Question 1

Students who talk loudly with each other in class

Accepted Answer

A)  create an externality because other students cannot follow the lecture as well. 
B)  disturb nobody. 
C)  benefit the other students in class because they engage in conversation. 
D)  only create an externality if they talk about something unrelated to class. 
A)  create an externality because other students cannot follow the lecture as well. 
B)  disturb nobody. 
C)  benefit the other students in class because they engage in conversation. 
D)  only create an externality if they talk about something unrelated to class.

Question 2

-The above figure shows the market for steel ingots.If the market is competitive,then

Accepted Answer

A)  the socially optimal quantity of steel is zero. 
B)  the socially optimal quantity of steel of 50 units is produced. 
C)  the socially optimal quantity of steel of 100 units is produced. 
D)  more than the socially optimal quantity of 50 units of steel is produced. 
A)  the socially optimal quantity of steel is zero. 
B)  the socially optimal quantity of steel of 50 units is produced. 
C)  the socially optimal quantity of steel of 100 units is produced. 
D)  more than the socially optimal quantity of 50 units of steel is produced.

Question 3

Monopolizing the sale of liquor

Accepted Answer

A)  can lead to an increase in total welfare. 
B)  will decrease total welfare. 
C)  results in a deadweight loss. 
D)  is anti-competitive and thus lowers total welfare. 
A)  can lead to an increase in total welfare. 
B)  will decrease total welfare. 
C)  results in a deadweight loss. 
D)  is anti-competitive and thus lowers total welfare.

Question 4

A common resource is best described as a resource where

Accepted Answer

A)  there is a positive externality in consumption. 
B)  there is a negative externality in consumption. 
C)  there is a positive externality in production. 
D)  there is a negative externality in production. 
A)  there is a positive externality in consumption. 
B)  there is a negative externality in consumption. 
C)  there is a positive externality in production. 
D)  there is a negative externality in production.

Question 5

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

Accepted Answer

A)  marginal benefit to the median voter. 
B)  marginal benefit to each individual. 
C)  sum of all individual marginal benefits. 
D)  sum of all individual marginal benefits divided by the number of voters. 
A)  marginal benefit to the median voter. 
B)  marginal benefit to each individual. 
C)  sum of all individual marginal benefits. 
D)  sum of all individual marginal benefits divided by the number of voters.

Question 6

If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because

Accepted Answer

A)  firms take all costs into consideration. 
B)  firms incur all costs of production but ignore some of them. 
C)  firms ignore the costs of production that they do not incur. 
D)  firms set price equal to social marginal cost. 
A)  firms take all costs into consideration. 
B)  firms incur all costs of production but ignore some of them. 
C)  firms ignore the costs of production that they do not incur. 
D)  firms set price equal to social marginal cost.

Question 7

A public good in which exclusion is possible is called

Accepted Answer

A)  an exclusive good. 
B)  a common good. 
C)  an impure good. 
D)  a club good. 
A)  an exclusive good. 
B)  a common good. 
C)  an impure good. 
D)  a club good.

Question 8

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

Accepted Answer

A)  0 units. 
B)  50 units. 
C)  100 units. 
D)  the amount produced if the market were competitive. 
A)  0 units. 
B)  50 units. 
C)  100 units. 
D)  the amount produced if the market were competitive.

Question 9

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If property rights are not defined,how much pollution will occur?

Accepted Answer

A)  0 units 
B)  500 units 
C)  1000 units 
D)  more than 1000 units 
A)  0 units 
B)  500 units 
C)  1000 units 
D)  more than 1000 units

Question 10

Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MCp = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MCe = Q.Is social welfare greater under monopoly or under competition?

Accepted Answer

First,the socially optimal quantity of p

Question 11

In the presence of a negative externality,a specific tax can achieve the social optimum because

Accepted Answer

A)  output is reduced to zero as a result. 
B)  it internalizes the external cost. 
C)  it directly charges the producer for polluting. 
D)  the price of the good rises by the full amount of the tax. 
A)  output is reduced to zero as a result. 
B)  it internalizes the external cost. 
C)  it directly charges the producer for polluting. 
D)  the price of the good rises by the full amount of the tax.

Question 12

If a production process creates pollution,a competitive market produces excessive pollution because

Accepted Answer

A)  the firms do not include the social cost of the pollution in their profit-maximizing decisions. 
B)  the firms place too high a price on society's cost of inflation. 
C)  people are not injured by the pollution. 
D)  zero pollution is optimal. 
A)  the firms do not include the social cost of the pollution in their profit-maximizing decisions. 
B)  the firms place too high a price on society's cost of inflation. 
C)  people are not injured by the pollution. 
D)  zero pollution is optimal.

Question 13

-Suppose that the market for steel is shown in the above figure.What specific tax would result in a competitive market producing the socially optimal quantity of steel?

Accepted Answer

The social optimum occurs when

Question 14

Because a monopoly ignores external costs,it is possible that it will

Accepted Answer

A)  produce the socially optimal quantity of a good. 
B)  produce more than the socially optimal quantity of a good. 
C)  produce less than the socially optimal quantity of a good. 
D)  All of the above. 
A)  produce the socially optimal quantity of a good. 
B)  produce more than the socially optimal quantity of a good. 
C)  produce less than the socially optimal quantity of a good. 
D)  All of the above.

Question 15

Firms that are most likely to buy marketable pollution rights are those that produce the most pollution per unit of output produced.

Accepted Answer

A) True 
 B)False

Question 16

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the chemical firm owns the lake and the beach owner must pay the chemical firm $10 to produce only one ton of pollution,what is the outcome? If the beach owner owns the lake and the chemical firm must pay $10 per ton of pollution,what is the outcome? Compare this result to the case where nobody owns the lake.

Accepted Answer

If the chemical firm owns the lake,the r

Question 17

Explain how a specific tax equal to the marginal harm of pollution can increase or decrease total welfare in a monopoly market.

Accepted Answer

If the monopoly is producing more output

Question 18

Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

Accepted Answer

A) True 
 B)False

Question 19

In which of the following situations would the Coase theorem more likely to be applied?

Accepted Answer

A)  Two neighbors: a farmer and a beekeeper. 
B)  Highway drivers and the dwellers of neighborhoods crossed by the highway. 
C)  A railroad and its adjacent land owners. 
D)  None of the above. 
A)  Two neighbors: a farmer and a beekeeper. 
B)  Highway drivers and the dwellers of neighborhoods crossed by the highway. 
C)  A railroad and its adjacent land owners. 
D)  None of the above.

Question 20

-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can

Accepted Answer

A)  outlaw the production of steel. 
B)  institute a specific tax of $25. 
C)  institute a specific tax of $50. 
D)  institute a specific tax equal to area b. 
A)  outlaw the production of steel. 
B)  institute a specific tax of $25. 
C)  institute a specific tax of $50. 
D)  institute a specific tax equal to area b.

Students who talk loudly with each other in class

-The above figure shows the market for steel ingots.If the market is competitive,then

Monopolizing the sale of liquor

A common resource is best described as a resource where

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because

A public good in which exclusion is possible is called

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If property rights are not defined,how much pollution will occur?

Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MC^p = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MC^e = Q.Is social welfare greater under monopoly or under competition?

In the presence of a negative externality,a specific tax can achieve the social optimum because

If a production process creates pollution,a competitive market produces excessive pollution because

-Suppose that the market for steel is shown in the above figure.What specific tax would result in a competitive market producing the socially optimal quantity of steel?

Because a monopoly ignores external costs,it is possible that it will

Firms that are most likely to buy marketable pollution rights are those that produce the most pollution per unit of output produced.

Explain how a specific tax equal to the marginal harm of pollution can increase or decrease total welfare in a monopoly market.

Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

In which of the following situations would the Coase theorem more likely to be applied?

-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 18: Externalities, Open-Access, and Public Goods

Students who talk loudly with each other in class

-The above figure shows the market for steel ingots.If the market is competitive,then

Monopolizing the sale of liquor

A common resource is best described as a resource where

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because

A public good in which exclusion is possible is called

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If property rights are not defined,how much pollution will occur?

Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MCp = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MCe = Q.Is social welfare greater under monopoly or under competition?

In the presence of a negative externality,a specific tax can achieve the social optimum because

If a production process creates pollution,a competitive market produces excessive pollution because

-Suppose that the market for steel is shown in the above figure.What specific tax would result in a competitive market producing the socially optimal quantity of steel?

Because a monopoly ignores external costs,it is possible that it will

Firms that are most likely to buy marketable pollution rights are those that produce the most pollution per unit of output produced.

Explain how a specific tax equal to the marginal harm of pollution can increase or decrease total welfare in a monopoly market.

Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

In which of the following situations would the Coase theorem more likely to be applied?

-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MC^p = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MC^e = Q.Is social welfare greater under monopoly or under competition?