Question 1

Which of the following goods is more likely to be excludable?

Accepted Answer

A) a chocolate bar 
B) a concert at Times Square 
C) national defense 
D) ocean breeze 
A) a chocolate bar 
B) a concert at Times Square 
C) national defense 
D) ocean breeze

Question 2

The Commons Problem arises because

Accepted Answer

A) firms don't maximize profits. 
B) social and private incentives are not aligned and property rights are missing. 
C) social cost equals private cost and property rights are missing. 
D) social benefit equals private benefit and property rights are missing. 
A) firms don't maximize profits. 
B) social and private incentives are not aligned and property rights are missing. 
C) social cost equals private cost and property rights are missing. 
D) social benefit equals private benefit and property rights are missing.

Question 3

Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use.

Accepted Answer

The shepherd allows his sheep to graze i

Question 4

-Suppose that the market for steel is shown in the above figure. What specific tax would result in a competitive market producing the socially optimal quantity of steel?

Accepted Answer

The social optimum occurs when

Question 5

The exclusive privilege to use an asset is called a(n)

Accepted Answer

A) property right. 
B) exclusive use agreement. 
C) property privilege. 
D) right to work privilege. 
A) property right. 
B) exclusive use agreement. 
C) property privilege. 
D) right to work privilege.

Question 6

-The above figure shows the payoff matrix for two firms. A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake. A private beach on the lake must decide whether to operate or not. Increased pollution reduces the number of people who wish to visit the beach. If the beach owner also owns the lake, and the chemical firm must pay $10 per ton to pollute, then

Accepted Answer

A) the beach shuts down and the chemical firm produces 1 ton of pollution. 
B) the beach shuts down and the chemical firm produces 2 tons of pollution. 
C) the beach operates and the chemical firm produces 1 ton of pollution. 
D) the beach operates and the chemical firm produces 2 tons of pollution. 
A) the beach shuts down and the chemical firm produces 1 ton of pollution. 
B) the beach shuts down and the chemical firm produces 2 tons of pollution. 
C) the beach operates and the chemical firm produces 1 ton of pollution. 
D) the beach operates and the chemical firm produces 2 tons of pollution.

Question 7

Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MCp = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MCe = Q. What specific tax would result in a competitive market producing the socially optimal quantity of paper?

Accepted Answer

The socially optimal quantity of paper i

Question 8

Which of the following is NOT a club good?

Accepted Answer

A) cable television 
B) a rock concert 
C) a country club 
D) a baseball bat 
A) cable television 
B) a rock concert 
C) a country club 
D) a baseball bat

Question 9

-The above figure shows the market for steel ingots. At the social optimum level of output, the social producer surplus is

Accepted Answer

A) $1,875. 
B) $1,575. 
C) $2,500. 
D) $3,000. 
A) $1,875. 
B) $1,575. 
C) $2,500. 
D) $3,000.

Question 10

Which of the following statements about private and social costs is TRUE?

Accepted Answer

A) Social costs include externalities. 
B) Private cost do not include externalities. 
C) Social costs are never smaller than private costs. 
D) All of the above. 
A) Social costs include externalities. 
B) Private cost do not include externalities. 
C) Social costs are never smaller than private costs. 
D) All of the above.

Question 11

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

Accepted Answer

A) private good. 
B) public good. 
C) Giffen good. 
D) Coase good. 
A) private good. 
B) public good. 
C) Giffen good. 
D) Coase good.

Question 12

Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al

Accepted Answer

A) will achieve the socially optimal quantity of trash. 
B) will result in zero trash being dumped in the park. 
C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly. 
D) is unfair. 
A) will achieve the socially optimal quantity of trash. 
B) will result in zero trash being dumped in the park. 
C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly. 
D) is unfair.

Question 13

In a market with positive externalities,

Accepted Answer

A) the efficient level of production is less than what competition will obtain. 
B) the efficient level of production is equal to what competition will obtain. 
C) the efficient level of production is more than what competition will obtain. 
D) there cannot be an efficient level of production. 
A) the efficient level of production is less than what competition will obtain. 
B) the efficient level of production is equal to what competition will obtain. 
C) the efficient level of production is more than what competition will obtain. 
D) there cannot be an efficient level of production.

Question 14

Markets tend to produce too little of an excludable public good because

Accepted Answer

A) transaction costs are high. 
B) of the lack of rivalry. 
C) these goods are depletable. 
D) All of the above. 
A) transaction costs are high. 
B) of the lack of rivalry. 
C) these goods are depletable. 
D) All of the above.

Question 15

Suppose 10 citizens each derive marginal benefit from traffic lights according to the function MB = 10 - Q. If traffic lights cost $10 each to produce, what is the efficient quantity of traffic lights?

Accepted Answer

A) 9 traffic lights 
B) 12 traffic lights 
C) 8 traffic lights 
D) 1 traffic light 
A) 9 traffic lights 
B) 12 traffic lights 
C) 8 traffic lights 
D) 1 traffic light

Question 16

-The above figure shows the market for steel ingots. The socially optimal quantity of steel is

Accepted Answer

A) 0 units. 
B) 50 units. 
C) 100 units. 
D) the amount produced if the market were competitive. 
A) 0 units. 
B) 50 units. 
C) 100 units. 
D) the amount produced if the market were competitive.

Question 17

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output, and the marginal cost to the firm's neighbor. The marginal cost of production is zero for the firm. If there is just one neighbor who owns the river, how much pollution is likely to occur?

Accepted Answer

A) 0 units 
B) 500 units 
C) 1000 units 
D) more than 1000 units. 
A) 0 units 
B) 500 units 
C) 1000 units 
D) more than 1000 units.

Question 18

Because a monopoly ignores external costs, it is possible that it will

Accepted Answer

A) produce the socially optimal quantity of a good. 
B) produce more than the socially optimal quantity of a good. 
C) produce less than the socially optimal quantity of a good. 
D) All of the above. 
A) produce the socially optimal quantity of a good. 
B) produce more than the socially optimal quantity of a good. 
C) produce less than the socially optimal quantity of a good. 
D) All of the above.

Question 19

Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MCp = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MCe = Q. What specific tax would result in a competitive market producing the socially optimal quantity of paper?

Accepted Answer

The socially optimal quantity of paper i

Question 20

A tax on a previously untaxed monopoly-produced good will necessarily lower total welfare if

Accepted Answer

A) the demand curve is relatively inelastic. 
B) the demand curve is relatively elastic. 
C) less than the socially optimum is produced before the tax. 
D) more than the socially optimum is produced before the tax. 
A) the demand curve is relatively inelastic. 
B) the demand curve is relatively elastic. 
C) less than the socially optimum is produced before the tax. 
D) more than the socially optimum is produced before the tax.

Which of the following goods is more likely to be excludable?

The Commons Problem arises because

Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use.

-Suppose that the market for steel is shown in the above figure. What specific tax would result in a competitive market producing the socially optimal quantity of steel?

The exclusive privilege to use an asset is called a(n)

Which of the following is NOT a club good?

-The above figure shows the market for steel ingots. At the social optimum level of output, the social producer surplus is

Which of the following statements about private and social costs is TRUE?

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al

In a market with positive externalities,

Markets tend to produce too little of an excludable public good because

Suppose 10 citizens each derive marginal benefit from traffic lights according to the function MB = 10 - Q. If traffic lights cost $10 each to produce, what is the efficient quantity of traffic lights?

-The above figure shows the market for steel ingots. The socially optimal quantity of steel is

Because a monopoly ignores external costs, it is possible that it will

A tax on a previously untaxed monopoly-produced good will necessarily lower total welfare if

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 18: Externalities, Open-Access, and Public Goods

Which of the following goods is more likely to be excludable?

The Commons Problem arises because

Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use.

-Suppose that the market for steel is shown in the above figure. What specific tax would result in a competitive market producing the socially optimal quantity of steel?

The exclusive privilege to use an asset is called a(n)

Which of the following is NOT a club good?

-The above figure shows the market for steel ingots. At the social optimum level of output, the social producer surplus is

Which of the following statements about private and social costs is TRUE?

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al

In a market with positive externalities,

Markets tend to produce too little of an excludable public good because

Suppose 10 citizens each derive marginal benefit from traffic lights according to the function MB = 10 - Q. If traffic lights cost $10 each to produce, what is the efficient quantity of traffic lights?

-The above figure shows the market for steel ingots. The socially optimal quantity of steel is

Because a monopoly ignores external costs, it is possible that it will

A tax on a previously untaxed monopoly-produced good will necessarily lower total welfare if

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Asymmetric Information

Contracts and Moral Hazards

Filters