Exam 10: Externalities and Public Goods

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(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:

(Multiple Choice)

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Question 101

A market with negative externalities will tend to _____ compared to a market producing the socially optimal output.

(Multiple Choice)

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Question 102

(Figure: Market 3) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _ per unit will move the cinnamon roll market to the socially optimal output of _ units.

(Multiple Choice)

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Question 103

Describe the three-step recipe for analyzing externalities based on the Rational Rule for Society.

(Essay)

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Question 104

With a system of cap and trade, one of the main problems is determining the _, while with emissions taxes, the main problem is determining the _.

(Multiple Choice)

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Question 105

An externality is defined as:

(Multiple Choice)

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Question 106

The Coase theorem states that the externality problem can be solved by private bargaining:

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Question 107

(Figure: Market 4) Use the graph to answer the question. The graph shows the marginal social benefit, demand, and supply curves in the toothbrush market. Market forces would yield a quantity of _, whereas the socially optimal quantity is _.

(Multiple Choice)

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Question 108

Which of the following goods would be nonrival?

(Multiple Choice)

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Question 109

In a market system, public goods would:

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Question 110

Each year, around Christmas, you decorate your home so elaborately that news crews come to film stories about your Christmas spirit. As a result, hundreds of people from all over the city drive by your house to see the "Christmas" home, creating noise and congestion that is a nuisance to your neighbors. As they have a right to not be bothered, you agree to pay your neighbors a modest sum to compensate them for the disturbance. This illustrates:

(Multiple Choice)

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Question 111

Which of the following is a positive externality?

(Multiple Choice)

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Question 112

A nonexcludable good is a good in which:

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Question 113

The socially optimal quantity of pollution emissions occurs where:

(Multiple Choice)

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Question 114

(Figure: MSC and Supply Curves) Use the graph to answer the question. The graph shows the marginal social cost and supply curves in the market for shampoo. When four units are produced, the marginal external cost is:

(Multiple Choice)

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Question 115

The BEST example of a private good is:

(Multiple Choice)

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Question 116

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

(Multiple Choice)

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Question 117

A corrective tax leads:

(Multiple Choice)

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Question 118

A cost imposed on bystanders is _____ cost.

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Question 119

Explain why positive and negative externalities lead to market failure.

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Question 120

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Exam 10: Externalities and Public Goods

(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 market with negative externalities will tend to _____ compared to a market producing the socially optimal output.

(Figure: Market 3) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

Describe the three-step recipe for analyzing externalities based on the Rational Rule for Society.

With a system of cap and trade, one of the main problems is determining the _____, while with emissions taxes, the main problem is determining the _____.

An externality is defined as:

The Coase theorem states that the externality problem can be solved by private bargaining:

(Figure: Market 4) Use the graph to answer the question. The graph shows the marginal social benefit, demand, and supply curves in the toothbrush market. Market forces would yield a quantity of _____, whereas the socially optimal quantity is _____.

Which of the following goods would be nonrival?

In a market system, public goods would:

Which of the following is a positive externality?

A nonexcludable good is a good in which:

The socially optimal quantity of pollution emissions occurs where:

(Figure: MSC and Supply Curves) Use the graph to answer the question. The graph shows the marginal social cost and supply curves in the market for shampoo. When four units are produced, the marginal external cost is:

The BEST example of a private good is:

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

A corrective tax leads:

A cost imposed on bystanders is _____ cost.

Explain why positive and negative externalities lead to market failure.

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: Market 3) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _ per unit will move the cinnamon roll market to the socially optimal output of _ units.

With a system of cap and trade, one of the main problems is determining the _, while with emissions taxes, the main problem is determining the _.

(Figure: Market 4) Use the graph to answer the question. The graph shows the marginal social benefit, demand, and supply curves in the toothbrush market. Market forces would yield a quantity of _, whereas the socially optimal quantity is _.