Question 1

Firms that are involved in more than one type of business could be evidence of an attempt to

Accepted Answer

A)   increase private profit at the expense of consumers.
B)   internalize some forms of positive externalities.
C)   reduce the impact of government regulations on their business.
D)   increase the private marginal cost of production.

Question 2

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 3

Table 10-3
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 10-3.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?

Accepted Answer

A)   $67
B)   $68
C)   $81
D)   $83

Question 4

A corrective tax places a price on the right to pollute.

Accepted Answer

A) True 
 B)False

Question 5

When producers operate in a market characterized by negative externalities,a tax that forces them to internalize the externality will

Accepted Answer

A)   give sellers the incentive to account for the external effects of their actions.
B)   increase demand.
C)   increase the amount of the commodity exchanged in market equilibrium.
D)   restrict the producers' ability to take the costs of the externality into account when deciding how much to supply.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

Which of the following statements is not correct?

Accepted Answer

A)   Corrective taxes can be used to place a price on the right to pollute.
B)   Corrective taxes allocate pollution to those producers who face the highest cost of reducing pollution.
C)   Corrective taxes provide incentives to develop cleaner technologies.
D)   Corrective taxes require the government to set a target level of pollution.

Question 10

Which of the following is an example of a positive externality?

Accepted Answer

A)   Sue not catching the flu because she got a flu vaccine.
B)   Mary not catching the flu from Sue because Sue got a flu vaccine.
C)   Sue catching the flu because she did not get a flu vaccine..
D)   Mary catching the flu from Sue because Sue did not get a flu vaccine.

Question 11

Suppose that cookie producers create a positive externality equal to $2 per dozen.Further suppose that the government offers a $2 per-dozen subsidy to the producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Accepted Answer

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

Question 12

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.

Question 13

Private markets fail to account for externalities because

Accepted Answer

A)   externalities don't occur in private markets.
B)   sellers include costs associated with externalities in the price of their product.
C)   decisionmakers in the market fail to include the costs of their behavior to third parties.
D)   the government cannot easily estimate the optimal quantity of pollution.

Question 14

Figure 10-2 
-Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.What is the socially optimal quantity of plastic?

Accepted Answer

A)   200 units
B)   450 units
C)   500 units
D)   650 units

Question 15

If a paper manufacturer does not bear the entire cost of the dioxin it emits,it will

Accepted Answer

A)   emit a lower level of dioxin than is socially efficient.
B)   emit a higher level of dioxin than is socially efficient.
C)   emit an acceptable level of dioxin.
D)   not emit any dioxin in an attempt to avoid paying the entire cost.

Question 16

Ed is a writer who works from his home.Ed lives nextdoor to Ricky,the drummer for a local band.Ricky needs lots of practice to earn his share of the bands profits,$250.Ed gets distracted by Ricky's drumming but needs to get his writing done to earn $500 for his current article.Which of the following is an efficient solution?

Accepted Answer

A)   Ricky offers Ed $499 to allow Ricky to continue drumming.Ed accepts and both are better off.
B)   Ricky offers Ed $249 to allow Ricky to continue drumming.Ed accepts and both are better off.
C)   Ed offers Ricky $251 to stop practicing his drumming.Ricky agrees and both are better off.
D)   Ed offers Ricky $501 to stop practicing his drumming.Ricky agrees and both are better off.

Question 17

Which of the following statements is correct?

Accepted Answer

A)   Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and decrease the price of the good produced.
B)   Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced.
C)   Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and decrease the price of the good produced.
D)   Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced.

Question 18

Corrective taxes

Accepted Answer

A)   encourage consumers to avoid sales taxes by shopping online.
B)   are frequently used to discourage imports.
C)   are less efficient than direct regulation.
D)   give factory owners an economic incentive to reduce pollution.

Question 19

A corrective tax

Accepted Answer

A)   allocates pollution to those factories that face the highest cost of reducing it.
B)   is a form of regulation.
C)   works well for all types of externalities.
D)   is inferior to regulatory policy according to most economists.

Question 20

Barking dogs cannot be considered an externality because externalities must be associated with some form of market exchange.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

Firms that are involved in more than one type of business could be evidence of an attempt to

Correct Answer
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All remedies for externalities share the goal of

Correct Answer
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Which of the following is an example of a positive externality?

Correct Answer
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Correct Answer
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Correct Answer
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Private markets fail to account for externalities because

Correct Answer
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When producers operate in a market characterized by negative externalities,a tax that forces them to internalize the externality will

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

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Correct Answer
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If a paper manufacturer does not bear the entire cost of the dioxin it emits,it will

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Figure 10-2 -Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.What is the socially optimal quantity of plastic?

Correct Answer
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A corrective tax

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

Correct Answer
verified

Suppose that cookie producers create a positive externality equal to $2 per dozen.Further suppose that the government offers a $2 per-dozen subsidy to the producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Correct Answer
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A corrective tax

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Corrective taxes

Correct Answer
verified

Barking dogs cannot be considered an externality because externalities must be associated with some form of market exchange.

Correct Answer
verified

A corrective tax places a price on the right to pollute.

Correct Answer
verified

Exam 10: Externalities

Firms that are involved in more than one type of business could be evidence of an attempt to

Correct AnswerverifiedShow Answer

All remedies for externalities share the goal of

Correct AnswerverifiedShow Answer

Which of the following is an example of a positive externality?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Private markets fail to account for externalities because

Correct AnswerverifiedShow Answer

When producers operate in a market characterized by negative externalities,a tax that forces them to internalize the externality will

Correct AnswerverifiedShow Answer

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

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Correct AnswerverifiedShow Answer

If a paper manufacturer does not bear the entire cost of the dioxin it emits,it will

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Figure 10-2 -Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.What is the socially optimal quantity of plastic?

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that cookie producers create a positive externality equal to $2 per dozen.Further suppose that the government offers a $2 per-dozen subsidy to the producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Corrective taxes

Correct AnswerverifiedShow Answer

Barking dogs cannot be considered an externality because externalities must be associated with some form of market exchange.

Correct AnswerverifiedShow Answer

A corrective tax places a price on the right to pollute.

Correct AnswerverifiedShow 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
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Correct Answer
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Correct Answer
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One solution would be to have one person...
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
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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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