Question 1

The efficient output level of a public good occurs where the

Accepted Answer

A)  greatest number of free riders occurs. 
B)  marginal cost of producing the last unit is equal to the marginal benefit realised by consumers. 
C)  total cost of production is affordable. 
D)  marginal cost of production is at its lowest. 
A)  greatest number of free riders occurs. 
B)  marginal cost of producing the last unit is equal to the marginal benefit realised by consumers. 
C)  total cost of production is affordable. 
D)  marginal cost of production is at its lowest.

Question 2

-Refer to Figure 15-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D2 represent?

Accepted Answer

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

Question 3

-Refer to Figure 15-2. The size of marginal external costs can be determined by

Accepted Answer

A)  S2 + S1 at each output level. 
B)  S2 - S1 at each output level. 
C)  the supply curve S2. 
D)  the supply curve S1. 
A)  S2 + S1 at each output level. 
B)  S2 - S1 at each output level. 
C)  the supply curve S2. 
D)  the supply curve S1.

Question 4

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Accepted Answer

A)  Does the intervention program reduce pollution to zero using the least costly method? 
B)  Is the intervention program economically efficient? 
C)  Does the intervention program make the amount of economic surplus as large as possible? 
D)  Is the damage to the environment from government intervention as small as possible? 
A)  Does the intervention program reduce pollution to zero using the least costly method? 
B)  Is the intervention program economically efficient? 
C)  Does the intervention program make the amount of economic surplus as large as possible? 
D)  Is the damage to the environment from government intervention as small as possible?

Question 5

-Refer to Figure 15-6. What is the market equilibrium output level?

Accepted Answer

A)  Q1 
B)  Q2 
C)  Q1 + Q2 
D)  Q2 - Q1 
A)  Q1 
B)  Q2 
C)  Q1 + Q2 
D)  Q2 - Q1

Question 6

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

Accepted Answer

A) True 
 B)False

Question 7

-Refer to Figure 15-4.What is the economically efficient output level?

Accepted Answer

A)  Q1 
B)  Q2 minus Q1 
C)  Q2 
D)  Q1 plus Q2 
A)  Q1 
B)  Q2 minus Q1 
C)  Q2 
D)  Q1 plus Q2

Question 8

The 'tragedy of the commons' refers to the phenomenon where

Accepted Answer

A)  individuals are free riders. 
B)  people overuse a common resource. 
C)  people do not internalise an externality. 
D)  there is rivalry in consumption. 
A)  individuals are free riders. 
B)  people overuse a common resource. 
C)  people do not internalise an externality. 
D)  there is rivalry in consumption.

Question 9

The market demand for a public good can be determined by

Accepted Answer

A)  adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B)  adding up how much each citizen expects to consume at each possible price. 
C)  adding up how much each consumer is willing to pay for each unit of the public good. 
D)  estimating the value of the benefit that each unit provides and multiplying that by the number of consumers. 
A)  adding up the total private benefits and external benefits that each quantity provides the citizens of a country. 
B)  adding up how much each citizen expects to consume at each possible price. 
C)  adding up how much each consumer is willing to pay for each unit of the public good. 
D)  estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.

Question 10

A modern example of the tragedy of the commons is the forests in many poor countries.

Accepted Answer

A) True 
 B)False

Question 11

What does the phrase 'internalising an external cost' mean?

Accepted Answer

A)  limiting the extent to which domestic firms can outsource production 
B)  prohibiting economic activities that create externalities 
C)  forcing producers to factor into their production costs the cost of the externalities created in the production of their output 
D)  finding a way to address cross-border pollution 
A)  limiting the extent to which domestic firms can outsource production 
B)  prohibiting economic activities that create externalities 
C)  forcing producers to factor into their production costs the cost of the externalities created in the production of their output 
D)  finding a way to address cross-border pollution

Question 12

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Accepted Answer

A)  the Pigovian method of pollution control. 
B)  a command and control approach to pollution reduction. 
C)  a Coasian solution to pollution reduction. 
D)  a tradable emission allowance system of pollution control. 
A)  the Pigovian method of pollution control. 
B)  a command and control approach to pollution reduction. 
C)  a Coasian solution to pollution reduction. 
D)  a tradable emission allowance system of pollution control.

Question 13

If there is pollution in producing a product, then the market equilibrium price

Accepted Answer

A)  is too high and equilibrium quantity is too low. 
B)  and equilibrium quantity are too low. 
C)  and equilibrium quantity are too high. 
D)  is too low and equilibrium quantity is too high. 
A)  is too high and equilibrium quantity is too low. 
B)  and equilibrium quantity are too low. 
C)  and equilibrium quantity are too high. 
D)  is too low and equilibrium quantity is too high.

Question 14

A market supply curve reflects the

Accepted Answer

A)  external costs of producing a good or service. 
B)  external benefits of producing a good or service. 
C)  social costs of producing a good or service. 
D)  private costs of producing a good or service. 
A)  external costs of producing a good or service. 
B)  external benefits of producing a good or service. 
C)  social costs of producing a good or service. 
D)  private costs of producing a good or service.

Question 15

Which of the following is an example of a positive externality?

Accepted Answer

A)  banning the sale of candy in elementary schools 
B)  planting trees along the pavement, which adds beauty and creates shade 
C)  forbidding the use of cell phones in public 
D)  prohibiting street parking in all residential neighbourhoods 
A)  banning the sale of candy in elementary schools 
B)  planting trees along the pavement, which adds beauty and creates shade 
C)  forbidding the use of cell phones in public 
D)  prohibiting street parking in all residential neighbourhoods

Question 16

Governments can increase the consumption of a product that creates positive externalities by

Accepted Answer

A)  subsidising the production of the product so that the supply is increased and market price is reduced. 
B)  taxing the production and consumption of the product. 
C)  convincing everyone to consume the good. 
D)  assigning property rights to the producers of the product. 
A)  subsidising the production of the product so that the supply is increased and market price is reduced. 
B)  taxing the production and consumption of the product. 
C)  convincing everyone to consume the good. 
D)  assigning property rights to the producers of the product.

Question 17

An advantage of imposing a tax on the producer that generates pollution is that

Accepted Answer

A)  it forces the polluting producer to internalise the external cost of the pollution. 
B)  the government can keep tabs on exactly what is produced in an industry. 
C)  it will eliminate pollution. 
D)  a producer can pass the cost of the pollution to consumers. 
A)  it forces the polluting producer to internalise the external cost of the pollution. 
B)  the government can keep tabs on exactly what is produced in an industry. 
C)  it will eliminate pollution. 
D)  a producer can pass the cost of the pollution to consumers.

Question 18

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

Accepted Answer

A) True 
 B)False

Question 19

An external cost is created when you

Accepted Answer

A)  graduate from university. 
B)  buy flowers for your mother on Mother's Day. 
C)  litter on the side of the road. 
D)  buy a sandwich for lunch. 
A)  graduate from university. 
B)  buy flowers for your mother on Mother's Day. 
C)  litter on the side of the road. 
D)  buy a sandwich for lunch.

Question 20

-Refer to Figure 15-9. Suppose the government wants to use a Pigovian tax to bring about the efficient level of production. What should the value of the tax be?

Accepted Answer

A)  (P2- P1) per ton of output 
B)  (P2- P0) per ton of output 
C)  (P1- P0) per ton of output 
D)  P1 per ton of output 
A)  (P2- P1) per ton of output 
B)  (P2- P0) per ton of output 
C)  (P1- P0) per ton of output 
D)  P1 per ton of output

The efficient output level of a public good occurs where the

-Refer to Figure 15-5. If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does D₂ represent?

-Refer to Figure 15-2. The size of marginal external costs can be determined by

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

-Refer to Figure 15-6. What is the market equilibrium output level?

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

-Refer to Figure 15-4.What is the economically efficient output level?

The 'tragedy of the commons' refers to the phenomenon where

The market demand for a public good can be determined by

A modern example of the tragedy of the commons is the forests in many poor countries.

What does the phrase 'internalising an external cost' mean?

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

If there is pollution in producing a product, then the market equilibrium price

A market supply curve reflects the

Which of the following is an example of a positive externality?

Governments can increase the consumption of a product that creates positive externalities by

An advantage of imposing a tax on the producer that generates pollution is that

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

An external cost is created when you

-Refer to Figure 15-9. Suppose the government wants to use a Pigovian tax to bring about the efficient level of production. What should the value of the tax be?

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

The efficient output level of a public good occurs where the

-Refer to Figure 15-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D2 represent?

-Refer to Figure 15-2. The size of marginal external costs can be determined by

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

-Refer to Figure 15-6. What is the market equilibrium output level?

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

-Refer to Figure 15-4.What is the economically efficient output level?

The 'tragedy of the commons' refers to the phenomenon where

The market demand for a public good can be determined by

A modern example of the tragedy of the commons is the forests in many poor countries.

What does the phrase 'internalising an external cost' mean?

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

If there is pollution in producing a product, then the market equilibrium price

A market supply curve reflects the

Which of the following is an example of a positive externality?

Governments can increase the consumption of a product that creates positive externalities by

An advantage of imposing a tax on the producer that generates pollution is that

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

An external cost is created when you

-Refer to Figure 15-9. Suppose the government wants to use a Pigovian tax to bring about the efficient level of production. What should the value of the tax be?

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 15-5. If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does D₂ represent?