer

We call th...

Question 2

An externality is an example of

Accepted Answer

A)   a corrective tax.
B)   a tradable pollution permit.
C)   a market failure.
D)   Both a and b are correct.

Question 3

Suppose the market-equilibrium quantity of good x is 5,000 units and the socially-optimal quantity of good x is 4,000 units. Then

Accepted Answer

A)   the production of good x imposes external costs on society.
B)   the private value of good x exceeds the private cost of good x when 5,000 units are produced.
C)   the private cost of good x exceeds the private value of good x when 5,000 units are produced.
D)   the social cost of good x exceeds the private value of good x when 4,000 units are produced.

Question 4

Table 10-3
 
-Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Accepted Answer

A)   $2
B)   $3
C)   $5
D)   $10

Question 5

Use a graph to illustrate the quantity of pollution that would be emitted a) after a corrective tax has been imposed and b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Yes, these two quantities cou...

Question 6

A corrective tax places a price on the right to pollute.

Accepted Answer

A) True 
 B)False

Question 7

Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

Accepted Answer

A) True 
 B)False

Question 8

Table 10-6
The following table shows the total costs for each of four firms A, B, C, and D to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $46, and for Firm A to eliminate two units of pollution, it would cost a total of $103.
 
-Refer to Table 10-6. If the government charged a fee of $85 per unit of pollution, how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   10
B)   12
C)   14
D)   16

Question 9

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of a positive externality?

Accepted Answer

A)   air pollution
B)   a person littering in a public park
C)   a nice garden in front of your neighbor's house
D)   the pollution of a stream

Question 11

Figure 10-15 
-Refer to Figure 10-15. Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects?

Accepted Answer

A)   PB must be equivalent to the corrective tax.
B)   QA must be equivalent to the amount of pollution allowed to the pollution permit holders.
C)   The equilibrium price and quantity of pollution must be the same in both graphs.
D)   The amount of pollution emitted by each firm must be the same.

Question 12

A positive externality occurs when

Accepted Answer

A)   Jack receives a benefit from John's consumption of a certain good.
B)   Jack receives personal benefits from his own consumption of a certain good.
C)   Jack's benefit exceeds John's benefit when they each consume the same good.
D)   Jack's receives a loss from John's consumption of a certain good.

Question 13

To enhance the well-being of society, a social planner will encourage firms to increase production when

Accepted Answer

A)   the firms are producing basic goods.
B)   there is a shortage in the market.
C)   technology spillovers are associated with production.
D)   negative externalities "spill over" into production.

Question 14

Corrective taxes are typically advocated to correct for the effects of

Accepted Answer

A)   positive externalities.
B)   negative externalities.
C)   patents.
D)   All of the above are correct.

Question 15

A negative externality

Accepted Answer

A)   is an adverse impact on a bystander.
B)   causes the product in a market to be under-produced.
C)   is an adverse impact on market participants.
D)   is present in markets where the good or service does not have any impact on bystanders.

Question 16

Figure 10-9
 
-Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Accepted Answer

A)   Panel a) .
B)   Panel b) .
C)   Panel c) .
D)   Both b)  and c)  are correct.

Question 17

Figure 10-7 
-Refer to Figure 10-7. To internalize the externality in this market, the government should

Accepted Answer

A)   impose a tax on this product.
B)   provide a subsidy for this product.
C)   forbid production.
D)   produce the product itself.

Question 18

Corrective taxes are more efficient than regulations for keeping the environment clean.

Accepted Answer

A) True 
 B)False

Question 19

Table 10-3
 
-Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Accepted Answer

A)   $18.
B)   $38.
C)   $46.
D)   $55.

Question 20

Which of the following is an advantage of tradable pollution permits?

Accepted Answer

A)   Each firm is allowed to pollute exactly the same amount.
B)   Revenue from the sale of permits is greater than revenue from a corrective tax.
C)   The initial allocation of permits to firms does not affect the efficiency of the market.
D)   Firms will engage in joint research efforts to reduce pollution.

Exam 10: Externalities

A corrective tax places a price on the right to pollute.

Correct Answer
verified

Suppose the market-equilibrium quantity of good x is 5,000 units and the socially-optimal quantity of good x is 4,000 units. Then

Correct Answer
verified

A positive externality occurs when

Correct Answer
verified

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own. What name do we use for these types of policies?

Correct Answer
verified
We call th...
View Answer

Correct Answer
verified

An externality is an example of

Correct Answer
verified

A negative externality

Correct Answer
verified

Figure 10-7 -Refer to Figure 10-7. To internalize the externality in this market, the government should

Correct Answer
verified

Which of the following is an advantage of tradable pollution permits?

Correct Answer
verified

Figure 10-15 -Refer to Figure 10-15. Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects?

Correct Answer
verified

Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

Correct Answer
verified

Table 10-3 -Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Correct Answer
verified

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Correct Answer
verified

Use a graph to illustrate the quantity of pollution that would be emitted a) after a corrective tax has been imposed and b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Correct Answer
verified
Yes, these two quantities cou...
View Answer

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Correct Answer
verified

Corrective taxes are typically advocated to correct for the effects of

Correct Answer
verified

Table 10-3 -Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Correct Answer
verified

Which of the following is an example of a positive externality?

Correct Answer
verified

To enhance the well-being of society, a social planner will encourage firms to increase production when

Correct Answer
verified

Exam 10: Externalities

A corrective tax places a price on the right to pollute.

Correct AnswerverifiedShow Answer

Suppose the market-equilibrium quantity of good x is 5,000 units and the socially-optimal quantity of good x is 4,000 units. Then

Correct AnswerverifiedShow Answer

A positive externality occurs when

Correct AnswerverifiedShow Answer

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own. What name do we use for these types of policies?

Correct AnswerverifiedWe call th...View AnswerShow Answer

Correct AnswerverifiedShow Answer

An externality is an example of

Correct AnswerverifiedShow Answer

A negative externality

Correct AnswerverifiedShow Answer

Figure 10-7 -Refer to Figure 10-7. To internalize the externality in this market, the government should

Correct AnswerverifiedShow Answer

Which of the following is an advantage of tradable pollution permits?

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15. Which of the following is not necessary in order for the corrective tax and pollution permit to have equivalent effects?

Correct AnswerverifiedShow Answer

Laws that are passed that either require or forbid certain behaviors are examples of command-and-control policies.

Correct AnswerverifiedShow Answer

Table 10-3 -Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Correct AnswerverifiedShow Answer

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

Correct AnswerverifiedShow Answer

Use a graph to illustrate the quantity of pollution that would be emitted a) after a corrective tax has been imposed and b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Correct Answerverified Yes, these two quantities cou...View AnswerShow Answer

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Correct AnswerverifiedShow Answer

Corrective taxes are typically advocated to correct for the effects of

Correct AnswerverifiedShow Answer

Table 10-3 -Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Correct AnswerverifiedShow Answer

Which of the following is an example of a positive externality?

Correct AnswerverifiedShow Answer

To enhance the well-being of society, a social planner will encourage firms to increase production when

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
We call th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Yes, these two quantities cou...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified