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Exam 10: Externalities

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Question 191

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The tax on cigarettes is an example of

A) a consumption tax.
B) a corrective tax.
C) an income tax.
D) a command-and-control policy.

E) All of the above
F) B) and C)

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Question 192

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When a market experiences a positive externality,

A) the demand curve does not reflect the value to society of the good.
B) too much of the good is being produced.
C) the government can internalize the externality by imposing a tax on the product.
D) the private value is greater than the social value.

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

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Question 193

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A paper plant produces water pollution during the production process. If the government forces the plant to internalize the negative externality, then the

Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

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

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

One drawback to industrial policy is that

A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x,

Table 10-6 The following table shows the total 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 $46, and for Firm A to eliminate two units of pollution, it would cost a total of $103. -Refer to Table 10-6. If the government charged a fee of $85 per unit of pollution, how many units of pollution would the firms eliminate altogether?

Which of the following helped reduce sulfur dioxide emissions, a leading cause of acid rain?

To economists, good environmental policy begins by acknowledging one of the Ten Principles of Economics:

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 particular tax or subsidy would move the market to the social optimum?

If an externality is present in a market, economic efficiency may be enhanced by

A corrective tax

Suppose the Environmental Protection Agency issues pollution permits in order to limit the quantity of pollution. Under this policy, is the supply of pollution rights perfectly elastic or is it perfectly inelastic?

Figure 10-12 -Refer to Figure 10-12. Which of the following is an appropriate label for Line 1?

When the government reduces my income tax by $0.30 for every $1.00 that I contribute to a charity, the government is effectively

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

The Environmental Protection Agency (EPA) cannot reach a target level of pollution through the use of pollution permits.