Question 1

If electric utilities continually reduce their emissions of sulphur dioxide,

Accepted Answer

A)  the utilities will eventually be forced to go out of business. 
B)  the marginal benefit of additional emissions will rise. 
C)  the marginal cost of further emissions will rise. 
D)  the total benefit of sulphur dioxide emissions will fall. 
A)  the utilities will eventually be forced to go out of business. 
B)  the marginal benefit of additional emissions will rise. 
C)  the marginal cost of further emissions will rise. 
D)  the total benefit of sulphur dioxide emissions will fall.

Question 2

Medical research that ends in a cure for a serious disease produces positive externalities. What is the impact of this positive externality on economic efficiency?

Accepted Answer

A)  At equilibrium, less than the economically efficient quantity of medical research is produced. 
B)  A deadweight loss occurs because at equilibrium, the marginal social cost of medical research is greater than the marginal social benefit. 
C)  At equilibrium, more than the economically efficient quantity of medical research is produced. 
D)  A deadweight loss occurs because at equilibrium, the marginal social cost equals the marginal social benefit. 
A)  At equilibrium, less than the economically efficient quantity of medical research is produced. 
B)  A deadweight loss occurs because at equilibrium, the marginal social cost of medical research is greater than the marginal social benefit. 
C)  At equilibrium, more than the economically efficient quantity of medical research is produced. 
D)  A deadweight loss occurs because at equilibrium, the marginal social cost equals the marginal social benefit.

Question 3

What are property rights?

Accepted Answer

A)  the title to ownership of any physical asset 
B)  a legal document verifying ownership of intangible assets 
C)  the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it 
D)  the right of the government to appropriate private assets for the good of society 
A)  the title to ownership of any physical asset 
B)  a legal document verifying ownership of intangible assets 
C)  the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it 
D)  the right of the government to appropriate private assets for the good of society

Question 4

Which of the following statements about the economically efficient level of air pollution is correct?

Accepted Answer

A)  The economically efficient level of pollution is zero. 
B)  The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C)  The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D)  The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised. 
A)  The economically efficient level of pollution is zero. 
B)  The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C)  The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D)  The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised.

Question 5

In economics, the term 'free rider' refers to

Accepted Answer

A)  a person who evades taxes. 
B)  a supervisor who delegates menial time-consuming activities to others. 
C)  one who volunteers her services. 
D)  one who waits for others to produce a good and then enjoys its benefits without paying for it. 
A)  a person who evades taxes. 
B)  a supervisor who delegates menial time-consuming activities to others. 
C)  one who volunteers her services. 
D)  one who waits for others to produce a good and then enjoys its benefits without paying for it.

Question 6

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter. If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction

Accepted Answer

A)  would be significantly less than if the owners of the smelter were legally liable for damages. 
B)  would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. 
C)  would be the same as if it would be if the owners of the smelter were legally liable. 
D)  would be too small; the government would have to intervene to bring about an efficient outcome. 
A)  would be significantly less than if the owners of the smelter were legally liable for damages. 
B)  would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. 
C)  would be the same as if it would be if the owners of the smelter were legally liable. 
D)  would be too small; the government would have to intervene to bring about an efficient outcome.

Question 7

-Refer to Figure 15-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent?

Accepted Answer

A)  the market supply curve reflecting external cost 
B)  the market supply curve reflecting implicit cost 
C)  the market supply curve reflecting social cost 
D)  the market supply curve reflecting private cost 
A)  the market supply curve reflecting external cost 
B)  the market supply curve reflecting implicit cost 
C)  the market supply curve reflecting social cost 
D)  the market supply curve reflecting private cost

Question 8

A tragedy of the commons occurs when a resource is

Accepted Answer

A)  rival and excludable. 
B)  rival and non-excludable. 
C)  non-rival and non-excludable. 
D)  non-rival and excludable. 
A)  rival and excludable. 
B)  rival and non-excludable. 
C)  non-rival and non-excludable. 
D)  non-rival and excludable.

Question 9

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

Accepted Answer

A)  enforcement costs. 
B)  implicit costs. 
C)  explicit costs. 
D)  transactions costs. 
A)  enforcement costs. 
B)  implicit costs. 
C)  explicit costs. 
D)  transactions costs.

Question 10

State the Coase theorem.

Accepted Answer

The Coase theorem states that if transac

Question 11

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

Accepted Answer

A)  further reductions will make society better off. 
B)  the marginal benefit will rise and the marginal cost will fall as further reductions are made. 
C)  economic efficiency will be achieved when emissions are reduced to zero. 
D)  private businesses, rather the consumers, should be made to pay for the cost of further reductions. 
A)  further reductions will make society better off. 
B)  the marginal benefit will rise and the marginal cost will fall as further reductions are made. 
C)  economic efficiency will be achieved when emissions are reduced to zero. 
D)  private businesses, rather the consumers, should be made to pay for the cost of further reductions.

Question 12

A product is considered to be excludable if it is jointly owned by all members of a community.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an example of a product that is non-excludable and rival?

Accepted Answer

A)  free concert (with limited seating) in a park 
B)  national defense 
C)  automobiles 
D)  flu vaccinations 
A)  free concert (with limited seating) in a park 
B)  national defense 
C)  automobiles 
D)  flu vaccinations

Question 14

The private cost of a good or service is the cost borne by the producer.

Accepted Answer

A) True 
 B)False

Question 15

-Refer to Figure 15-6. What is the deadweight loss resulting from producing at the market equilibrium?

Accepted Answer

A)  B + C 
B)  E + C 
C)  F 
D)  C 
A)  B + C 
B)  E + C 
C)  F 
D)  C

Question 16

When there is a positive externality in a free market, too much of the good is produced and consumed.

Accepted Answer

A) True 
 B)False

Question 17

Define the tragedy of the commons. Give three examples of common resources. Briefly explain why common property resources are subject to overuse.

Accepted Answer

The tragedy of the commons refers to sit

Question 18

Which of the following is an example of a Pigovian tax?

Accepted Answer

A)  payments by utilities to obtain tradable emissions allowances 
B)  a payroll tax 
C)  payments for licenses to pollute 
D)  a tax imposed on a utility that internalises the cost of externalities caused by the utility 
A)  payments by utilities to obtain tradable emissions allowances 
B)  a payroll tax 
C)  payments for licenses to pollute 
D)  a tax imposed on a utility that internalises the cost of externalities caused by the utility

Question 19

-Refer to Figure 15-13 to answer the following questions.
a. In the absence of any government intervention, what is the equilibrium level of security that airlines will supply? Denote this level, Q*. Briefly explain why this quantity is not the economically efficient level of aviation security.
b. In the diagram, illustrate the presence of positive externalities in the aviation security market. Label any new curve that you draw.
c. On your diagram identify the economically efficient level of aviation security. Denote this level Qe.
d. Explain how a government subsidy for the airlines can bring about the economically efficient aviation security level. Be sure to identify the size of the subsidy.

Accepted Answer

@#IMG-DLM& a. See the figure above. Q* is not the

Question 20

What is a market failure?

Accepted Answer

A)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C)  It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event. 
D)  It refers to a breakdown in a market economy because of widespread corruption in government. 
A)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B)  It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C)  It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event. 
D)  It refers to a breakdown in a market economy because of widespread corruption in government.

If electric utilities continually reduce their emissions of sulphur dioxide,

Medical research that ends in a cure for a serious disease produces positive externalities. What is the impact of this positive externality on economic efficiency?

What are property rights?

Which of the following statements about the economically efficient level of air pollution is correct?

In economics, the term 'free rider' refers to

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter. If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction

-Refer to Figure 15-1. If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₁ represent?

A tragedy of the commons occurs when a resource is

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

State the Coase theorem.

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

A product is considered to be excludable if it is jointly owned by all members of a community.

Which of the following is an example of a product that is non-excludable and rival?

The private cost of a good or service is the cost borne by the producer.

-Refer to Figure 15-6. What is the deadweight loss resulting from producing at the market equilibrium?

When there is a positive externality in a free market, too much of the good is produced and consumed.

Define the tragedy of the commons. Give three examples of common resources. Briefly explain why common property resources are subject to overuse.

Which of the following is an example of a Pigovian tax?

What is a market failure?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters

Exam 15: Externalities , Environmental Policy and Public Goods

If electric utilities continually reduce their emissions of sulphur dioxide,

Medical research that ends in a cure for a serious disease produces positive externalities. What is the impact of this positive externality on economic efficiency?

What are property rights?

Which of the following statements about the economically efficient level of air pollution is correct?

In economics, the term 'free rider' refers to

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter. If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction

-Refer to Figure 15-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent?

A tragedy of the commons occurs when a resource is

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

State the Coase theorem.

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

A product is considered to be excludable if it is jointly owned by all members of a community.

Which of the following is an example of a product that is non-excludable and rival?

The private cost of a good or service is the cost borne by the producer.

-Refer to Figure 15-6. What is the deadweight loss resulting from producing at the market equilibrium?

When there is a positive externality in a free market, too much of the good is produced and consumed.

Define the tragedy of the commons. Give three examples of common resources. Briefly explain why common property resources are subject to overuse.

Which of the following is an example of a Pigovian tax?

What is a market failure?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters

-Refer to Figure 15-1. If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₁ represent?