Question 1

-Refer to Figure 15-2. The private profit-maximising quantity for the firm is

Accepted Answer

A)  Qa. 
B)  Qb. 
C)  Qb - Qd. 
D)  Qd. 
A)  Qa. 
B)  Qb. 
C)  Qb - Qd. 
D)  Qd.

Question 2

An externality refers to economic events outside a market.

Accepted Answer

A) True 
 B)False

Question 3

-Refer to Figure 15-3. At the competitive market equilibrium, for the last unit produced,

Accepted Answer

A)  the size of the external cost is Pm - Po. 
B)  the size of the external benefit is Pm - Po. 
C)  the size of the external cost is Pn - Po. 
D)  the size of the external benefit is Pn - Po. 
A)  the size of the external cost is Pm - Po. 
B)  the size of the external benefit is Pm - Po. 
C)  the size of the external cost is Pn - Po. 
D)  the size of the external benefit is Pn - Po.

Question 4

Some environmentalists have criticised tradable emissions allowances on the grounds that they give permit holders a license to pollute. Furthermore, environmentalists argue that those who sell their permits receive a monetary benefit from their contribution to polluting the environment. Use economic reasoning to evaluate this criticism.

Accepted Answer

is the price of the permit. In other wor

Question 5

A negative externality is an example of market failure. The root of the problem lies in the definition and enforcement of property rights. Explain.

Accepted Answer

If harmed parties do not have rights or

Question 6

-Refer to Figure 15-7. The marginal benefit of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the positive externality curve. 
D)  the external benefit curve. 
A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the positive externality curve. 
D)  the external benefit curve.

Question 7

-Refer to Figure 15-7. The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the negative externality curve. 
D)  the value of pollution reduction curve. 
A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the negative externality curve. 
D)  the value of pollution reduction curve.

Question 8

A negative externality exists if

Accepted Answer

A)  there are price controls in a market. 
B)  there are quantity controls in a market. 
C)  the marginal social cost of producing a good or service exceeds the private cost. 
D)  the marginal private cost of producing a good or service exceeds the social cost. 
A)  there are price controls in a market. 
B)  there are quantity controls in a market. 
C)  the marginal social cost of producing a good or service exceeds the private cost. 
D)  the marginal private cost of producing a good or service exceeds the social cost.

Question 9

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

Accepted Answer

Private cost of production is the cost b

Question 10

The supply curve of a public goods shows

Accepted Answer

A)  the total quantities that all producers are willing and able to supply at each price. 
B)  the maximum amount suppliers require to produce each quantity of the good. 
C)  the total cost of producing each unit of the good. 
D)  the marginal cost of producing each unit of the good. 
A)  the total quantities that all producers are willing and able to supply at each price. 
B)  the maximum amount suppliers require to produce each quantity of the good. 
C)  the total cost of producing each unit of the good. 
D)  the marginal cost of producing each unit of the good.

Question 11

In economics, the optimal level of pollution is

Accepted Answer

A)  zero. 
B)  the level for which the total benefit from reducing the pollution is the greatest. 
C)  the level for which the marginal benefit from reducing the pollution is the greatest. 
D)  the level for which the net benefit from reducing the pollution is the greatest. 
A)  zero. 
B)  the level for which the total benefit from reducing the pollution is the greatest. 
C)  the level for which the marginal benefit from reducing the pollution is the greatest. 
D)  the level for which the net benefit from reducing the pollution is the greatest.

Question 12

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents. In this sense, these mandatory helmet laws are reducing ________ of risky behaviour.

Accepted Answer

A)  positive externalities 
B)  negative externalities 
C)  the private benefit 
D)  the social benefit 
A)  positive externalities 
B)  negative externalities 
C)  the private benefit 
D)  the social benefit

Question 13

The basic cause of deadweight losses from the existence of common resources and externalities is

Accepted Answer

A)  a lack of clearly defined and enforceable property rights. 
B)  the self-interested rationality of human beings. 
C)  the use of a market system to deal with scarcity. 
D)  the absence of government intervention. 
A)  a lack of clearly defined and enforceable property rights. 
B)  the self-interested rationality of human beings. 
C)  the use of a market system to deal with scarcity. 
D)  the absence of government intervention.

Question 14

When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem

Accepted Answer

A)  an equitable solution can be reached only if property rights are assigned to the victims of pollution and not the polluters. 
B)  an equitable solution can be reached only if property rights are assigned to polluters and not to the victims of pollution. 
C)  an efficient solution can be reached regardless of the initial assignment of property rights. 
D)  government intervention is necessary to reach an efficient and equitable solution. 
A)  an equitable solution can be reached only if property rights are assigned to the victims of pollution and not the polluters. 
B)  an equitable solution can be reached only if property rights are assigned to polluters and not to the victims of pollution. 
C)  an efficient solution can be reached regardless of the initial assignment of property rights. 
D)  government intervention is necessary to reach an efficient and equitable solution.

Question 16

-Refer to Figure 15-9. An efficient way to get the firm to produce the socially optimal output level is

Accepted Answer

A)  for government to set a quota on the quantity of toilet paper that the toilet paper industry can produce. 
B)  to impose a tax to make the industry bear the external costs it creates. 
C)  to grant a subsidy to enable the industry to internalise the external costs of production. 
D)  to assign property rights to the firms in the industry. 
A)  for government to set a quota on the quantity of toilet paper that the toilet paper industry can produce. 
B)  to impose a tax to make the industry bear the external costs it creates. 
C)  to grant a subsidy to enable the industry to internalise the external costs of production. 
D)  to assign property rights to the firms in the industry.

Question 17

An externality is an example of a market failure.

Accepted Answer

A) True 
 B)False

Question 18

The cost borne by a producer in the production of a good or service is called

Accepted Answer

A)  private cost. 
B)  public cost. 
C)  social cost. 
D)  internal cost. 
A)  private cost. 
B)  public cost. 
C)  social cost. 
D)  internal cost.

Question 19

If the social benefit of consuming a good or a service exceeds the private benefit,

Accepted Answer

A)  a negative externality exists. 
B)  the market achieves economic efficiency. 
C)  a positive externality exists. 
D)  the sum of consumer surplus and producer surplus is maximised. 
A)  a negative externality exists. 
B)  the market achieves economic efficiency. 
C)  a positive externality exists. 
D)  the sum of consumer surplus and producer surplus is maximised.

Question 20

-Refer to Figure 15-6. Why is there a deadweight loss?

Accepted Answer

A)  because the marginal private benefit for each additional unit between Q1 and Q2 exceeds the marginal cost 
B)  because the marginal private cost for each additional unit between Q1 and Q2 exceeds the marginal private benefit 
C)  because the marginal social cost for each additional unit between Q1 and Q2 exceeds the marginal social benefit 
D)  because the marginal social benefit for each additional unit between Q1 and Q2 exceeds the marginal cost 
A)  because the marginal private benefit for each additional unit between Q1 and Q2 exceeds the marginal cost 
B)  because the marginal private cost for each additional unit between Q1 and Q2 exceeds the marginal private benefit 
C)  because the marginal social cost for each additional unit between Q1 and Q2 exceeds the marginal social benefit 
D)  because the marginal social benefit for each additional unit between Q1 and Q2 exceeds the marginal cost

-Refer to Figure 15-2. The private profit-maximising quantity for the firm is

An externality refers to economic events outside a market.

-Refer to Figure 15-3. At the competitive market equilibrium, for the last unit produced,

A negative externality is an example of market failure. The root of the problem lies in the definition and enforcement of property rights. Explain.

-Refer to Figure 15-7. The marginal benefit of reducing pollution curve is the same curve as

-Refer to Figure 15-7. The marginal cost of reducing pollution curve is the same curve as

A negative externality exists if

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

The supply curve of a public goods shows

In economics, the optimal level of pollution is

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents. In this sense, these mandatory helmet laws are reducing ________ of risky behaviour.

The basic cause of deadweight losses from the existence of common resources and externalities is

When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.

Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem

-Refer to Figure 15-9. An efficient way to get the firm to produce the socially optimal output level is

An externality is an example of a market failure.

The cost borne by a producer in the production of a good or service is called

If the social benefit of consuming a good or a service exceeds the private benefit,

-Refer to Figure 15-6. Why is there a deadweight loss?

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

-Refer to Figure 15-2. The private profit-maximising quantity for the firm is

An externality refers to economic events outside a market.

-Refer to Figure 15-3. At the competitive market equilibrium, for the last unit produced,

A negative externality is an example of market failure. The root of the problem lies in the definition and enforcement of property rights. Explain.

-Refer to Figure 15-7. The marginal benefit of reducing pollution curve is the same curve as

-Refer to Figure 15-7. The marginal cost of reducing pollution curve is the same curve as

A negative externality exists if

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

The supply curve of a public goods shows

In economics, the optimal level of pollution is

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents. In this sense, these mandatory helmet laws are reducing ________ of risky behaviour.

The basic cause of deadweight losses from the existence of common resources and externalities is

When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.

Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem

-Refer to Figure 15-9. An efficient way to get the firm to produce the socially optimal output level is

An externality is an example of a market failure.

The cost borne by a producer in the production of a good or service is called

If the social benefit of consuming a good or a service exceeds the private benefit,

-Refer to Figure 15-6. Why is there a deadweight loss?

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