Question 1

Assume that your roommate,Vanessa,is very messy,and 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.What would the Coase theorem suggest would be an efficient solution for your roommate

Accepted Answer

A)  to pay you $99.99 to live with the clutter
B)  to pay you at least $100 but less than $200 to live with the clutter
C)  to demand payment of at least $100 but no more than $200 to clean up after herself
D)  to demand payment of $200 to clean up after herself

Question 2

What are two types of private solutions to the problem of externalities

Accepted Answer

A)  charities and the Golden Rule
B)  charities and subsidies
C)  the Golden Rule and taxes
D)  taxes and subsidies

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

What does the height of the supply curve at any given quantity of coal show

Accepted Answer

A)  the value to the consumer of the last unit of coal bought
B)  the consumer's willingness to pay for coal at each quantity
C)  the cost to the producer of the last unit of coal sold
D)  the total quantity of coal exchanged in the market

Question 5

What is the effect of a negative externality

Accepted Answer

A)  It has an adverse impact on a bystander.
B)  It causes the product in a market to be underproduced.
C)  It has an adverse impact on market participants.
D)  When it is present in a market, the good or service is undesirable for society.

Question 6

What does the demand curve for a product reflect

Accepted Answer

A)  the value of the product to consumers
B)  the cost of the product's externality on society
C)  the quantity consumers are able to purchase
D)  the price the product will sell for in the market

Question 7

Why would corrective taxes NOT be preferred over regulations in order to reduce pollution

Accepted Answer

A)  They cause each factory to reduce pollution to the same maximum level.
B)  They are a less costly solution to society than regulations.
C)  They cause pollution levels to drop below the regulated amount.
D)  They are a better solution for the environment than regulations.

Question 8

If the government wanted to ensure that the market reaches the social optimum in the presence of a technology spillover,what should it do

Accepted Answer

A)  It should impose a corrective tax on any firm producing a technology spillover.
B)  It should offer tax credits to consumers who are adversely affected by the new technology.
C)  It should subsidize producers by an amount equal to the value of the technology spillover.
D)  It should provide research grants to those firms not currently engaging in research to increase competition in the industry.

Question 9

Imagine you are a nonsmoker sharing a house with a smoker. According to the Coase theorem, what determines whether your roommate smokes in the house? Is this outcome efficient? How do you and your roommate reach this solution?

Accepted Answer

According to the Coase theorem, you and ...

Question 10

Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Accepted Answer

A positive externality leads the market ...

Question 11

Figure 10-3
 
-Refer to Figure 10-3.How is the negative externality measured

Accepted Answer

A)  P₂ - P₁
B)  P₃ - P₂
C)  P₃ - P₀
D)  P₃ - P₁

Question 12

Two firms,A and B,each currently dump 20 tonnes of chemicals into the local river.From now on both firms will require a pollution permit for each tonne of pollution dumped into the river.The government gives each firm 10 pollution permits,which it can either use or sell to the other firm.It costs Firm A $100 for each tonne of pollution that it eliminates before it reaches the river,and it costs Firm B $50 for each tonne of pollution that it eliminates before it reaches the river.After the two firms buy or sell pollution permits from each other,what would we expect

Accepted Answer

A)  Firm A will no longer pollute, and Firm B will not reduce its pollution at all.
B)  Firm B will no longer pollute, and Firm A will not reduce its pollution at all.
C)  Firm A will dump 10 tonnes of pollution into the river, and Firm B will dump 10 tonnes of pollution into the river.
D)  Firm A will increase its pollution, and Firm B will reduce its pollution.

Question 13

Figure 10-1
This figure reflects the market for outdoor concerts in a public park surrounded by residential neighbourhoods.
 
-Refer to Figure 10-1.What price and quantity combination best represents the optimum price and number of concerts that should be organized

Accepted Answer

A)  P₁, Q₁
B)  P₂, Q₀
C)  P₁, Q₀
D)  P₁, Q₀.

Question 14

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders affected adversely by the pollution.

Accepted Answer

A) True 
 B)False

Question 15

Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency

Accepted Answer

A negative externality leads t...

Question 16

What does the height of the supply curve show

Accepted Answer

A)  the maximum cost a seller will pay to produce a product
B)  the price a buyer can expect to pay for a certain quantity of a product
C)  the maximum amount buyers are willing to pay for a product
D)  the cost to the producer of the last unit sold

Question 17

A market for pollution permits can efficiently allocate the right to pollute by the forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 18

Figure 10-2
 
-Refer to Figure 10-2.If this market currently produces Q₂,how could total economic well-being be maximized

Accepted Answer

A)  if production decreased to Q₁
B)  if output stayed at Q₂
C)  if production increased to Q₃
D)  if output decreased to zero

Question 19

How can the government internalize a positive externality

Accepted Answer

A)  by taxing production, which would decrease supply
B)  by taxing production, which would increase supply
C)  by subsidizing production, which would decrease supply
D)  by subsidizing production, which would increase supply

Question 20

Social welfare can be enhanced by allowing firms to trade their rights to pollute.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

What does the demand curve for a product reflect

Correct Answer
verified

Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency

Correct Answer
verified
A negative externality leads t...
View Answer

What is the effect of a negative externality

Correct Answer
verified

What are two types of private solutions to the problem of externalities

Correct Answer
verified

If the government wanted to ensure that the market reaches the social optimum in the presence of a technology spillover,what should it do

Correct Answer
verified

What does the height of the supply curve at any given quantity of coal show

Correct Answer
verified

How can the government internalize a positive externality

Correct Answer
verified

Correct Answer
verified

Assume that your roommate,Vanessa,is very messy,and 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.What would the Coase theorem suggest would be an efficient solution for your roommate

Correct Answer
verified

Figure 10-2 -Refer to Figure 10-2.If this market currently produces Q₂,how could total economic well-being be maximized

Correct Answer
verified

A market for pollution permits can efficiently allocate the right to pollute by the forces of supply and demand.

Correct Answer
verified

Why would corrective taxes NOT be preferred over regulations in order to reduce pollution

Correct Answer
verified

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

Correct Answer
verified

Figure 10-3 -Refer to Figure 10-3.How is the negative externality measured

Correct Answer
verified

What does the height of the supply curve show

Correct Answer
verified

Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Correct Answer
verified
A positive externality leads the market ...
View Answer

Social welfare can be enhanced by allowing firms to trade their rights to pollute.

Correct Answer
verified

Figure 10-1 This figure reflects the market for outdoor concerts in a public park surrounded by residential neighbourhoods. -Refer to Figure 10-1.What price and quantity combination best represents the optimum price and number of concerts that should be organized

Correct Answer
verified

Imagine you are a nonsmoker sharing a house with a smoker. According to the Coase theorem, what determines whether your roommate smokes in the house? Is this outcome efficient? How do you and your roommate reach this solution?

Correct Answer
verified
According to the Coase theorem, you and ...
View Answer

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders affected adversely by the pollution.

Correct Answer
verified

Exam 10: Externalities

What does the demand curve for a product reflect

Correct AnswerverifiedShow Answer

Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency

Correct AnswerverifiedA negative externality leads t...View AnswerShow Answer

What is the effect of a negative externality

Correct AnswerverifiedShow Answer

What are two types of private solutions to the problem of externalities

Correct AnswerverifiedShow Answer

If the government wanted to ensure that the market reaches the social optimum in the presence of a technology spillover,what should it do

Correct AnswerverifiedShow Answer

What does the height of the supply curve at any given quantity of coal show

Correct AnswerverifiedShow Answer

How can the government internalize a positive externality

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume that your roommate,Vanessa,is very messy,and 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.What would the Coase theorem suggest would be an efficient solution for your roommate

Correct AnswerverifiedShow Answer

Figure 10-2 -Refer to Figure 10-2.If this market currently produces Q₂,how could total economic well-being be maximized

Correct AnswerverifiedShow Answer

A market for pollution permits can efficiently allocate the right to pollute by the forces of supply and demand.

Correct AnswerverifiedShow Answer

Why would corrective taxes NOT be preferred over regulations in order to reduce pollution

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 10-3 -Refer to Figure 10-3.How is the negative externality measured

Correct AnswerverifiedShow Answer

What does the height of the supply curve show

Correct AnswerverifiedShow Answer

Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Correct AnswerverifiedA positive externality leads the market ...View AnswerShow Answer

Social welfare can be enhanced by allowing firms to trade their rights to pollute.

Correct AnswerverifiedShow Answer

Figure 10-1 This figure reflects the market for outdoor concerts in a public park surrounded by residential neighbourhoods. -Refer to Figure 10-1.What price and quantity combination best represents the optimum price and number of concerts that should be organized

Correct AnswerverifiedShow Answer

Imagine you are a nonsmoker sharing a house with a smoker. According to the Coase theorem, what determines whether your roommate smokes in the house? Is this outcome efficient? How do you and your roommate reach this solution?

Correct AnswerverifiedAccording to the Coase theorem, you and ...View AnswerShow Answer

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders affected adversely by the pollution.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
A negative externality leads t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A positive externality leads the market ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
According to the Coase theorem, you and ...
View Answer

Correct Answer
verified