Question 1

A monopoly might produce less than the socially optimal amount of pollution because

Accepted Answer

A)  it likes to be a good citizen. 
B)  it sets price above marginal cost. 
C)  it earns economic profit. 
D)  it internalizes the external costs. 
A)  it likes to be a good citizen. 
B)  it sets price above marginal cost. 
C)  it earns economic profit. 
D)  it internalizes the external costs. B

Question 2

Which of the following statements about private and social costs is TRUE?

Accepted Answer

A)  Social costs include externalities. 
B)  Private cost do not include externalities. 
C)  Social costs are never smaller than private costs. 
D)  All of the above. 
A)  Social costs include externalities. 
B)  Private cost do not include externalities. 
C)  Social costs are never smaller than private costs. 
D)  All of the above. D

Question 3

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

Accepted Answer

A)  is 0 units. 
B)  is 50 units. 
C)  is 100 units. 
D)  cannot be determined from the information provided. 
A)  is 0 units. 
B)  is 50 units. 
C)  is 100 units. 
D)  cannot be determined from the information provided. D

Question 4

If the median voter voted against a project,we can infer that

Accepted Answer

A)  at least half of the voters also voted against it. 
B)  at most a third of the voters voted against the project. 
C)  the project was approved. 
D)  at least half of the voters voted in favor of the project. 
A)  at least half of the voters also voted against it. 
B)  at most a third of the voters voted against the project. 
C)  the project was approved. 
D)  at least half of the voters voted in favor of the project.

Question 5

Suppose that the market for steel is shown in the above figure.Is social welfare greater under monopoly or under competition?

Accepted Answer

Under competition,the deadweight loss eq

Question 6

-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 7

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.What specific tax would result in a competitive market producing the socially optimal quantity of paper?

Accepted Answer

The socially optimal quantity of paper i

Question 8

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

Accepted Answer

A)  private marginal cost of pollution exceeds its social marginal cost. 
B)  social marginal cost of pollution exceeds its private marginal cost. 
C)  the marginal benefit of pollution to the firm is zero. 
D)  zero pollution is optimal. 
A)  private marginal cost of pollution exceeds its social marginal cost. 
B)  social marginal cost of pollution exceeds its private marginal cost. 
C)  the marginal benefit of pollution to the firm is zero. 
D)  zero pollution is optimal.

Question 9

Two neighboring farmers must each decide whether to contribute to a fence that separates their properties.The fence costs a total of $20.Both farmers currently have a profit of $30 each.With a fence to keep each farmer's animals from wandering onto the other's property,both farmers would experience a $15 rise in profits.Draw the payoff matrix and discuss the possible outcomes.

Accepted Answer

@#IMG-DLM& See the above figure.This is a prisoner

Question 10

Which of the following policies address the the problem posed by positive externalities?

Accepted Answer

A)  a subsidy to the agent that generates the positive externality 
B)  a tax on the agent that generates the positive externality 
C)  limit the activity that generates the positive externality 
D)  a subsidy to the agents that benefit from the positive externality 
A)  a subsidy to the agent that generates the positive externality 
B)  a tax on the agent that generates the positive externality 
C)  limit the activity that generates the positive externality 
D)  a subsidy to the agents that benefit from the positive externality

Question 11

Explain why the optimal amount of pollution is often not zero.

Accepted Answer

The optimal amount of pollution occurs w

Question 12

-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 13

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 14

If the social marginal cost of a good is very high relative to the private marginal cost,then a monopoly will most likely

Accepted Answer

A)  produce more than the social optimum. 
B)  produce less than the social optimum. 
C)  produce the social optimum. 
D)  produce zero pollution. 
A)  produce more than the social optimum. 
B)  produce less than the social optimum. 
C)  produce the social optimum. 
D)  produce zero pollution.

Question 15

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 16

A specific tax in a monopoly market equal to the marginal harm of pollution

Accepted Answer

A)  will increase welfare. 
B)  will decrease welfare. 
C)  will leave welfare unchanged. 
D)  All of the above are possible. 
A)  will increase welfare. 
B)  will decrease welfare. 
C)  will leave welfare unchanged. 
D)  All of the above are possible.

Question 17

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 18

-The above figure shows the market for steel ingots.An externality can be seen because

Accepted Answer

A)  the social marginal cost exceeds the private marginal cost. 
B)  the private marginal cost exceeds the social marginal cost. 
C)  the optimal quantity of steel is zero. 
D)  not enough steel gets produced by the competitive market. 
A)  the social marginal cost exceeds the private marginal cost. 
B)  the private marginal cost exceeds the social marginal cost. 
C)  the optimal quantity of steel is zero. 
D)  not enough steel gets produced by the competitive market.

Question 19

Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's Theorem,one necessary condition to alleviate the externality is that

Accepted Answer

A)  Al is fined by the government. 
B)  Al has the right to leave trash and Bert cannot do anything about it. 
C)  Bert has the right to a clean park and Al cannot leave trash. 
D)  Either Al or Bert owns the park. 
A)  Al is fined by the government. 
B)  Al has the right to leave trash and Bert cannot do anything about it. 
C)  Bert has the right to a clean park and Al cannot leave trash. 
D)  Either Al or Bert owns the park.

Question 20

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.

A monopoly might produce less than the socially optimal amount of pollution because

Which of the following statements about private and social costs is TRUE?

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

If the median voter voted against a project,we can infer that

Suppose that the market for steel is shown in the above figure.Is social welfare greater under monopoly or under competition?

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

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

Which of the following policies address the the problem posed by positive externalities?

Explain why the optimal amount of pollution is often not zero.

-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?

A public good in which exclusion is possible is called

If the social marginal cost of a good is very high relative to the private marginal cost,then a monopoly will most likely

Students who talk loudly with each other in class

A specific tax in a monopoly market equal to the marginal harm of pollution

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?

-The above figure shows the market for steel ingots.An externality can be seen because

Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's Theorem,one necessary condition to alleviate the externality is that

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

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

A monopoly might produce less than the socially optimal amount of pollution because

Which of the following statements about private and social costs is TRUE?

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

If the median voter voted against a project,we can infer that

Suppose that the market for steel is shown in the above figure.Is social welfare greater under monopoly or under competition?

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

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

Which of the following policies address the the problem posed by positive externalities?

Explain why the optimal amount of pollution is often not zero.

-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?

A public good in which exclusion is possible is called

If the social marginal cost of a good is very high relative to the private marginal cost,then a monopoly will most likely

Students who talk loudly with each other in class

A specific tax in a monopoly market equal to the marginal harm of pollution

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?

-The above figure shows the market for steel ingots.An externality can be seen because

Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's Theorem,one necessary condition to alleviate the externality is that

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

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?