Question 1

Suppose that flu shots create a positive externality equal to $12 per shot.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Accepted Answer

A)   They are equal.
B)   The equilibrium quantity is greater than the socially optimal quantity.
C)   The equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) None of the above
F) B) and C)

Question 2

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Accepted Answer

A)   reduced purchasing power for Americans.
B)   reduced work incentives.
C)   depressed economic activity.
D)   All of the above are correct.E) All of the above
F) B) and D)

Question 3

Assume that your roommate is very messy.According to campus policy,you have a right to live in an uncluttered apartment.Suppose she gets a $200 benefit from being messy but imposes a $100 cost on you.The Coase theorem would suggest that an efficient solution would be for your roommate to

Accepted Answer

A)   stop her messy habits or else move out.
B)   pay you at least $100 but less than $200 to live with the clutter.
C)   continue to be messy and force you to move out.
D)   demand payment of at least $100 but no more than $200 to clean up after herself.E) None of the above
F) B) and C)

Question 4

Research into new technologies provides a

Accepted Answer

A)   negative externality,and too few resources are devoted to research as a result.
B)   negative externality,and too many resources are devoted to research as a result.
C)   positive externality,and too few resources are devoted to research as a result.
D)   positive externality,and too many resources are devoted to research as a result.E) A) and C)
F) A) and B)

Question 5

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a problem that keeps people from privately solving externality problems?

Accepted Answer

A)   Each party involved holds out for a better deal.
B)   The externality is large.
C)   Only problems with a sufficiently large number of parties can be solved.
D)   There is a lack of government intervention.E) All of the above
F) None of the above

Question 7

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) None of the above
F) A) and B)

Question 8

When Lisa drives to work every morning,she drives on a congested highway.What Lisa does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway.In this case,the external cost of Lisa's highway trip

Accepted Answer

A)   increases the social cost above the private cost.
B)   lowers the social cost below the private cost.
C)   increases the social value above the private benefit.
D)   decreases the social value below the private benefit.E) All of the above
F) A) and C)

Question 9

The tax on gasoline

Accepted Answer

A)   reduces efficiency by causing large deadweight losses.
B)   reduces efficiency by decreasing consumer surplus and producer surplus.
C)   enhances efficiency by serving as a corrective device in a market with positive externalities.
D)   enhances efficiency by serving as a corrective device in a market with negative externalities.E) None of the above
F) All of the above

Question 10

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway.This is an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 11

When he was a candidate for president,Barack Obama proposed a cap-and-trade system for carbon.

Accepted Answer

A) True 
 B)False

Question 12

Figure 10-14 2 - P0. B)  To induce firms to internalize the externality in this market,the government should offer a subsidy measured by P2 - P0. C)  To induce firms to internalize the externality in this market,the government should impose a tax measured by P2 - P1. D)  There is no externality in this market." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-14.Which of the following statements is correct?

Accepted Answer

A)   To induce firms to internalize the externality in this market,the government should impose a tax measured by P2 - P0.
B)   To induce firms to internalize the externality in this market,the government should offer a subsidy measured by P2 - P0.
C)   To induce firms to internalize the externality in this market,the government should impose a tax measured by P2 - P1.
D)   There is no externality in this market.E) None of the above
F) A) and B)

Question 13

Two firms,A and B,each currently emit 100 tons of chemicals into the air.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air.The government gives each firm 40 pollution permits,which it can either use or sell to the other firm.It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air,and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air.After the two firms buy or sell pollution permits from each other,we would expect that Firm A will emit

Accepted Answer

A)   20 fewer tons of pollution into the air,and Firm B will emit 100 fewer tons of pollution into the air.
B)   100 fewer tons of pollution into the air,and Firm B will emit 20 fewer tons of pollution into the air.
C)   50 fewer tons of pollution into the air,and Firm B will emit 50 fewer tons of pollution into the air.
D)   20 more tons of pollution into the air,and Firm B will emit 100 fewer tons of pollution into the air.E) B) and C)
F) None of the above

Question 14

Reaching an efficient bargain is difficult when the

Accepted Answer

A)   externality is large.
B)   number of interested parties is large.
C)   externality is negative.
D)   government becomes involved.E) B) and C)
F) A) and D)

Question 15

Suppose that a firm produces electricity by burning coal.The production process creates a negative externality of air pollution.If the firm does not internalize the cost of the externality,it will produce where

Accepted Answer

A)   the value of electricity to consumers equals the private cost of producing electricity.
B)   the value of electricity to consumers equals the social cost of producing electricity.
C)   the cost of the externality is maximized.
D)   the transaction costs of private bargaining are minimized.E) C) and D)
F) B) and D)

Question 16

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages.If there are no government subsidies for MBAs,then which of the following statements is correct?

Accepted Answer

A)   The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
B)   The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAs.
C)   The equilibrium quantity of MBAs will be less than the socially optimal quantity of MBAs.
D)   There is not enough information to answer the question.E) A) and B)
F) A) and C)

Question 17

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Accepted Answer

A)   They are equal.
B)   The equilibrium quantity is greater than the socially optimal quantity.
C)   The equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) A) and D)
F) A) and C)

Question 18

Technology spillover occurs when

Accepted Answer

A)   a firm passes the high costs of technical research on to society through higher prices.
B)   a firm's research yields technical knowledge that is used by society as a whole.
C)   the government subsidizes firms engaged in high-tech research.
D)   copyright laws prohibit firms from profiting from the research of others.E) B) and C)
F) B) and D)

Question 19

To produce honey,beekeepers place hives of bees in the fields of farmers.As bees gather nectar,they pollinate the crops in the fields,which increases the yields of these fields at no additional cost to the farmer.What might be a reasonable private solution to this externality,and how might the solution be reached?

Accepted Answer

One solution would be to have one person...

Question 20

A corrective tax

Accepted Answer

A)   can be used to internalize a negative externality.
B)   imposed on sellers shifts the supply curve to the left.
C)   imposed on buyers shifts the demand curve to the left.
D)   All of the above.E) All of the above
F) A) and B)

Exam 10: Externalities

Which of the following is a problem that keeps people from privately solving externality problems?

Correct Answer
verified

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Correct Answer
verified

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages.If there are no government subsidies for MBAs,then which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

Reaching an efficient bargain is difficult when the

Correct Answer
verified

When he was a candidate for president,Barack Obama proposed a cap-and-trade system for carbon.

Correct Answer
verified

Technology spillover occurs when

Correct Answer
verified

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Correct Answer
verified

Suppose that a firm produces electricity by burning coal.The production process creates a negative externality of air pollution.If the firm does not internalize the cost of the externality,it will produce where

Correct Answer
verified

When Lisa drives to work every morning,she drives on a congested highway.What Lisa does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway.In this case,the external cost of Lisa's highway trip

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

Research into new technologies provides a

Correct Answer
verified

Figure 10-14 -Refer to Figure 10-14.Which of the following statements is correct?

Correct Answer
verified

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Correct Answer
verified

Correct Answer
verified
One solution would be to have one person...
View Answer

Assume that your roommate is very messy.According to campus policy,you have a right to live in an uncluttered apartment.Suppose she gets a $200 benefit from being messy but imposes a $100 cost on you.The Coase theorem would suggest that an efficient solution would be for your roommate to

Correct Answer
verified

Suppose that flu shots create a positive externality equal to $12 per shot.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct Answer
verified

A corrective tax

Correct Answer
verified

The tax on gasoline

Correct Answer
verified

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway.This is an example of a negative externality.

Correct Answer
verified

Exam 10: Externalities

Which of the following is a problem that keeps people from privately solving externality problems?

Correct AnswerverifiedShow Answer

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the particular "cap and trade" legislation that was making its way to President Obama's desk at that time would result in

Correct AnswerverifiedShow Answer

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages.If there are no government subsidies for MBAs,then which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Reaching an efficient bargain is difficult when the

Correct AnswerverifiedShow Answer

When he was a candidate for president,Barack Obama proposed a cap-and-trade system for carbon.

Correct AnswerverifiedShow Answer

Technology spillover occurs when

Correct AnswerverifiedShow Answer

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Correct AnswerverifiedShow Answer

Suppose that a firm produces electricity by burning coal.The production process creates a negative externality of air pollution.If the firm does not internalize the cost of the externality,it will produce where

Correct AnswerverifiedShow Answer

When Lisa drives to work every morning,she drives on a congested highway.What Lisa does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway.In this case,the external cost of Lisa's highway trip

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

Research into new technologies provides a

Correct AnswerverifiedShow Answer

Figure 10-14 -Refer to Figure 10-14.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedOne solution would be to have one person...View AnswerShow Answer

Assume that your roommate is very messy.According to campus policy,you have a right to live in an uncluttered apartment.Suppose she gets a $200 benefit from being messy but imposes a $100 cost on you.The Coase theorem would suggest that an efficient solution would be for your roommate to

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $12 per shot.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

The tax on gasoline

Correct AnswerverifiedShow Answer

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway.This is an example of a negative externality.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
One solution would be to have one person...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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