Question 1

Many goods provided by the government, such as education, are _____ and are accordingly nonexcludable and nonrival in consumption.

Accepted Answer

A) private goods 
B) club goods 
C) public goods 
D) common resources 
A) private goods 
B) club goods 
C) public goods 
D) common resources

Question 2

A corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the _____ cost.

Accepted Answer

A) marginal social 
B) marginal external 
C) total externality 
D) total social 
A) marginal social 
B) marginal external 
C) total externality 
D) total social

Question 3

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if a tax is imposed on sellers, the equilibrium price will _____, and the equilibrium quantity will _____.

Accepted Answer

A) increase; decrease 
B) remain the same; increase 
C) remain the same; decrease 
D) increase; increase 
A) increase; decrease 
B) remain the same; increase 
C) remain the same; decrease 
D) increase; increase

Question 4

The BEST example of a public good is:

Accepted Answer

A) a fireworks display organized by a municipality. 
B) clothing from American Eagle. 
C) lunch at Subway. 
D) a country club membership. 
A) a fireworks display organized by a municipality. 
B) clothing from American Eagle. 
C) lunch at Subway. 
D) a country club membership.

Question 5

The marginal social benefit of flu shots falls as the quantity of shots given:

Accepted Answer

A) remains constant. 
B) falls. 
C) rises. 
D) rises but subsequently falls. 
A) remains constant. 
B) falls. 
C) rises. 
D) rises but subsequently falls.

Question 6

A corrective subsidy:

Accepted Answer

A) removes choice by requiring production to change for goods with externalities. 
B) provides more alternatives so that satisfaction rises with few units sold. 
C) incentivizes a reduction in the output when negative externalities exist. 
D) incentivizes an increase in the output when positive externalities exist. 
A) removes choice by requiring production to change for goods with externalities. 
B) provides more alternatives so that satisfaction rises with few units sold. 
C) incentivizes a reduction in the output when negative externalities exist. 
D) incentivizes an increase in the output when positive externalities exist.

Question 7

When your actions affect bystanders, then your _____ is in conflict with _____.

Accepted Answer

A) private interest; society's interest 
B) external cost; society's marginal cost 
C) externality; society's externality 
D) interest in society; society's interest in that person 
A) private interest; society's interest 
B) external cost; society's marginal cost 
C) externality; society's externality 
D) interest in society; society's interest in that person

Question 8

If the city government of Chicago decides to limit the total amount of municipal sewage that can be discharged into Lake Michigan by selling the rights to the total discharge level, then the government's environmental policy includes:

Accepted Answer

A) emissions taxes. 
B) corrective subsidies. 
C) cap and trade. 
D) command and control. 
A) emissions taxes. 
B) corrective subsidies. 
C) cap and trade. 
D) command and control.

Question 9

(Figure: Market 3) Use the graph to answer the question.
The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

Accepted Answer

A) 2 
B) 4 
C) 8 
D) 12 
A) 2 
B) 4 
C) 8 
D) 12

Question 10

(Figure: MSB and Demand Curves 2) Use the graph to answer the question.
The graph shows the marginal social benefit and demand curves in the dog food market. What is the marginal private benefit when four bags of dog food are bought?

Accepted Answer

A) $4 
B) $8 
C) $12 
D) $20 
A) $4 
B) $8 
C) $12 
D) $20

Question 11

When the lawn care services market is characterized by positive externalities:

Accepted Answer

A) too many lawn care services are produced. 
B) too few lawn care services are produced. 
C) output is too high, and price is too low. 
D) output is too low, and price is too high. 
A) too many lawn care services are produced. 
B) too few lawn care services are produced. 
C) output is too high, and price is too low. 
D) output is too low, and price is too high.

Question 12

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external costs, a tax imposed on sellers will:

Accepted Answer

A) decrease the equilibrium quantity. 
B) increase the equilibrium quantity. 
C) have no effect on the equilibrium price. 
D) decrease the equilibrium price. 
A) decrease the equilibrium quantity. 
B) increase the equilibrium quantity. 
C) have no effect on the equilibrium price. 
D) decrease the equilibrium price.

Question 13

Ollie considers the benefits and costs of buying a large motorcycle versus a bicycle or a car. He buys the motorcycle. What externalities might be associated with Ollie's use of his motorcycle that he might not have considered when he assessed the benefits and costs of buying a large motorcycle?

Accepted Answer

The answer of Ollie considers the benefits and costs of...

Question 14

(Figure: Market) Use the graph to answer the question.
The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. What are the socially optimal quantity and price in this market?

Accepted Answer

A) 6; $6 
B) 8; $4 
C) 6; $10 
D) 4; $8 
A) 6; $6 
B) 8; $4 
C) 6; $10 
D) 4; $8

Question 15

Which example BEST fits the characteristics of a private good?

Accepted Answer

A) a seminar discussing developments in the study of economics 
B) a book purchased from Barnes and Noble 
C) fire service in a small town 
D) vaccinations administered in elementary schools 
A) a seminar discussing developments in the study of economics 
B) a book purchased from Barnes and Noble 
C) fire service in a small town 
D) vaccinations administered in elementary schools

Question 16

An externality is said to exist when:

Accepted Answer

A) the side effect of an activity affects bystanders whose interests aren't taken into account. 
B) the side effect of an activity affects bystanders , and the market provides incentives to take these affects into account. 
C) individual actions are affected by external forces like the loss of U.S. jobs because of competition from abroad. 
D) individual actions are affected by government policies (such as taxes) that are externally imposed on the market. 
A) the side effect of an activity affects bystanders whose interests aren't taken into account. 
B) the side effect of an activity affects bystanders , and the market provides incentives to take these affects into account. 
C) individual actions are affected by external forces like the loss of U.S. jobs because of competition from abroad. 
D) individual actions are affected by government policies (such as taxes) that are externally imposed on the market.

Question 17

Pollution may be the best example of a negative externality. A negative externality is:

Accepted Answer

A) any cost in excess of economic cost. 
B) equal to the social cost plus the firm's private cost. 
C) an activity whose side effects harm bystanders. 
D) equal to the opportunity cost minus the social costs. 
A) any cost in excess of economic cost. 
B) equal to the social cost plus the firm's private cost. 
C) an activity whose side effects harm bystanders. 
D) equal to the opportunity cost minus the social costs.

Question 18

How can the tragedy of the commons be averted?

Accepted Answer

A) The government can assess corrective taxes. 
B) Ownership rights can be assigned. 
C) The parties involved can engage in public bargaining. 
D) The government can implement a cap and trade policy. 
A) The government can assess corrective taxes. 
B) Ownership rights can be assigned. 
C) The parties involved can engage in public bargaining. 
D) The government can implement a cap and trade policy.

Question 19

The free-rider problem results from:

Accepted Answer

A) the inability to prevent individuals who do not pay for a good from consuming it. 
B) average cost pricing. 
C) monopoly pricing. 
D) the horizontal summing of supply curves. 
A) the inability to prevent individuals who do not pay for a good from consuming it. 
B) average cost pricing. 
C) monopoly pricing. 
D) the horizontal summing of supply curves.

Question 20

(Figure: MSC and MPC Curves) Use the graph to answer the question.
The graph shows marginal social cost and marginal private cost curves. What is the marginal external cost?

Accepted Answer

A) $2 
B) $4 
C) $6 
D) $12 
A) $2 
B) $4 
C) $6 
D) $12

Exam 10: Externalities and Public Goods

Many goods provided by the government, such as education, are _____ and are accordingly nonexcludable and nonrival in consumption.

A corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the _____ cost.

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if a tax is imposed on sellers, the equilibrium price will _____, and the equilibrium quantity will _____.

The BEST example of a public good is:

The marginal social benefit of flu shots falls as the quantity of shots given:

A corrective subsidy:

When your actions affect bystanders, then your _____ is in conflict with _____.

If the city government of Chicago decides to limit the total amount of municipal sewage that can be discharged into Lake Michigan by selling the rights to the total discharge level, then the government's environmental policy includes:

(Figure: Market 3) Use the graph to answer the question. The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

(Figure: MSB and Demand Curves 2) Use the graph to answer the question. The graph shows the marginal social benefit and demand curves in the dog food market. What is the marginal private benefit when four bags of dog food are bought?

When the lawn care services market is characterized by positive externalities:

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external costs, a tax imposed on sellers will:

Ollie considers the benefits and costs of buying a large motorcycle versus a bicycle or a car. He buys the motorcycle. What externalities might be associated with Ollie's use of his motorcycle that he might not have considered when he assessed the benefits and costs of buying a large motorcycle?

(Figure: Market) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. What are the socially optimal quantity and price in this market?

Which example BEST fits the characteristics of a private good?

An externality is said to exist when:

Pollution may be the best example of a negative externality. A negative externality is:

How can the tragedy of the commons be averted?

The free-rider problem results from:

(Figure: MSC and MPC Curves) Use the graph to answer the question. The graph shows marginal social cost and marginal private cost curves. What is the marginal external cost?

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

Elasticity: Measuring Responsiveness

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if a tax is imposed on sellers, the equilibrium price will _, and the equilibrium quantity will _.

When your actions affect bystanders, then your _ is in conflict with _.