Question 1

In which of these situations is there no deadweight loss?

Accepted Answer

A)  free market production and consumption of a private good without any externalities 
B)  free market production of a private good with a negative externality 
C)  free market consumption of a private good with a positive externality 
D)  consumption of a common resource without government restrictions 
A)  free market production and consumption of a private good without any externalities 
B)  free market production of a private good with a negative externality 
C)  free market consumption of a private good with a positive externality 
D)  consumption of a common resource without government restrictions

Question 2

In 2006, Abu Dhabi Launched MASDAR in an attempt to reduce its carbon footprint and promote a more environment friendly culture around the UAE. Abu Dhabi is trying to solve the issue of

Accepted Answer

A)  having too many petrodollars in its reserves. 
B)  negative externalities caused by carbon emissions. 
C)  unemployment in Abu Dhabi. 
D)  None of the above. 
A)  having too many petrodollars in its reserves. 
B)  negative externalities caused by carbon emissions. 
C)  unemployment in Abu Dhabi. 
D)  None of the above.

Question 3

The Coase theorem states that

Accepted Answer

A)  a free market equilibrium is the best solution to address externalities. 
B)  government intervention is always needed if externalities are present. 
C)  if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 
D)  assigning property rights is the only thing the government should do in a market economy. 
A)  a free market equilibrium is the best solution to address externalities. 
B)  government intervention is always needed if externalities are present. 
C)  if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 
D)  assigning property rights is the only thing the government should do in a market economy.

Question 4

Figure 13-4 shows a market with a positive externality.
-Refer to Figure 13 -4. The efficient output level is

Accepted Answer

A)  Qn. 
B)  Qo  -Qm. 
C)  Qo. 
D)  Qm. 
A)  Qn. 
B)  Qo  -Qm. 
C)  Qo. 
D)  Qm.

Question 5

Figure 13-3 shows a market with an externality. The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output. The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 13 -3. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does What does D1 represent?

Accepted Answer

A)  the demand curve reflecting external benefits 
B)  the demand curve reflecting the sum of private and social benefits 
C)  the demand curve reflecting private benefits 
D)  the demand curve reflecting social benefits 
A)  the demand curve reflecting external benefits 
B)  the demand curve reflecting the sum of private and social benefits 
C)  the demand curve reflecting private benefits 
D)  the demand curve reflecting social benefits

Question 6

One difference between the demand for a private good and that for a public good is that

Accepted Answer

A)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
B)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
C)  with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. 
D)  the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former. 
A)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. 
B)  with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity. 
C)  with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. 
D)  the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former.

Question 7

In an effort to maintain privacy and enhance property values, three homeowners, Ahmed, Khaled and Yusef, are considering leasing a portion of an adjoining vacant land for a private park. Table 13-1 shows each person's willingness to pay for each quantity of the land.
a. Complete the column in Table 13-1
b. Graph the marginal social benefit curve.
c. Suppose the landowner is willing to lease a portion of her land according to the following supply schedule given in Table 13-2. On the same diagram, graph the supply curve
     d. What is the optimal quantity of land that homeowners should lease? Explain your answer.
e. Explain why a park of 5 acres is not optimal

Accepted Answer

a. @#IMG-DLM& b. @#IMG-DLM& c. The optimal quantity of land

Question 8

Figure 13-1 shows a market with an externality. The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output. The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 13 -1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, diagram shows

Accepted Answer

A)  the effect of an external cost imposed on a producer. 
B)  the effect of a positive externality in the production of a good. 
C)  the effect of an external benefit such as a subsidy granted to consumers of a good. 
D)  the effect of a negative externality in the production of a good. 
A)  the effect of an external cost imposed on a producer. 
B)  the effect of a positive externality in the production of a good. 
C)  the effect of an external benefit such as a subsidy granted to consumers of a good. 
D)  the effect of a negative externality in the production of a good.

Question 9

Global warming refers to the effect of global pollutants such as carbon dioxide on climates on the earth. Climate -induced changes in temperatures affect, among other things, agriculture. Which of the following is a reason why policymakers are still debating if this problem should be addressed and how it should be addressed?

Accepted Answer

A)  There is much disagreement about all aspects of the problem: how much carbon emissions contribute to damage from climate change which in turn informs the benefits from reduction, and what methods to use which in turn determines the cost of reduction. 
B)  The marginal cost of reducing carbon emissions is not known with certainly but the marginal benefit from reduction is known with certainty. 
C)  The marginal cost of reducing carbon emissions is known with certainly but the marginal benefit from reduction is not known with certainty. 
D)  Scientists agree about the damage caused by carbon emissions but disagree about the methods of reducing emissions. 
A)  There is much disagreement about all aspects of the problem: how much carbon emissions contribute to damage from climate change which in turn informs the benefits from reduction, and what methods to use which in turn determines the cost of reduction. 
B)  The marginal cost of reducing carbon emissions is not known with certainly but the marginal benefit from reduction is known with certainty. 
C)  The marginal cost of reducing carbon emissions is known with certainly but the marginal benefit from reduction is not known with certainty. 
D)  Scientists agree about the damage caused by carbon emissions but disagree about the methods of reducing emissions.

Question 10

An external cost can be calculated as the difference between

Accepted Answer

A)  the social cost of production and the private cost of production. 
B)  the social cost of production and the social benefit of production. 
C)  the private cost of production and the social benefit of production. 
D)  a producer's cost of production and the price at which the good is sold. 
A)  the social cost of production and the private cost of production. 
B)  the social cost of production and the social benefit of production. 
C)  the private cost of production and the social benefit of production. 
D)  a producer's cost of production and the price at which the good is sold.

Question 11

The 1997 Kyoto Treaty is an agreement among industrial nations to

Accepted Answer

A)  impose a carbon tax by the year 2010 on all industries that emit carbon dioxide. 
B)  establish a tradable carbon emissions permit system. 
C)  reduce carbon dioxide emissions. 
D)  provide fast growing developing countries such as India and China with the technology to reduce their carbon emissions. 
A)  impose a carbon tax by the year 2010 on all industries that emit carbon dioxide. 
B)  establish a tradable carbon emissions permit system. 
C)  reduce carbon dioxide emissions. 
D)  provide fast growing developing countries such as India and China with the technology to reduce their carbon emissions.

Question 12

Figure 13-4 shows a market with a positive externality.
-Refer to Figure 13 -4. In the absence of any government intervention, the private market

Accepted Answer

A)  under produces by Qn -Qm units. 
B)  under produces by Qo -Qm units. 
C)  over produces by Qo -Qm units. 
D)  over produces by Qn -Qm units. 
A)  under produces by Qn -Qm units. 
B)  under produces by Qo -Qm units. 
C)  over produces by Qo -Qm units. 
D)  over produces by Qn -Qm units.

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Private benefit equals external benefit minus social benefit. 
B)  External cost minus private cost equals social cost. 
C)  Private benefit plus external benefit equals social benefit. 
D)  Private cost equals external cost. 
A)  Private benefit equals external benefit minus social benefit. 
B)  External cost minus private cost equals social cost. 
C)  Private benefit plus external benefit equals social benefit. 
D)  Private cost equals external cost.

Question 14

One of the strategies of MASDAR, Abu Dhabi's green initiative, is to commercialize renewable energy and make it widely available. The purpose behind this strategy is

Accepted Answer

A)  eliminating all dependency on oil. 
B)  making energy cheaper for car use. 
C)  profiting from the sale of these renewable energies. 
D)  None of the above. 
A)  eliminating all dependency on oil. 
B)  making energy cheaper for car use. 
C)  profiting from the sale of these renewable energies. 
D)  None of the above.

Question 15

If your neighbor burns auto tires in the yard and you can smell them and cannot see sunlight because of the black smoke, you are experiencing

Accepted Answer

A)  a private benefit. 
B)  a private cost. 
C)  a positive externality. 
D)  a negative externality. 
A)  a private benefit. 
B)  a private cost. 
C)  a positive externality. 
D)  a negative externality.

In which of these situations is there no deadweight loss?

In 2006, Abu Dhabi Launched MASDAR in an attempt to reduce its carbon footprint and promote a more environment friendly culture around the UAE. Abu Dhabi is trying to solve the issue of

The Coase theorem states that

Figure 13-4 shows a market with a positive externality. -Refer to Figure 13 -4. The efficient output level is

One difference between the demand for a private good and that for a public good is that

An external cost can be calculated as the difference between

The 1997 Kyoto Treaty is an agreement among industrial nations to

Figure 13-4 shows a market with a positive externality. -Refer to Figure 13 -4. In the absence of any government intervention, the private market

Which of the following statements is correct?

One of the strategies of MASDAR, Abu Dhabi's green initiative, is to commercialize renewable energy and make it widely available. The purpose behind this strategy is

If your neighbor burns auto tires in the yard and you can smell them and cannot see sunlight because of the black smoke, you are experiencing

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Elasticity: The Responsiveness of Demand and Supply

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

Comparative Advantage and the Gains From International Trade Macro

GDP: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Unemployment and Inflation

The Markets for Labor and Other Factors of Production

Output and Expenditure in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Central Bank

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Central Bank Policy

Macroeconomics in an Open Economy

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Exam 13: Externalities, Environmental Policy, and Public Goods

In which of these situations is there no deadweight loss?

In 2006, Abu Dhabi Launched MASDAR in an attempt to reduce its carbon footprint and promote a more environment friendly culture around the UAE. Abu Dhabi is trying to solve the issue of

The Coase theorem states that

Figure 13-4 shows a market with a positive externality. -Refer to Figure 13 -4. The efficient output level is

One difference between the demand for a private good and that for a public good is that

An external cost can be calculated as the difference between

The 1997 Kyoto Treaty is an agreement among industrial nations to

Figure 13-4 shows a market with a positive externality. -Refer to Figure 13 -4. In the absence of any government intervention, the private market

Which of the following statements is correct?

One of the strategies of MASDAR, Abu Dhabi's green initiative, is to commercialize renewable energy and make it widely available. The purpose behind this strategy is

If your neighbor burns auto tires in the yard and you can smell them and cannot see sunlight because of the black smoke, you are experiencing

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Elasticity: The Responsiveness of Demand and Supply

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

Comparative Advantage and the Gains From International Trade Macro

GDP: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Unemployment and Inflation

The Markets for Labor and Other Factors of Production

Output and Expenditure in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Central Bank

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Central Bank Policy

Macroeconomics in an Open Economy

Filters