Question 1

​The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

Accepted Answer

A) ​a corrective tax. 
B) ​a corrective subsidy. 
C) ​a command-and-control policy. 
D) ​the Coase Theorem. 
A) ​a corrective tax. 
B) ​a corrective subsidy. 
C) ​a command-and-control policy. 
D) ​the Coase Theorem.

Question 2

According to the Coase theorem, private parties can solve the problem of externalities if

Accepted Answer

A) the cost of bargaining is small. 
B) the initial distribution of legal rights favors the person being adversely affected by the externality. 
C) the number of parties involved is sufficiently large. 
D) All of the above are correct. 
A) the cost of bargaining is small. 
B) the initial distribution of legal rights favors the person being adversely affected by the externality. 
C) the number of parties involved is sufficiently large. 
D) All of the above are correct.

Question 3

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Accepted Answer

For each college degree, the s

Question 4

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

Accepted Answer

@#IMG-DLM& When a negative externality exists, the

Question 5

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

Accepted Answer

A) ​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel accepts, and both parties are better off. 
B) ​Sophia offers Gabriel between $0 and $10 to not recline his seat. Gabriel accepts, and Sophia is better off. 
C) ​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel declines because he has the right to recline his seat. 
D) ​Gabriel offers Sophia between $10 and $40 to recline his seat. Sophia accepts, and both parties are better off. 
A) ​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel accepts, and both parties are better off. 
B) ​Sophia offers Gabriel between $0 and $10 to not recline his seat. Gabriel accepts, and Sophia is better off. 
C) ​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel declines because he has the right to recline his seat. 
D) ​Gabriel offers Sophia between $10 and $40 to recline his seat. Sophia accepts, and both parties are better off.

Question 6

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3  
-Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the

Accepted Answer

A) profit margin of each concert. 
B) cost of spillover effects from the concert (e.g., noise and traffic). 
C) value of concerts to society as a whole. 
D) amount by which the city should subsidize the concert organizers. 
A) profit margin of each concert. 
B) cost of spillover effects from the concert (e.g., noise and traffic). 
C) value of concerts to society as a whole. 
D) amount by which the city should subsidize the concert organizers.

Question 7

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1thS1S1P0 fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
-Refer to Scenario 10-4. In order to reach the social optimum, should fire extinguishers be taxed or subsidized? What is the appropriate amount of the tax or subsidy on each fire extinguisher?

Accepted Answer

Each fire extinguish

Question 8

When the social cost curve is above a product's supply curve,

Accepted Answer

A) the government has intervened in the market. 
B) a negative externality exists in the market. 
C) a positive externality exists in the market. 
D) the distribution of resources is unfair. 
A) the government has intervened in the market. 
B) a negative externality exists in the market. 
C) a positive externality exists in the market. 
D) the distribution of resources is unfair.

Question 9

Patent protection is one way to deal with technology spillovers.

Accepted Answer

A) True 
 B)False

Question 10

A technology spillover is a type of negative externality.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a necessary condition for the Coase theorem?

Accepted Answer

A) Property rights are clearly defined. 
B) The costs of bargaining are sufficiently low. 
C) The government intervenes to internalize the externality. 
D) There are only a few parties involved. 
A) Property rights are clearly defined. 
B) The costs of bargaining are sufficiently low. 
C) The government intervenes to internalize the externality. 
D) There are only a few parties involved.

Question 12

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Accepted Answer

A) Corrective taxes apply only to goods that are bad for people's health, such as cigarettes and alcohol. 
B) Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders. 
C) Corrective taxes provide incentives for the conservation of natural resources. 
D) Corrective taxes do not affect deadweight loss. 
A) Corrective taxes apply only to goods that are bad for people's health, such as cigarettes and alcohol. 
B) Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders. 
C) Corrective taxes provide incentives for the conservation of natural resources. 
D) Corrective taxes do not affect deadweight loss.

Question 13

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 14

A corrective tax

Accepted Answer

A) can be used to internalize a negative externality. 
B) imposed on sellers shifts the supply curve to the left. 
C) imposed on buyers shifts the demand curve to the left. 
D) All of the above are correct. 
A) can be used to internalize a negative externality. 
B) imposed on sellers shifts the supply curve to the left. 
C) imposed on buyers shifts the demand curve to the left. 
D) All of the above are correct.

Question 15

Which of the following is not a negative externality associated with driving cars?

Accepted Answer

A) congestion 
B) pollution 
C) repairs 
D) accidents 
A) congestion 
B) pollution 
C) repairs 
D) accidents

Question 16

Figure 10-11  
-Refer to Figure 10-11. On the

Accepted Answer

A) 390th unit of output, private value exceeds private cost. 
B) 390th unit of output, private value exceeds external value. 
C) 450th unit of output, private value exceeds social value. 
D) 450th unit of output, private cost exceeds social value. 
A) 390th unit of output, private value exceeds private cost. 
B) 390th unit of output, private value exceeds external value. 
C) 450th unit of output, private value exceeds social value. 
D) 450th unit of output, private cost exceeds social value.

Question 17

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

Accepted Answer

A) private benefit equals the social benefit at the private market solution. 
B) private cost exceeds the private benefit at the private market solution. 
C) social value exceeds the private value at the private market solution. 
D) private cost exceeds the social benefit at the private market solution. 
A) private benefit equals the social benefit at the private market solution. 
B) private cost exceeds the private benefit at the private market solution. 
C) social value exceeds the private value at the private market solution. 
D) private cost exceeds the social benefit at the private market solution.

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

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. 
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.

Question 20

Figure 10-10  
-Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Accepted Answer

A) 120 units 
B) 140 units 
C) 160 units 
D) The statement is true at all quantities of output. 
A) 120 units 
B) 140 units 
C) 160 units 
D) The statement is true at all quantities of output.

Exam 10: Externalities

​The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

According to the Coase theorem, private parties can solve the problem of externalities if

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the

When the social cost curve is above a product's supply curve,

Patent protection is one way to deal with technology spillovers.

A technology spillover is a type of negative externality.

Which of the following is not a necessary condition for the Coase theorem?

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

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

A corrective tax

Which of the following is not a negative externality associated with driving cars?

Figure 10-11 -Refer to Figure 10-11. On the

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

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.

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

Figure 10-10 -Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

The requirement that a minimum volume of ethanol is blended into the U.S. fuel supply is an example of

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500^th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500^th college degree?

Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?