Question 1

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) B) and D)
F) B) and C)

Question 2

Education is heavily subsidized through public schools and government scholarships. This subsidization of education reflects the fact that

Accepted Answer

A)  a negative externality requires a subsidy to move the market equilibrium closer to the social optimum.
B)  the social cost of education exceeds the private cost of education.
C)  the social value of education exceeds the private value of education.
D)  the market-equilibrium quantity of education exceeds the optimal quantity of education.E) None of the above
F) All of the above

Question 3

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.E) A) and B)
F) A) and C)

Question 4

Assuming education results in a positive externality, which of the following statements is correct?

Accepted Answer

A)  The social cost of producing education exceeds the private cost of producing education.
B)  The positive externality can be depicted on a graph by the vertical distance between the supply curve and the social-cost curve.
C)  The socially optimal quantity of education will exceed the market equilibrium quantity of education.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 5

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the social cost of producing 30 units of the good?

Accepted Answer

The social cost of p...

Question 6

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

Accepted Answer

A)  less than the social cost of producing it.
B)  less than the private cost of producing it.
C)  more than the social cost of producing it.
D)  more than the private cost of producing it.E) All of the above
F) A) and B)

Question 7

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) B) and D)
F) A) and D)

Question 8

Figure 10-8 
-Refer to Figure 10-8. What is the equilibrium price in this market?

Accepted Answer

A)  $8
B)  Between $8 and $10
C)  $10
D)  More than $10E) A) and D)
F) All of the above

Question 9

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.E) A) and C)
F) B) and C)

Question 10

Figure 10-9   
-Refer to Figure 10-9, Panel (b)  and Panel (c) . The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the socially optimal quantity of smokestack scrubbers is represented by point

Accepted Answer

A)  Q2.
B)  Q3.
C)  Q4.
D)  Q5.E) C) and D)
F) A) and D) D

Question 11

For the purpose of protecting the environment, upon which of the following approaches do we rely more and more as time goes by?

Accepted Answer

A)  adherence to the notion of the invisible hand
B)  command-and-control policies
C)  the development and enforcement of regulations
D)  the requirement that decision makers bear the full costs of their actionsE) C) and D)
F) All of the above

Question 12

When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level.

Accepted Answer

A) True 
 B)False

Question 13

If gasoline taxes were significantly increased in the United States, then

Accepted Answer

A)  some of the government regulations that require automakers to produce more fuel-efficient cars would become unnecessary.
B)  other taxes, such as income taxes, could be lowered.
C)  it is likely that roads would become safer and the environment would become cleaner.
D)  All of the above are correct.E) A) and D)
F) C) and D) D

Question 14

Education yields positive externalities. For example, a more educated population

Accepted Answer

A)  may increase the pace of technological advances, leading to higher productivity and wages for everyone.
B)  leads to more informed voters, resulting in better government for everyone.
C)  tends to result in lower crime rates.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

In some circumstances, selling pollution permits may be better than levying a corrective tax.

Accepted Answer

A) True 
 B)False

Question 17

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Accepted Answer

The answer of At any given quantity, the willingness to...

Question 18

​Figure 10-20. ​ 
-Refer to Figure 10-20. Without government intervention,

Accepted Answer

A)  the equilibrium quantity is less than the socially optimal quantity.
B)  the equilibrium quantity is larger than the socially optimal quantity.
C)  the equilibrium quantity equals the socially optimal quantity.
D)  there is no clear relationship between the equilibrium quantity and socially optimal quantity.E) C) and D)
F) A) and B)

Question 19

A positive externality will cause a market to produce

Accepted Answer

A)  more than is socially desirable.
B)  less than is socially desirable.
C)  the socially optimal equilibrium amount.
D)  more than the same market would produce in the presence of a negative externality.E) C) and D)
F) B) and D) B

Question 20

Research into new technologies conveys neither negative externalities nor positive externalities.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

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

Correct Answer
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Education is heavily subsidized through public schools and government scholarships. This subsidization of education reflects the fact that

Correct Answer
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Correct Answer
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Assuming education results in a positive externality, which of the following statements is correct?

Correct Answer
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Correct Answer
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The social cost of p...
View Answer

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

Correct Answer
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A corrective tax

Correct Answer
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Figure 10-8 -Refer to Figure 10-8. What is the equilibrium price in this market?

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

Correct Answer
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Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c) . The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the socially optimal quantity of smokestack scrubbers is represented by point

Correct Answer
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D

For the purpose of protecting the environment, upon which of the following approaches do we rely more and more as time goes by?

Correct Answer
verified

When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level.

Correct Answer
verified

If gasoline taxes were significantly increased in the United States, then

Correct Answer
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D

Education yields positive externalities. For example, a more educated population

Correct Answer
verified

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

Correct Answer
verified

In some circumstances, selling pollution permits may be better than levying a corrective tax.

Correct Answer
verified

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Correct Answer
verified

Figure 10-20. -Refer to Figure 10-20. Without government intervention,

Correct Answer
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A positive externality will cause a market to produce

Correct Answer
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B

Research into new technologies conveys neither negative externalities nor positive externalities.

Correct Answer
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Exam 10: Externalities

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

Correct AnswerverifiedShow Answer

Education is heavily subsidized through public schools and government scholarships. This subsidization of education reflects the fact that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assuming education results in a positive externality, which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe social cost of p...View AnswerShow Answer

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

Figure 10-8 -Refer to Figure 10-8. What is the equilibrium price in this market?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c) . The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the socially optimal quantity of smokestack scrubbers is represented by point

Correct AnswerverifiedD

For the purpose of protecting the environment, upon which of the following approaches do we rely more and more as time goes by?

Correct AnswerverifiedShow Answer

When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level.

Correct AnswerverifiedShow Answer

If gasoline taxes were significantly increased in the United States, then

Correct AnswerverifiedD

Education yields positive externalities. For example, a more educated population

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In some circumstances, selling pollution permits may be better than levying a corrective tax.

Correct AnswerverifiedShow Answer

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Correct AnswerverifiedShow Answer

​Figure 10-20. ​ -Refer to Figure 10-20. Without government intervention,

Correct AnswerverifiedShow Answer

A positive externality will cause a market to produce

Correct AnswerverifiedB

Research into new technologies conveys neither negative externalities nor positive externalities.

Correct AnswerverifiedShow Answer

Correct Answer
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The social cost of p...
View Answer

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D

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D

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Figure 10-20. -Refer to Figure 10-20. Without government intervention,

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B

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