Question 1

An example of a private solution to externalities is charities. The government encourages this private solution by allowing ___________ .

Accepted Answer

tax deduct...

Question 2

Many charities like the Sierra Club are established to deal with externalities.

Accepted Answer

A) True 
 B)False

Question 3

​Figure 10-20. ​ 
-​Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.

Accepted Answer

A) True 
 B)False

Question 4

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2. Is the market equilibrium quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The market equilibri...

Question 5

When an externality is present, the market equilibrium is

Accepted Answer

A)  efficient, and the equilibrium maximizes the total benefit to society as a whole.
B)  efficient, but the equilibrium does not maximize the total benefit to society as a whole.
C)  inefficient, but the equilibrium maximizes the total benefit to society as a whole.
D)  inefficient, and the equilibrium does not maximize the total benefit to society as a whole.E) C) and D)
F) A) and C)

Question 6

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 number of permits is

Accepted Answer

A)  50
B)  100
C)  1,000
D)  2,000E) C) and D)
F) All of the above

Question 7

Which of the following is not correct?

Accepted Answer

A)  Markets allocate scarce resources with the forces of supply and demand.
B)  The equilibrium of supply and demand is typically an efficient allocation of resources.
C)  Governments can sometimes improve market outcomes.
D)  Externalities cannot be positive.E) B) and C)
F) B) and D)

Question 8

A corrective tax

Accepted Answer

A)  causes each factory to reduce pollution by the same amount.
B)  assigns a legal pollution limit for firms.
C)  places a price on the right to pollute.
D)  costs society more than pollution regulations.E) A) and D)
F) A) and C)

Question 9

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 graphE) All of the above
F) C) and D)

Question 10

Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200. Suppose that the farmer has the right to compensation for any damage that his crops suffer. Assume that there are no transaction costs. Which of the following characterizes the efficient outcome?

Accepted Answer

A)  The railroad will continue to operate but will pay the farmer $1,500 in damages.
B)  The railroad will purchase the grease for $1,200 and pay the farmer nothing because no crop damage will occur.
C)  The farmer will incur $1,500 in damages to his crops.
D)  The farmer will pay the railroad $1,200 to purchase the grease so that no crop damage will occur.E) A) and B)
F) A) and C)

Question 11

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3 
-Refer to Figure 10-3. The social cost curve is above the supply curve because

Accepted Answer

A)  it takes into account the external costs imposed on society by the concert.
B)  it takes into account the effect of local noise restrictions on concerts in parks surrounded by residential neighborhoods.
C)  concert tickets are likely to cost more than the concert actually costs the organizers.
D)  residents in the surrounding neighborhoods get to listen to the concert for free.E) None of the above
F) B) and C)

Question 12

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. 
-Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

Accepted Answer

A)  $1,250.
B)  $1,600.
C)  $2,000.
D)  $2,500.E) B) and C)
F) A) and B)

Question 13

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then

Accepted Answer

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

Question 14

Figure 10-15 
-Refer to Figure 10-15. The supply of pollution permits is

Accepted Answer

A)  elastic and represented by line A.
B)  inelastic and represented by line A.
C)  elastic and represented by line F
D)  inelastic and represented by line F.E) A) and C)
F) A) and D)

Question 15

Markets are often inefficient when negative externalities are present because

Accepted Answer

A)  private costs exceed social costs at the private market solution.
B)  externalities cannot be corrected without government regulation.
C)  social costs exceed private costs at the private market solution.
D)  production externalities lead to consumption externalities.E) A) and B)
F) All of the above

Question 16

Does research into new technologies create a positive externality or does it create a negative externality?

Accepted Answer

Research into new te...

Question 17

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

Accepted Answer

A)  automobiles.
B)  aluminum.
C)  industrial robots.
D)  All of the above are correct.E) None of the above
F) C) and D)

Question 18

Which of the following illustrates the concept of a negative externality?

Accepted Answer

A)  A college professor plays a vigorous game of racquet ball with the racquet he recently purchased.
B)  A flood wipes out a farmer's corn crop.
C)  A college student plays loud music on his new stereo system at 2:00 a.m.
D)  A janitor eats a hamburger during his lunch break.E) None of the above
F) A) and B)

Question 19

Figure 10-19 
-Refer to Figure 10-19. The social optimum can be reached if

Accepted Answer

A)  a subsidy of $36 is applied to each unit of the good.
B)  a subsidy of $23 is applied to each unit of the good.
C)  a tax of $23 is applied to each unit of the good.
D)  a tax of $15 is applied to each unit of the good.E) C) and D)
F) A) and C)

Question 20

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

Exam 10: Externalities

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

Correct Answer
verified

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then

Correct Answer
verified

An example of a private solution to externalities is charities. The government encourages this private solution by allowing ___________ .

Correct Answer
verified
tax deduct...
View Answer

Markets are often inefficient when negative externalities are present because

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 number of permits is

Correct Answer
verified

Figure 10-19 -Refer to Figure 10-19. The social optimum can be reached if

Correct Answer
verified

Correct Answer
verified

Many charities like the Sierra Club are established to deal with externalities.

Correct Answer
verified

Figure 10-15 -Refer to Figure 10-15. The supply of pollution permits is

Correct Answer
verified

When an externality is present, the market equilibrium is

Correct Answer
verified

A corrective tax

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Correct Answer
verified
The market equilibri...
View Answer

Correct Answer
verified

Does research into new technologies create a positive externality or does it create a negative externality?

Correct Answer
verified
Research into new te...
View Answer

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The social cost curve is above the supply curve because

Correct Answer
verified

Which of the following illustrates the concept of a negative externality?

Correct Answer
verified

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

Correct Answer
verified

Figure 10-20. -Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Externalities

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

Correct AnswerverifiedShow Answer

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then

Correct AnswerverifiedShow Answer

An example of a private solution to externalities is charities. The government encourages this private solution by allowing ___________ .

Correct Answerverifiedtax deduct...View AnswerShow Answer

Markets are often inefficient when negative externalities are present because

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 number of permits is

Correct AnswerverifiedShow Answer

Figure 10-19 -Refer to Figure 10-19. The social optimum can be reached if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Many charities like the Sierra Club are established to deal with externalities.

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15. The supply of pollution permits is

Correct AnswerverifiedShow Answer

When an externality is present, the market equilibrium is

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe market equilibri...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Does research into new technologies create a positive externality or does it create a negative externality?

Correct AnswerverifiedResearch into new te...View AnswerShow Answer

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The social cost curve is above the supply curve because

Correct AnswerverifiedShow Answer

Which of the following illustrates the concept of a negative externality?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

​Figure 10-20. ​ -​Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
tax deduct...
View Answer

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The market equilibri...
View Answer

Correct Answer
verified

Correct Answer
verified
Research into new te...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 10-20. -Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.

Correct Answer
verified

Correct Answer
verified