Question 1

Figure 10-15 
-Refer to Figure 10-15.Which graph illustrates a pollution permit program?

Accepted Answer

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

Question 2

The difference between a corrective tax and a tradable pollution permit is that

Accepted Answer

A)  a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
B)  a corrective tax creates a more efficient outcome than a permit.
C)  a corrective tax sets the quantity of pollution and a permit sets the price of pollution.
D)  a permit creates a more efficient outcome than a corrective tax.

Question 3

Corrective taxes differ from most taxes in that corrective taxes

Accepted Answer

A)  enhance economic efficiency.
B)  do not raise revenue for the government.
C)  cause deadweight loss.
D)  cannot be divided between the buyer and seller.

Question 4

Public Policies Toward Externalities
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.

Question 5

Two firms,A and B,each currently dump 20 tons of chemicals into the local river.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton 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 ton of pollution that it eliminates before it reaches the river,and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river.After the two firms buy or sell pollution permits from each other,we would expect that

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 tons of pollution into the river,and Firm B will dump 10 tons of pollution into the river.
D)  Firm A will increase its pollution and Firm B will reduce its pollution.

Question 6

Figure 10-7 1. B) Q2. C) Q3. D) Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-7.Which quantity represents the social optimum for this market?

Accepted Answer

A)  Q1.
B)  Q2.
C)  Q3.
D)  Q4.

Question 7

Technology spillover is one type of

Accepted Answer

A)  negative externality.
B)  positive externality.
C)  subsidy.
D)  producer surplus.

Question 8

In a market economy,government intervention

Accepted Answer

A)  will always improve market outcomes.
B)  reduces efficiency in the presence of externalities.
C)  may improve market outcomes in the presence of externalities.
D)  is necessary to control individual greed.

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  False

Question 10

The term market failure refers to

Accepted Answer

A)  a market that fails to allocate resources efficiently.
B)  an unsuccessful advertising campaign which reduces demand.
C)  ruthless competition among firms.
D)  a firm that is forced out of business because of losses.s

Question 11

Since almost all forms of transportation produce some type of pollution,

Accepted Answer

A)  the government should ban all transportation.
B)  the government should ban all pollution.
C)  society has to weigh the cost and benefits when deciding how much pollution to allow.
D)  refrain from intervening because the market can best solve this problem.

Question 12

When the production of a good results in a positive externality,the social value curve is

Accepted Answer

A)  below the demand curve,indicating that the total value to society is less than the private benefit.
B)  above the demand curve,indicating that the total value to society is greater than the private benefit.
C)  identical to the demand curve,indicating that the total cost to society is the equal to the private benefit.
D)  above the supply curve,indicating that the total cost to society exceeds the private cost.

Question 13

All remedies for externalities share the goal of

Accepted Answer

A)  moving the allocation of resources toward the market equilibrium.
B)  moving the allocation of resources toward the socially optimal equilibrium.
C)  increasing the allocation of resources.
D)  decreasing the allocation of resources. B

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Suppose a certain good provides an external benefit.If the private cost of the last unit of the good that was produced is equal to the social value of that unit,then the sum of producer and consumer surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 16

That some firms are engaged in more than one type of business is explained,in some cases,by

Accepted Answer

A)  moral injunctions such as the Golden Rule.
B)  the existence of charitable organizations.
C)  government regulations that discourage the internalization of externalities.
D)  the fact that the internalization of externalities sometimes coincides with the self-interest of the relevant parties.

Question 17

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining.Under what circumstances will private bargaining fail to produce a solution?

Accepted Answer

Private parties may fail to bargain to a...

Question 18

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 19

If education produces positive externalities,we would expect

Accepted Answer

A)  the government to tax education.
B)  the government to subsidize education.
C)  people to realize the benefits,which would increase the demand for education.
D)  colleges to relax admission requirements.

Question 20

Internalizing a positive externality will cause the demand curve to

Accepted Answer

A)  shift to the right.
B)  shift to the left.
C)  become more elastic.
D)  remain unchanged. A

Exam 10: Externalities

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a pollution permit program?

Correct Answer
verified

The difference between a corrective tax and a tradable pollution permit is that

Correct Answer
verified

Corrective taxes differ from most taxes in that corrective taxes

Correct Answer
verified

Public Policies Toward Externalities Figure 10-14 -Refer to Figure 10-14.Which of the following statements is correct?

Correct Answer
verified

Correct Answer
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Figure 10-7 -Refer to Figure 10-7.Which quantity represents the social optimum for this market?

Correct Answer
verified

Technology spillover is one type of

Correct Answer
verified

In a market economy,government intervention

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
False

The term market failure refers to

Correct Answer
verified

Since almost all forms of transportation produce some type of pollution,

Correct Answer
verified

When the production of a good results in a positive externality,the social value curve is

Correct Answer
verified

All remedies for externalities share the goal of

Correct Answer
verified
B

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

Correct Answer
verified

Suppose a certain good provides an external benefit.If the private cost of the last unit of the good that was produced is equal to the social value of that unit,then the sum of producer and consumer surplus is maximized.

Correct Answer
verified

That some firms are engaged in more than one type of business is explained,in some cases,by

Correct Answer
verified

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining.Under what circumstances will private bargaining fail to produce a solution?

Correct Answer
verified
Private parties may fail to bargain to a...
View Answer

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Correct Answer
verified

If education produces positive externalities,we would expect

Correct Answer
verified

Internalizing a positive externality will cause the demand curve to

Correct Answer
verified
A

Exam 10: Externalities

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a pollution permit program?

Correct AnswerverifiedShow Answer

The difference between a corrective tax and a tradable pollution permit is that

Correct AnswerverifiedShow Answer

Corrective taxes differ from most taxes in that corrective taxes

Correct AnswerverifiedShow Answer

Public Policies Toward Externalities Figure 10-14 -Refer to Figure 10-14.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-7 -Refer to Figure 10-7.Which quantity represents the social optimum for this market?

Correct AnswerverifiedShow Answer

Technology spillover is one type of

Correct AnswerverifiedShow Answer

In a market economy,government intervention

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

The term market failure refers to

Correct AnswerverifiedShow Answer

Since almost all forms of transportation produce some type of pollution,

Correct AnswerverifiedShow Answer

When the production of a good results in a positive externality,the social value curve is

Correct AnswerverifiedShow Answer

All remedies for externalities share the goal of

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

Suppose a certain good provides an external benefit.If the private cost of the last unit of the good that was produced is equal to the social value of that unit,then the sum of producer and consumer surplus is maximized.

Correct AnswerverifiedShow Answer

That some firms are engaged in more than one type of business is explained,in some cases,by

Correct AnswerverifiedShow Answer

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining.Under what circumstances will private bargaining fail to produce a solution?

Correct AnswerverifiedPrivate parties may fail to bargain to a...View AnswerShow Answer

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Correct AnswerverifiedShow Answer

If education produces positive externalities,we would expect

Correct AnswerverifiedShow Answer

Internalizing a positive externality will cause the demand curve to

Correct AnswerverifiedA

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False

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B

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Correct Answer
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Private parties may fail to bargain to a...
View Answer

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A