Question 1

Figure 10-15 
-Refer to Figure 10-15. Which graph illustrates a corrective tax?

Accepted Answer

A)   the left graph
B)   the right graph
C)   both graphs
D)   neither graphE) C) and D)
F) B) and C)

Question 2

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics.  Multiple Choice - Section 02: Public Policies toward Externalities
-Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Accepted Answer

A)   social optimum has been reached.
B)   market equilibrium has been reached.
C)   government must have imposed a corrective tax to guide the market to this outcome.
D)   government must have offered a corrective subsidy to guide the market to this outcome.E) A) and D)
F) None of the above

Question 3

When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.

Accepted Answer

A) True 
 B)False

Question 4

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following:
• a private cost of $3.10;
• a social cost of $3.55;
• a value to consumers of $3.70.
-Refer to Scenario 10-1. Suppose the equilibrium quantity of gasoline is 1,150 gallons; that is, QMARKET = 1,150. Then the equilibrium price of a gallon could be

Accepted Answer

A)   $2.80.
B)   $3.00.
C)   $3.30.
D)   $3.80.E) A) and B)
F) B) and D)

Question 5

If a market is characterized by a positive externality that is not the result of a technology spillover,

Accepted Answer

A)   the socially optimal level of output is less than the equilibrium level of output, and the optimal price is greater than the equilibrium price.
B)   the socially optimal level of output is greater than the equilibrium level of output, and the socially optimal price is less than the equilibrium price.
C)   the socially optimal level of output is greater than the equilibrium level of output, and the socially optimal price is greater than the equilibrium price.
D)   the socially optimal level of output is less than the equilibrium level of output, and the socially optimal price is less than the equilibrium price.E) A) and D)
F) A) and C)

Question 6

Figure 10-9
 
-Refer to Figure 10-9, Panel b)  and Panel c) . The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Accepted Answer

A)   Q2.
B)   Q3.
C)   Q4.
D)   Q5.E) B) and C)
F) A) and B)

Question 7

Which of the following is a difference between corrective taxes and tradable pollution permits?

Accepted Answer

A)   Corrective taxes are a market-based solution while tradable pollution permits are a command-and-control policy.
B)   With a corrective tax the government sets the price of pollution; with tradable pollution permits, demand and supply set the price of pollution.
C)   With corrective taxes firms pay for pollution; with tradable pollution permits firms do not.
D)   Corrective taxes internalize the pollution externality while tradable pollution permits do not.E) All of the above
F) A) and D)

Question 8

Private markets fail to account for externalities because

Accepted Answer

A)   externalities don't occur in private markets.
B)   sellers include costs associated with externalities in the price of their product.
C)   decisionmakers in the market fail to include the costs of their behavior to third parties.
D)   the government cannot easily estimate the optimal quantity of pollution.E) B) and C)
F) A) and D)

Question 9

When technology spillover occurs,

Accepted Answer

A)   it is the government's responsibility to own firms that are engaged in high-tech research.
B)   a firm's research yields technological knowledge that can then be used by society as a whole.
C)   those firms engaged in technology research should be taxed by the government.
D)   firms invest in the latest production technology and the cost of that technology "spills over" to the prices consumers must pay for the product.E) All of the above
F) B) and D)

Question 10

Figure 10-16 
-Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium price of pollution is

Accepted Answer

A)   $50
B)   $500
C)   $1,000
D)   $2,000E) A) and B)
F) A) and C)

Question 11

Figure 10-12 
-Refer to Figure 10-12. An alternative label for the quantity  would be

Accepted Answer

A)    .
B)    .
C)    .
D)    .E) None of the above
F) C) and D)

Question 12

Which of the following policies is an example of a command-and-control policy?

Accepted Answer

A)   subsidies to education
B)   maximum levels of pollution that factories may emit
C)   tradable pollution permits
D)   None of the above is an example of a command-and-control policy.E) C) and D)
F) None of the above

Question 13

Before the flu season begins, Jeremy gets a flu shot. As a result, Jeremy and several of his friends and relatives avoid the flu for the entire flu season. It would make sense to argue that

Accepted Answer

A)   flu shots provide a positive externality, and that flu shots should be subsidized.
B)   if flu shots are not subsidized, then the number of people getting flu shots will be smaller than the socially optimal number.
C)   the externality generated by flu shots is more like the externality generated by education than the externality generated by pollution.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 14

Figure 10-10 
-Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Accepted Answer

A)   120 units
B)   140 units
C)   160 units
D)   The statement is true at all quantities of output.E) All of the above
F) A) and C)

Question 15

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. What could the federal government do to equate the equilibrium quantity of university research and the socially optimal quantity of university research produced?

Accepted Answer

A)   tax university researchers
B)   offer grants to university researchers
C)   eliminate subsidized student loans
D)   nothingE) A) and B)
F) All of the above

Question 16

Figure 10-12 
-Refer to Figure 10-12. The graph, as drawn, could apply to the market for

Accepted Answer

A)   fire extinguishers.
B)   immunizations such as flu shots.
C)   education.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 17

Which of the following statements is correct?

Accepted Answer

A)   The use of pollution permits and corrective taxes reduces the cost of environmental protection.
B)   Rich countries usually have cleaner environments than poor countries because a clean environment is like other normal goods in that it has a positive income elasticity.
C)   Clean water and clean air are goods to which the law of demand applies.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 18

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500th fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
•
-Refer to Scenario 10-4. What is the social value of the 500th fire extinguisher?

Accepted Answer

The social value is equal to t...

Question 19

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Accepted Answer

A)   Corrective taxes apply only to goods that are bad for people's health, such as cigarettes and alcohol.
B)   Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders.
C)   Corrective taxes provide incentives for the conservation of natural resources.
D)   Corrective taxes do not affect deadweight loss.E) A) and D)
F) All of the above

Question 20

If only a few people are affected by an externality, then it is likely that

Accepted Answer

A)   corrective taxes will provide the most efficient solution to the externality.
B)   command-and-control regulation will provide the most efficient solution to the externality.
C)   a private solution to the inefficiency will occur.
D)   a private solution will be very difficult to negotiate.E) None of the above
F) C) and D)

Exam 10: Externalities

When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.

Correct Answer
verified

Figure 10-16 -Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium price of pollution is

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9, Panel b) and Panel c) . The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Correct Answer
verified

Figure 10-10 -Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Correct Answer
verified

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Correct Answer
verified

Figure 10-12 -Refer to Figure 10-12. The graph, as drawn, could apply to the market for

Correct Answer
verified

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a corrective tax?

Correct Answer
verified

If a market is characterized by a positive externality that is not the result of a technology spillover,

Correct Answer
verified

Private markets fail to account for externalities because

Correct Answer
verified

Before the flu season begins, Jeremy gets a flu shot. As a result, Jeremy and several of his friends and relatives avoid the flu for the entire flu season. It would make sense to argue that

Correct Answer
verified

Correct Answer
verified
The social value is equal to t...
View Answer

Which of the following policies is an example of a command-and-control policy?

Correct Answer
verified

Correct Answer
verified

If only a few people are affected by an externality, then it is likely that

Correct Answer
verified

Which of the following is a difference between corrective taxes and tradable pollution permits?

Correct Answer
verified

Correct Answer
verified

When technology spillover occurs,

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Correct Answer
verified

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity would be

Correct Answer
verified

Exam 10: Externalities

When a transaction between a buyer and seller directly affects a third party, the effect is called an externality.

Correct AnswerverifiedShow Answer

Figure 10-16 -Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium price of pollution is

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9, Panel b) and Panel c) . The overuse of antibiotics leads to the development of antibiotic- resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Correct AnswerverifiedShow Answer

Figure 10-10 -Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Correct AnswerverifiedShow Answer

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12. The graph, as drawn, could apply to the market for

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a corrective tax?

Correct AnswerverifiedShow Answer

If a market is characterized by a positive externality that is not the result of a technology spillover,

Correct AnswerverifiedShow Answer

Private markets fail to account for externalities because

Correct AnswerverifiedShow Answer

Before the flu season begins, Jeremy gets a flu shot. As a result, Jeremy and several of his friends and relatives avoid the flu for the entire flu season. It would make sense to argue that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe social value is equal to t...View AnswerShow Answer

Which of the following policies is an example of a command-and-control policy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If only a few people are affected by an externality, then it is likely that

Correct AnswerverifiedShow Answer

Which of the following is a difference between corrective taxes and tradable pollution permits?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When technology spillover occurs,

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12. An alternative label for the quantity would be

Correct AnswerverifiedShow 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

Correct Answer
verified
The social value is equal to t...
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