Question 1

In markets with externalities or public goods, private benefits exceed social benefits.

Accepted Answer

A) True 
 B)False

Question 2

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be $M S C = 2 Q + 30$ and the marginal private cost of production to be $M P C = Q$ $+ 30$. The market demand curve can be expressed as $P = 60 - Q$. If the consultants have accurately measured the impact of the pollution externality, the cost of the externality at the market equilibrium (i.e. where the externality is not taken into account in production decisions) is

Accepted Answer

A)  $\$ 0$. 
B)  $\$ 112.5$. 
C)  $\$ 150$. 
D)  $\$ 250$. 
A)  $\$ 0$. 
B)  $\$ 112.5$. 
C)  $\$ 150$. 
D)  $\$ 250$.

Question 3

Suppose that an industry emits a chemical that pollutes the ground water. Without considering the effects of the pollution, the industry has a marginal private cost curve of $M P C = Q + 30$. The market demand curve is $P = 60 - Q$, while the marginal social cost curve is $\mathrm { MSC } = 2 \mathrm { Q } + 30$. How can the optimal level of emissions fee best be depicted on a graph in this problem?

Accepted Answer

A)  The optimal fee shifts down the marginal private cost of production until it intersects demand at the socially optimal output level. 
B)  The optimal fee shifts the demand curve out until it intersects the marginal private cost of production at the socially optimal level of production. 
C)  The optimal fee establishes a maximum level of output at the socially optimal level of production. 
D)  The optimal fee shifts the marginal private cost of production up until it intersects the demand curve at the socially optimal level of production. 
A)  The optimal fee shifts down the marginal private cost of production until it intersects demand at the socially optimal output level. 
B)  The optimal fee shifts the demand curve out until it intersects the marginal private cost of production at the socially optimal level of production. 
C)  The optimal fee establishes a maximum level of output at the socially optimal level of production. 
D)  The optimal fee shifts the marginal private cost of production up until it intersects the demand curve at the socially optimal level of production.

Question 4

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be $\mathrm { MSC } = 2 \mathrm { Q } + 30$ and the marginal private cost of production to be $M P C = Q$ $+ 30$. The market demand curve can be expressed as $P = 60 - Q$. The sum of the consumer surplus plus producer surplus at the market equilibrium (i.e. the equilibrium where production decisions do not take into account the externality) is:

Accepted Answer

A)  $\$ 0$. 
B)  $\$ 112.5$ 
C)  $\$ 150$. 
D)  $\$ 225$ 
A)  $\$ 0$. 
B)  $\$ 112.5$ 
C)  $\$ 150$. 
D)  $\$ 225$

Question 5

Which of the following is not a good example of common property?

Accepted Answer

A) The internet 
B) A hunting ground 
C) A reservoir of oil 
D) A dormitory room 
A) The internet 
B) A hunting ground 
C) A reservoir of oil 
D) A dormitory room

Question 6

Suppose a particular national park imposes a voluntary contribution system for entrants of the park. It is suggested that all entrants pay something and there is an estimate given that $5 per user on average will be sufficient to pay for the expenses of maintaining the park. It is most likely that:

Accepted Answer

A) everybody that enters the park will pay a sufficient amount to make sure that expenses are covered. 
B) nobody who uses the park will contribute anything and the expenses will not be covered. 
C) some users of the park will not pay anything and will act as trespassers. 
D) some users of the park will not pay anything and will act as free riders. 
A) everybody that enters the park will pay a sufficient amount to make sure that expenses are covered. 
B) nobody who uses the park will contribute anything and the expenses will not be covered. 
C) some users of the park will not pay anything and will act as trespassers. 
D) some users of the park will not pay anything and will act as free riders.

Question 7

Which one of the following statements is false?

Accepted Answer

A) A nonrival good is a good where consumption by one person does not reduce the quantity that can be consumed by others. 
B) An exclusive good is a good to which consumers may be denied access. 
C) A good that, once produced is not accessible to all customers, is nonexclusive good. 
D) A rival good is a good where consumption by one person reduces the quantity that can be consumed by others. 
A) A nonrival good is a good where consumption by one person does not reduce the quantity that can be consumed by others. 
B) An exclusive good is a good to which consumers may be denied access. 
C) A good that, once produced is not accessible to all customers, is nonexclusive good. 
D) A rival good is a good where consumption by one person reduces the quantity that can be consumed by others.

Question 8

Efficient provision of a public good occurs when:

Accepted Answer

A) the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve is the sum of all the individual demand curves for the good. 
B) the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve reflects the costs and benefits of producing the good. 
C) each individual votes on the amount that is to be spent on public goods. 
D) the free market is left to determine the social costs and benefits. 
A) the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve is the sum of all the individual demand curves for the good. 
B) the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve reflects the costs and benefits of producing the good. 
C) each individual votes on the amount that is to be spent on public goods. 
D) the free market is left to determine the social costs and benefits.

In markets with externalities or public goods, private benefits exceed social benefits.

Which of the following is not a good example of common property?

Suppose a particular national park imposes a voluntary contribution system for entrants of the park. It is suggested that all entrants pay something and there is an estimate given that $5 per user on average will be sufficient to pay for the expenses of maintaining the park. It is most likely that:

Which one of the following statements is false?

Efficient provision of a public good occurs when:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

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Exam 17: Externalities and Public Goods

In markets with externalities or public goods, private benefits exceed social benefits.

Which of the following is not a good example of common property?

Suppose a particular national park imposes a voluntary contribution system for entrants of the park. It is suggested that all entrants pay something and there is an estimate given that $5 per user on average will be sufficient to pay for the expenses of maintaining the park. It is most likely that:

Which one of the following statements is false?

Efficient provision of a public good occurs when:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Filters