Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

Accepted Answer

A)   social cost
B)   opportunity cost of technology
C)   internalization of an externality
D)   technology spilloverE) None of the above
F) A) and B)

Question 3

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. 
-Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?

Accepted Answer

A)   "Demand for clean air"
B)   "Demand for pollution rights"
C)   "Supply of pollution permits"
D)   "Tax paid to government"E) None of the above
F) A) and B)

Question 4

Figure 10-4 1. B)  Q2. C)  Q3. D)  Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.If all external costs were internalized,then the market's equilibrium output would be

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.E) C) and D)
F) All of the above

Question 5

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Accepted Answer

A)   A well-maintained yard conveys a positive externality because it increases the home's market value.
B)   A well-maintained yard conveys a negative externality because it increases the property tax liability of the owner.
C)   A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood.
D)   A well-maintained yard cannot provide any type of externality.E) A) and B)
F) All of the above

Question 6

Figure 10-11 
-Refer to Figure 10-11.Taking only private value and private cost into account,total surplus at the market equilibrium amounts to

Accepted Answer

A)   $1,920.
B)   $2,240.
C)   $2,860.
D)   $3,980.E) A) and C)
F) None of the above

Question 7

In the case of a technology spillover,internalizing a positive externality will cause the supply curve of an industry to

Accepted Answer

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

Question 8

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Accepted Answer

A)   a "cap and trade" system in which the government would give away permits to emit carbon.
B)   an expansion of regulations on carbon emissions.
C)   stricter enforcement of existing regulations on carbon emissions.
D)   a tax on carbon emissions.E) A) and B)
F) All of the above

Question 9

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that cigarette smokers create a negative externality.Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality.What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Accepted Answer

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

Question 11

Figure 10-11 
-Refer to Figure 10-11.A benevolent social planner would prefer

Accepted Answer

A)   a $28 price to any other price.
B)   280 units to any other quantity of output.
C)   a subsidy of $18 per unit to a subsidy of $12 per unit.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 12

As a means of dealing with pollution,do economists generally prefer corrective taxes or do they prefer regulations?

Accepted Answer

Economists generally...

Question 13

Table 10-1
The following table shows the private value,private cost,and external cost for various quantities of output in a market.
 
-Refer to Table 10-1.Which of the following statements is correct?

Accepted Answer

A)   If the external benefit per unit of output were $0 instead of $2,then the socially efficient quantity of output would be 4 units.
B)   A tax of $4 per unit would enable this market to move from the equilibrium quantity of output to the socially optimal level of output.
C)   Taking the external cost into account,total surplus declines when the 3rd unit of output is produced and consumed.
D)   The market for flu shots is a market to which the concepts in this table apply very well.E) A) and C)
F) A) and D)

Question 14

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) None of the above
F) A) and B)

Question 15

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

Question 16

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.Could the government impose a tax or provide a subsidy to move the market to the social optimum? If your answer is "Yes," should it be a tax or should it be a subsidy?

Accepted Answer

The government could...

Question 17

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) A) and D)
F) None of the above

Question 18

Figure 10-4 
-Refer to Figure 10-4.This market is characterized by

Accepted Answer

A)   government intervention.
B)   a positive externality.
C)   a negative externality.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 19

Negative externalities lead markets to produce

Accepted Answer

A)   greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.
B)   smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
C)   greater than efficient output levels and positive externalities lead markets to produce efficient output levels.
D)   efficient output levels and positive externalities lead markets to produce greater than efficient output levels.E) C) and D)
F) A) and B)

Question 20

The business activities of Firm A confer positive externalities on Firm B,and the business activities of Firm B confer positive externalities on Firm A.If the two firms merged,then

Accepted Answer

A)   their respective markets would move closer to the social optimum.
B)   their respective markets would move further away from the social optimum.
C)   total surplus in their respective markets would decrease.
D)   the merger would serve as an example of a misguided public policy toward externalities.E) A) and B)
F) A) and C)

Exam 10: Externalities

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

Figure 10-11 -Refer to Figure 10-11.A benevolent social planner would prefer

Correct Answer
verified

Suppose that cigarette smokers create a negative externality.Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality.What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Correct Answer
verified

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.Which of the following statements is correct?

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

Correct Answer
verified

Negative externalities lead markets to produce

Correct Answer
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Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

Correct Answer
verified

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4.If all external costs were internalized,then the market's equilibrium output would be

Correct Answer
verified

Correct Answer
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The government could...
View Answer

In the case of a technology spillover,internalizing a positive externality will cause the supply curve of an industry to

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4.This market is characterized by

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Correct Answer
verified

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Correct Answer
verified

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

Correct Answer
verified

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Correct Answer
verified

As a means of dealing with pollution,do economists generally prefer corrective taxes or do they prefer regulations?

Correct Answer
verified
Economists generally...
View Answer

The business activities of Firm A confer positive externalities on Firm B,and the business activities of Firm B confer positive externalities on Firm A.If the two firms merged,then

Correct Answer
verified

Figure 10-11 -Refer to Figure 10-11.Taking only private value and private cost into account,total surplus at the market equilibrium amounts to

Correct Answer
verified

Exam 10: Externalities

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

Figure 10-11 -Refer to Figure 10-11.A benevolent social planner would prefer

Correct AnswerverifiedShow Answer

Suppose that cigarette smokers create a negative externality.Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality.What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Correct AnswerverifiedShow Answer

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Negative externalities lead markets to produce

Correct AnswerverifiedShow Answer

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

Correct AnswerverifiedShow Answer

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.If all external costs were internalized,then the market's equilibrium output would be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe government could...View AnswerShow Answer

In the case of a technology spillover,internalizing a positive externality will cause the supply curve of an industry to

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.This market is characterized by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Correct AnswerverifiedShow Answer

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Correct AnswerverifiedShow 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

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Correct AnswerverifiedShow Answer

As a means of dealing with pollution,do economists generally prefer corrective taxes or do they prefer regulations?

Correct AnswerverifiedEconomists generally...View AnswerShow Answer

The business activities of Firm A confer positive externalities on Firm B,and the business activities of Firm B confer positive externalities on Firm A.If the two firms merged,then

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11.Taking only private value and private cost into account,total surplus at the market equilibrium amounts to

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The government could...
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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Economists generally...
View Answer

Correct Answer
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Correct Answer
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