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Exam 10: Externalities

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Question 191

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Which of the following statements is correct about a market in which pollution is emitted?

A) Both corrective taxes and pollution permits move the market toward the social optimum.
B) Corrective taxes move the market toward the social optimum,but pollution permits do not move the market toward the social optimum.
C) Pollution permits move the market toward the social optimum,but corrective taxes do not move the market toward the social optimum.
D) Neither corrective taxes nor pollution permits move the market toward the social optimum.

E) A) and B)
F) C) and D)

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Question 192

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Since restored historic buildings convey a positive externality,local governments may choose to

A) regulate the demolition of them.
B) provide tax breaks to owners who restore them.
C) increase property taxes in historic areas.
D) Both a and b are correct.

E) B) and C)
F) A) and B)

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Question 193

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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 external cost of antibiotic overuse is represented by

Figure 10-12 -Refer to Figure 10-12.An alternative label for the line labeled "Supply" would be

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Government can be used to solve externality problems that are too costly for private parties to solve.

Suppose that smoking creates a negative externality.If the government does not interfere in the cigarette market,then

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

Table 10-4 -Refer to Table 10-4.Taking into account private and external costs,total surplus in the market equilibrium amounts to

One reason that private solutions to externalities do not always work is that

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with a negative externality?

Which of the following is NOT an example of a negative externality?

A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.

Figure 10-9 -Refer to Figure 10-9,Panel (b) .The market equilibrium quantity is

Markets sometimes fail to allocate resources efficiently.

Tradable pollution permits

Table 10-5 The following table shows the marginal 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 $54,and for Firm A to eliminate a second unit of pollution it would cost an additional $67. -Refer to Table 10-5.If the government wanted to reduce pollution from 16 units to 6 units,which of the following fees per unit of pollution would achieve that goal?

When firms internalize a negative externality,the market supply curve shifts to the left.

Economists believe that the optimal level of pollution is zero.

Although regulation and corrective taxes are both capable of reducing pollution,regulation accomplishes this goal more efficiently.