Question 1

The cost of buying or selling in a market, including search, bargaining, and writing contracts, is called the

Accepted Answer

A)  public cost. 
B)  transactions cost. 
C)  private cost. 
D)  remedy cost. 
E)  user cost. 
A)  public cost. 
B)  transactions cost. 
C)  private cost. 
D)  remedy cost. 
E)  user cost. B

Question 2

Suppose a candy producer and doctors at a hospital seek a private remedy to an externality problem. This means the

Accepted Answer

A)  two parties affected will negotiate with each other to internalize the externality. 
B)  candy producer will have to move to another state. 
C)  candy producer will shut down. 
D)  city mayor will decide who internalizes the externality. 
E)  hospital will shut down. 
A)  two parties affected will negotiate with each other to internalize the externality. 
B)  candy producer will have to move to another state. 
C)  candy producer will shut down. 
D)  city mayor will decide who internalizes the externality. 
E)  hospital will shut down. A

Question 3

Externalities have become international in recent years, paralleling the growth of international trade and finance.

Accepted Answer

A) True 
 B)False  True

Question 4

Agencies such as the Environmental Protection Agency widely use

Accepted Answer

A)  assignments of property rights to internalize externalities. 
B)  user fees. 
C)  command and control methods. 
D)  cost-benefit remedies. 
E)  private remedies. 
A)  assignments of property rights to internalize externalities. 
B)  user fees. 
C)  command and control methods. 
D)  cost-benefit remedies. 
E)  private remedies.

Question 5

If government uses taxation to correct for negative externalities, the desired consequence is

Accepted Answer

A)  a decrease in the quality of the good produced. 
B)  an increase in the quantity of the good produced and/or consumed. 
C)  a raise in revenue that can be used to provide subsidies to consumers. 
D)  a decrease in the quantity of the good produced and/or consumed. 
E)  increased revenue. 
A)  a decrease in the quality of the good produced. 
B)  an increase in the quantity of the good produced and/or consumed. 
C)  a raise in revenue that can be used to provide subsidies to consumers. 
D)  a decrease in the quantity of the good produced and/or consumed. 
E)  increased revenue.

Question 6

The median voter theorem states that the politician holding the median view among politicians will get the majority of votes.

Accepted Answer

A) True 
 B)False

Question 7

The fact that people vote even though the benefits seem low compared to the costs is called the voting paradox.

Accepted Answer

A) True 
 B)False

Question 8

Answer the following questions:
(A) Explain why overhunting, which leads to the endangerment of certain species, is an example of the tragedy of the commons.
(B) Would it make sense for the government to pay property owners a fee for allowing an endangered species to reside on their property? Explain.

Accepted Answer

(A) The tragedy of the commons is the id

Question 9

Refer to the figure below. To correct the externality problem, the government could

Accepted Answer

A)  provide a subsidy for the good. 
B)  impose a tax on the good. 
C)  produce the good itself. 
D)  provide more incentives for producers to produce more. 
E)  encourage buyers to buy more of the good. 
A)  provide a subsidy for the good. 
B)  impose a tax on the good. 
C)  produce the good itself. 
D)  provide more incentives for producers to produce more. 
E)  encourage buyers to buy more of the good.

Question 10

A lighthouse

Accepted Answer

A)  can project a light that simultaneously benefits many ships that pass. 
B)  is a service that is always provided by the government. 
C)  provides the feature of rivalry in the consumption of light. 
D)  can easily exclude ships from using its light if the shipowners do not pay. 
E)  can easily charge its users for the services provided. 
A)  can project a light that simultaneously benefits many ships that pass. 
B)  is a service that is always provided by the government. 
C)  provides the feature of rivalry in the consumption of light. 
D)  can easily exclude ships from using its light if the shipowners do not pay. 
E)  can easily charge its users for the services provided.

Question 11

In a case involving Jack's pollution of Jill's airspace, a private remedy would involve a judge ruling in favor of one of the individuals.

Accepted Answer

A) True 
 B)False

Question 12

Explain how research and development may yield external effects.

Accepted Answer

The firm that engages in the research re

Question 13

Suppose that in a certain town, construction of increasing numbers of condominiums results in increased water pollution. Draw a graph showing this externality. How can this externality be remedied?

Accepted Answer

Because of water pollution, the marginal

Question 14

It is hoped that productive efficiency will result from giving citizens vouchers rather than providing services through government agencies.

Accepted Answer

A) True 
 B)False

Question 15

If government associates an external cost with the production of a good or service, it may correct for the misallocation of resources by shifting the

Accepted Answer

A)  supply curve to the right. 
B)  demand curve to the left. 
C)  supply curve to the left. 
D)  demand curve to the right. 
E)  supply and demand curves to the left. 
A)  supply curve to the right. 
B)  demand curve to the left. 
C)  supply curve to the left. 
D)  demand curve to the right. 
E)  supply and demand curves to the left.

Question 16

Emission taxes have an advantage over taxes on production in that

Accepted Answer

A)  emission taxes change the firm's output, whereas taxes on production do not. 
B)  the amount of pollution associated with the firm's production will not change. 
C)  the firm can use technology to change the amount of pollution associated with its production. 
D)  emission taxes do not raise the firm's prices, whereas taxes on production do. 
E)  the firm can increase the amount of pollution associated with a given amount of production. 
A)  emission taxes change the firm's output, whereas taxes on production do not. 
B)  the amount of pollution associated with the firm's production will not change. 
C)  the firm can use technology to change the amount of pollution associated with its production. 
D)  emission taxes do not raise the firm's prices, whereas taxes on production do. 
E)  the firm can increase the amount of pollution associated with a given amount of production.

Question 17

A good or service that is characterized by nonrivalry in consumption and nonexcludability is called a(n)

Accepted Answer

A)  free good. 
B)  economic good. 
C)  public good. 
D)  private good. 
E)  noneconomic good. 
A)  free good. 
B)  economic good. 
C)  public good. 
D)  private good. 
E)  noneconomic good.

Question 18

If output is produced at the level at which the marginal social benefit curve and the supply curve intersect, then

Accepted Answer

A)  the level of output is socially desirable. 
B)  the level of output results in a net social cost. 
C)  the level of output results in a net social benefit. 
D)  producers will incur losses. 
E)  there will be no buyers in the market. 
A)  the level of output is socially desirable. 
B)  the level of output results in a net social cost. 
C)  the level of output results in a net social benefit. 
D)  producers will incur losses. 
E)  there will be no buyers in the market.

Question 19

In order to determine the quantity of a government-provided service that should be produced, one should consider the

Accepted Answer

A)  price minus the average cost of the service. 
B)  marginal cost and benefit of the service. 
C)  total cost and benefit of the service. 
D)  average cost and benefit of the service. 
E)  marginal benefit and average cost of the service. 
A)  price minus the average cost of the service. 
B)  marginal cost and benefit of the service. 
C)  total cost and benefit of the service. 
D)  average cost and benefit of the service. 
E)  marginal benefit and average cost of the service.

Question 20

What is a free-rider problem and how does the government deal with this type of problem?

Accepted Answer

A free-rider problem arises when those w

The cost of buying or selling in a market, including search, bargaining, and writing contracts, is called the

Suppose a candy producer and doctors at a hospital seek a private remedy to an externality problem. This means the

Externalities have become international in recent years, paralleling the growth of international trade and finance.

Agencies such as the Environmental Protection Agency widely use

If government uses taxation to correct for negative externalities, the desired consequence is

The median voter theorem states that the politician holding the median view among politicians will get the majority of votes.

The fact that people vote even though the benefits seem low compared to the costs is called the voting paradox.

Refer to the figure below. To correct the externality problem, the government could

A lighthouse

In a case involving Jack's pollution of Jill's airspace, a private remedy would involve a judge ruling in favor of one of the individuals.

Explain how research and development may yield external effects.

Suppose that in a certain town, construction of increasing numbers of condominiums results in increased water pollution. Draw a graph showing this externality. How can this externality be remedied?

It is hoped that productive efficiency will result from giving citizens vouchers rather than providing services through government agencies.

If government associates an external cost with the production of a good or service, it may correct for the misallocation of resources by shifting the

Emission taxes have an advantage over taxes on production in that

A good or service that is characterized by nonrivalry in consumption and nonexcludability is called a(n)

If output is produced at the level at which the marginal social benefit curve and the supply curve intersect, then

In order to determine the quantity of a government-provided service that should be produced, one should consider the

What is a free-rider problem and how does the government deal with this type of problem?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Exam 15: Public Goods, Externalities, and Government Behavior

The cost of buying or selling in a market, including search, bargaining, and writing contracts, is called the

Suppose a candy producer and doctors at a hospital seek a private remedy to an externality problem. This means the

Externalities have become international in recent years, paralleling the growth of international trade and finance.

Agencies such as the Environmental Protection Agency widely use

If government uses taxation to correct for negative externalities, the desired consequence is

The median voter theorem states that the politician holding the median view among politicians will get the majority of votes.

The fact that people vote even though the benefits seem low compared to the costs is called the voting paradox.

Refer to the figure below. To correct the externality problem, the government could

A lighthouse

In a case involving Jack's pollution of Jill's airspace, a private remedy would involve a judge ruling in favor of one of the individuals.

Explain how research and development may yield external effects.

Suppose that in a certain town, construction of increasing numbers of condominiums results in increased water pollution. Draw a graph showing this externality. How can this externality be remedied?

It is hoped that productive efficiency will result from giving citizens vouchers rather than providing services through government agencies.

If government associates an external cost with the production of a good or service, it may correct for the misallocation of resources by shifting the

Emission taxes have an advantage over taxes on production in that

A good or service that is characterized by nonrivalry in consumption and nonexcludability is called a(n)

If output is produced at the level at which the marginal social benefit curve and the supply curve intersect, then

In order to determine the quantity of a government-provided service that should be produced, one should consider the

What is a free-rider problem and how does the government deal with this type of problem?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters