Question 1

When the government aids the solar power industry by issuing a corrective subsidy, it is effectively:

Accepted Answer

A)  raising revenue for the government. 
B)  reducing the cost of the solar power. 
C)  decreasing quantity demanded. 
D)  reducing competition in the market. 
A)  raising revenue for the government. 
B)  reducing the cost of the solar power. 
C)  decreasing quantity demanded. 
D)  reducing competition in the market.

Question 2

Firm XYZ produces paper products, which cost the company $100,000. However, the production of the paper results in air pollution. The cost of this negative externality is $6,000.What is the marginal social benefit (MSB) at the social equilibrium, which reflects higher social costs?

Accepted Answer

A)  $106,000 
B)  $6,000 
C)  $94,000 
D)  $100,000 
A)  $106,000 
B)  $6,000 
C)  $94,000 
D)  $100,000

Question 3

Which of the following is a public good?

Accepted Answer

A)  hamburger 
B)  cell phone 
C)  fireworks display 
D)  car 
A)  hamburger 
B)  cell phone 
C)  fireworks display 
D)  car

Question 4

_____ goods are nonrival in consumption and excludable.

Accepted Answer

A)  Private 
B)  Public 
C)  Nonrival private 
D)  Nonrival public 
A)  Private 
B)  Public 
C)  Nonrival private 
D)  Nonrival public

Question 5

_____ benefits are marginal benefits plus external benefits.

Accepted Answer

A)  Marginal social 
B)  Marginal private 
C)  Social equilibrium 
D)  Marginal social equilibrium 
A)  Marginal social 
B)  Marginal private 
C)  Social equilibrium 
D)  Marginal social equilibrium

Question 6

The Coase theorem suggests that negative externalities occur, in part, because of a lack of clearly defined:

Accepted Answer

A)  government regulations. 
B)  corrective taxes. 
C)  transaction costs. 
D)  property rights. 
A)  government regulations. 
B)  corrective taxes. 
C)  transaction costs. 
D)  property rights.

Question 7

When too much of a common resource good is consumed, the marginal _____ of the good is less than the marginal:

Accepted Answer

A)  private cost; social cost. 
B)  private benefit; private cost. 
C)  social benefit; social cost. 
D)  social cost; social benefit. 
A)  private cost; social cost. 
B)  private benefit; private cost. 
C)  social benefit; social cost. 
D)  social cost; social benefit.

Question 8

Why might private markets be unwilling to provide public goods?

Accepted Answer

With public goods, individuals cannot be

Question 9

Firm XYZ produces paper products, which sells for $100,000. However, the production of the paper results in air pollution. The cost of this negative externality is $6,000. What is the marginal private benefit (MPB) if this externality is ignored?

Accepted Answer

A)  $106,000 
B)  $6,000 
C)  $94,000 
D)  $100,000 
A)  $106,000 
B)  $6,000 
C)  $94,000 
D)  $100,000

Question 10

Ronald Coase claimed that when many people are affected by negative externalities, it becomes difficult to negotiate a mutually beneficial outcome due to:

Accepted Answer

A)  government regulations. 
B)  corrective taxes. 
C)  transaction costs. 
D)  subsidies. 
A)  government regulations. 
B)  corrective taxes. 
C)  transaction costs. 
D)  subsidies.

Question 11

(Figure: Common Resource Goods) In this figure, _____ equilibrium is not achieved because _____ equilibrium is greater than the optimum quantity.

Accepted Answer

A)  social; social 
B)  social; private 
C)  private; social 
D)  private; private 
A)  social; social 
B)  social; private 
C)  private; social 
D)  private; private

Question 12

(Figure: Externalities A) In this figure, which two points include a positive externality?

Accepted Answer

A)  A and B 
B)  C and D 
C)  A and C 
D)  B and D 
A)  A and B 
B)  C and D 
C)  A and C 
D)  B and D

Question 13

_____ goods are those where it is impossible to exclude nonpayers.

Accepted Answer

A)  Private 
B)  Nonprivate 
C)  Nonexcludable 
D)  Rival 
A)  Private 
B)  Nonprivate 
C)  Nonexcludable 
D)  Rival

Question 14

The worst effects of climate change will occur in the future; therefore, the:

Accepted Answer

A)  free-rider problem is a large concern. 
B)  free-rider problem is not an issue. 
C)  cost of climate change is easily determined. 
D)  cost of climate change is not an issue. 
A)  free-rider problem is a large concern. 
B)  free-rider problem is not an issue. 
C)  cost of climate change is easily determined. 
D)  cost of climate change is not an issue.

Question 15

An example of a negative externality is:

Accepted Answer

A)  vaccinations. 
B)  education. 
C)  clothing donations to a charity. 
D)  noise pollution from jet engines. 
A)  vaccinations. 
B)  education. 
C)  clothing donations to a charity. 
D)  noise pollution from jet engines.

Question 16

The individual consumer gain received from buying an additional good is called:

Accepted Answer

A)  marginal social benefits. 
B)  marginal private benefits. 
C)  social equilibrium. 
D)  marginal social equilibrium. 
A)  marginal social benefits. 
B)  marginal private benefits. 
C)  social equilibrium. 
D)  marginal social equilibrium.

Question 17

(Figure: Externality Table A) The table shows the information for a public good being provided to two citizens. Based on the table, what is the equilibrium quantity?
 $\begin{array}{|r|r|r|r|}
\hline \text { Q } & \text { Ann's MPB } & \text { Ben's MPB } & \text { MSC } \
\hline 1 & \$ 10 & \$ 12 & 6 \
\hline 2 & 8 & 9 & 9 \
\hline 3 & 6 & 6 & 12 \
\hline 4 & 4 & 3 & 15 \
\hline 5 & 2 & 0 & 18 \
\hline 6 & 0 & 0 & 21 \
\hline 7 & 0 & 0 & 24\
\hline
\end{array}$

Accepted Answer

A)  1 
B)  3 
C)  5 
D)  7 
A)  1 
B)  3 
C)  5 
D)  7

Question 18

(Figure: Externalities 0) In this figure, which point represents the equilibrium that is likely to occur absent government intervention?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 19

_____ costs are costs from society's perspective.

Accepted Answer

A)  Marginal social 
B)  Marginal private 
C)  Government regulations 
D)  Pollution control 
A)  Marginal social 
B)  Marginal private 
C)  Government regulations 
D)  Pollution control

Question 20

Economic efficiency occurs when:

Accepted Answer

A)  marginal social benefits equal social benefits. 
B)  marginal private benefits equal private benefits. 
C)  marginal social costs equal marginal social benefits 
D)  marginal social benefits equal marginal private benefits. 
A)  marginal social benefits equal social benefits. 
B)  marginal private benefits equal private benefits. 
C)  marginal social costs equal marginal social benefits 
D)  marginal social benefits equal marginal private benefits.

Exam 8: Externalities, the Environment, and Public Goods

When the government aids the solar power industry by issuing a corrective subsidy, it is effectively:

Firm XYZ produces paper products, which cost the company $100,000. However, the production of the paper results in air pollution. The cost of this negative externality is $6,000.What is the marginal social benefit (MSB) at the social equilibrium, which reflects higher social costs?

Which of the following is a public good?

_____ goods are nonrival in consumption and excludable.

_____ benefits are marginal benefits plus external benefits.

The Coase theorem suggests that negative externalities occur, in part, because of a lack of clearly defined:

When too much of a common resource good is consumed, the marginal _____ of the good is less than the marginal:

Why might private markets be unwilling to provide public goods?

Firm XYZ produces paper products, which sells for $100,000. However, the production of the paper results in air pollution. The cost of this negative externality is $6,000. What is the marginal private benefit (MPB) if this externality is ignored?

Ronald Coase claimed that when many people are affected by negative externalities, it becomes difficult to negotiate a mutually beneficial outcome due to:

(Figure: Common Resource Goods) In this figure, _____ equilibrium is not achieved because _____ equilibrium is greater than the optimum quantity.

(Figure: Externalities A) In this figure, which two points include a positive externality?

_____ goods are those where it is impossible to exclude nonpayers.

The worst effects of climate change will occur in the future; therefore, the:

An example of a negative externality is:

The individual consumer gain received from buying an additional good is called:

(Figure: Externality Table A) The table shows the information for a public good being provided to two citizens. Based on the table, what is the equilibrium quantity? Q Ann's MPB Ben's MPB MSC 1 \ 10 \ 12 6 2 8 9 9 3 6 6 12 4 4 3 15 5 2 0 18 6 0 0 21 7 0 0 24

(Figure: Externalities 0) In this figure, which point represents the equilibrium that is likely to occur absent government intervention?

_____ costs are costs from society's perspective.

Economic efficiency occurs when:

The Basics of Economics

Why We Trade

The Supply and Demand Model

Elasticity

Consumer Choice

The Economic Efficiency of Markets

Taxation: An Economic Analysis

Organizing a Business

Stocks and Bonds

The Cost of Doing Business

Perfect Competition

Monopoly and Antitrust Laws

Monopolistic Competition and Price Discrimination

Oligopoly

Behavioral Economics and Strategy

Labor and Other Resources

The Distribution of Income

Information and Health Economics

GDP and the Price Level

Unemployment and the Business Cycle

Long Run Economic Growth

Saving, Investment, and the Federal Budget Deficit

The Monetary System

Money and the Price Level in the Long Run

Aggregate Supply and Aggregate Demand

Monetary Policy and Interest Rates

Fiscal Policy and the Business Cycle

The Aggregate Expenditure Model

Inflation Expectations and Stabilization Policies

International Trade

Foreign Exchange Markets

International Finance

Filters

(Figure: Common Resource Goods) In this figure, _ equilibrium is not achieved because _ equilibrium is greater than the optimum quantity.