Question 1

Subsidies can be used to internalize positive externalities.

Accepted Answer

A) True 
 B)False

Question 2

At the optimum, the marginal social benefit from pollution emissions

Accepted Answer

A)  is zero. 
B)  will be greater than the marginal social cost of pollution emitted. 
C)  will equal the marginal social cost of pollution emitted. 
D)  will be less than the marginal social cost of pollution emitted. 
A)  is zero. 
B)  will be greater than the marginal social cost of pollution emitted. 
C)  will equal the marginal social cost of pollution emitted. 
D)  will be less than the marginal social cost of pollution emitted.

Question 3

An externality is

Accepted Answer

A)  a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. 
B)  the total cost to society of producing an additional unit of a good or service. 
C)  the amount a consumer pays to consume an additional amount of a particular good. 
D)  a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays. 
A)  a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. 
B)  the total cost to society of producing an additional unit of a good or service. 
C)  the amount a consumer pays to consume an additional amount of a particular good. 
D)  a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays.

Question 4

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow.   Figure 16.2
-Refer to Figure 16.2. To force this firm to produce the efficient level of output, the government should impose a tax of

Accepted Answer

A)  $5.00 per car. 
B)  $10.00 per car. 
C)  $15.00 per car. 
D)  an amount that is indeterminate from this information. 
A)  $5.00 per car. 
B)  $10.00 per car. 
C)  $15.00 per car. 
D)  an amount that is indeterminate from this information.

Question 5

Refer to the information in Figure 16.5 below to answer the question(s) that follow.   Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the outcome under the tax, this common standard would result in

Accepted Answer

A)  Alpha gaining more than Beta loses. 
B)  Alpha gaining less than Beta loses. 
C)  Beta gaining more than Alpha loses. 
D)  Beta gaining less than Alpha loses. 
A)  Alpha gaining more than Beta loses. 
B)  Alpha gaining less than Beta loses. 
C)  Beta gaining more than Alpha loses. 
D)  Beta gaining less than Alpha loses.

Question 6

Refer to the information in Figure 16.5 below to answer the question(s) that follow.   Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the situation under the tax, Alpha's emissions would ________ and Beta's emissions would ________.

Accepted Answer

A)  increase by 50 tons; decrease by 50 tons 
B)  decrease by 50 tons; decrease by 50 tons 
C)  increase by 25 tons; decrease by 25 tons 
D)  decrease by 25 tons; increase by 25 tons 
A)  increase by 50 tons; decrease by 50 tons 
B)  decrease by 50 tons; decrease by 50 tons 
C)  increase by 25 tons; decrease by 25 tons 
D)  decrease by 25 tons; increase by 25 tons

Question 7

The many types of pollution do not include ________ pollution.

Accepted Answer

A)  air 
B)  price 
C)  water 
D)  sound 
A)  air 
B)  price 
C)  water 
D)  sound

Question 8

MSC - MC reflects

Accepted Answer

A)  an internal cost. 
B)  an external cost. 
C)  average marginal cost. 
D)  marginal benefit. 
A)  an internal cost. 
B)  an external cost. 
C)  average marginal cost. 
D)  marginal benefit.

Question 9

When it comes to ________ goods, it is important to remember only one level of output can be realized and consumers are ________ for that level.

Accepted Answer

A)  public; only willing to pay the same amount 
B)  public; willing to pay different amounts 
C)  private; only willing to pay the same amount 
D)  private; willing to pay different amounts 
A)  public; only willing to pay the same amount 
B)  public; willing to pay different amounts 
C)  private; only willing to pay the same amount 
D)  private; willing to pay different amounts

Question 10

Common resource is another term for public good.

Accepted Answer

A) True 
 B)False

Question 11

Education is a ________ good that creates a ________ externality.

Accepted Answer

A)  public; positive 
B)  private; positive 
C)  public; negative 
D)  private; negative 
A)  public; positive 
B)  private; positive 
C)  public; negative 
D)  private; negative

Question 12

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?

Accepted Answer

A)  $48 
B)  $80 
C)  $86 
D)  $162 
A)  $48 
B)  $80 
C)  $86 
D)  $162

Question 13

The marginal cost of producing 25 units of a public good is $100. There are two individuals in the society. Person A is willing to pay $40 for 25 units of the public good. If 25 units of the public good are provided, then Person B must be willing to pay

Accepted Answer

A)  $0. 
B)  $40. 
C)  $60. 
D)  $75. 
A)  $0. 
B)  $40. 
C)  $60. 
D)  $75.

Question 14

The optimal level of provision of public goods is where societyʹs total willingness to pay per unit is equal to the

Accepted Answer

A)  total cost of producing the good. 
B)  average cost of producing the good. 
C)  variable cost of producing the good. 
D)  marginal cost of producing the good. 
A)  total cost of producing the good. 
B)  average cost of producing the good. 
C)  variable cost of producing the good. 
D)  marginal cost of producing the good.

Question 15

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.   Figure 16.1
-Refer to Figure 16.1. What is the total damage imposed as a result of producing the market (unregulated) level of fertilizer?

Accepted Answer

A)  $250 
B)  $300 
C)  $500 
D)  $600 
A)  $250 
B)  $300 
C)  $500 
D)  $600

Question 16

Acid rain is an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 17

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.   Figure 16.1
-Refer to Figure 16.1. The ________ imposed as a result of producing the market (unregulated) level of fertilizer is $300.

Accepted Answer

A)  marginal social cost 
B)  total damage 
C)  marginal private cost 
D)  tax 
A)  marginal social cost 
B)  total damage 
C)  marginal private cost 
D)  tax

Question 18

An example of a common resource is

Accepted Answer

A)  college education. 
B)  a private beach. 
C)  airline travel. 
D)  a public parking lot. 
A)  college education. 
B)  a private beach. 
C)  airline travel. 
D)  a public parking lot.

Question 19

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow.   Figure 16.2
-Refer to Figure 16.2. The ________ imposed as a result of producing the market (unregulated) level of cars is $350.

Accepted Answer

A)  marginal social cost 
B)  total damage 
C)  marginal private cost 
D)  marginal social benefit 
A)  marginal social cost 
B)  total damage 
C)  marginal private cost 
D)  marginal social benefit

Question 20

Public goods represent a market failure because

Accepted Answer

A)  they are provided by firms with market power. 
B)  positive externalities are created through their production. 
C)  by their very nature they are nonexcludable and nonrival, which makes it difficult for the private sector to supply them profitably. 
D)  there is incomplete information regarding their quality. 
A)  they are provided by firms with market power. 
B)  positive externalities are created through their production. 
C)  by their very nature they are nonexcludable and nonrival, which makes it difficult for the private sector to supply them profitably. 
D)  there is incomplete information regarding their quality.

Subsidies can be used to internalize positive externalities.

At the optimum, the marginal social benefit from pollution emissions

An externality is

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. To force this firm to produce the efficient level of output, the government should impose a tax of

The many types of pollution do not include ________ pollution.

MSC - MC reflects

When it comes to goods, it is important to remember only one level of output can be realized and consumers are for that level.

Common resource is another term for public good.

Education is a good that creates a externality.

The marginal cost of producing 25 units of a public good is $100. There are two individuals in the society. Person A is willing to pay $40 for 25 units of the public good. If 25 units of the public good are provided, then Person B must be willing to pay

The optimal level of provision of public goods is where societyʹs total willingness to pay per unit is equal to the

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. What is the total damage imposed as a result of producing the market (unregulated) level of fertilizer?

Acid rain is an example of a negative externality.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ imposed as a result of producing the market (unregulated) level of fertilizer is $300.

An example of a common resource is

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. The ________ imposed as a result of producing the market (unregulated) level of cars is $350.

Public goods represent a market failure because

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 16: Externalities, Public Goods, and Common Resources

Subsidies can be used to internalize positive externalities.

At the optimum, the marginal social benefit from pollution emissions

An externality is

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. To force this firm to produce the efficient level of output, the government should impose a tax of

The many types of pollution do not include ________ pollution.

MSC - MC reflects

When it comes to ________ goods, it is important to remember only one level of output can be realized and consumers are ________ for that level.

Common resource is another term for public good.

Education is a ________ good that creates a ________ externality.

The marginal cost of producing 25 units of a public good is $100. There are two individuals in the society. Person A is willing to pay $40 for 25 units of the public good. If 25 units of the public good are provided, then Person B must be willing to pay

The optimal level of provision of public goods is where societyʹs total willingness to pay per unit is equal to the

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. What is the total damage imposed as a result of producing the market (unregulated) level of fertilizer?

Acid rain is an example of a negative externality.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ imposed as a result of producing the market (unregulated) level of fertilizer is $300.

An example of a common resource is

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. The ________ imposed as a result of producing the market (unregulated) level of cars is $350.

Public goods represent a market failure because

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

When it comes to goods, it is important to remember only one level of output can be realized and consumers are for that level.

Education is a good that creates a externality.