Question 1

Which of the following is an example of a common resource?

Accepted Answer

A)  elephants in the wild 
B)  lions in a zoo 
C)  a university education 
D)  public transportation 
A)  elephants in the wild 
B)  lions in a zoo 
C)  a university education 
D)  public transportation

Question 2

A positive externality results when

Accepted Answer

A)  economists are sure that a good or service provides benefits to consumers. 
B)  someone pays for a good or service even though she is not directly affected by the production or consumption of it. 
C)  when people who live in one country benefit from the production of a good or service that occurs in another country. 
D)  people who are not directly involved in producing or paying for a good or service benefit from it. 
A)  economists are sure that a good or service provides benefits to consumers. 
B)  someone pays for a good or service even though she is not directly affected by the production or consumption of it. 
C)  when people who live in one country benefit from the production of a good or service that occurs in another country. 
D)  people who are not directly involved in producing or paying for a good or service benefit from it.

Question 3

A product is considered to be non-excludable if

Accepted Answer

A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community. 
A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community.

Question 4

When a tax on output is imposed to internalise the external costs of pollution, the supply curve shifts down by the amount of the tax.

Accepted Answer

A) True 
 B)False

Question 5

Private costs

Accepted Answer

A)  are borne by producers of a good while social costs are borne by government. 
B)  are borne by consumers of a good while social costs are borne by government. 
C)  are borne by producers of a good while social costs are borne by society at large. 
D)  are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good. 
A)  are borne by producers of a good while social costs are borne by government. 
B)  are borne by consumers of a good while social costs are borne by government. 
C)  are borne by producers of a good while social costs are borne by society at large. 
D)  are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.

Question 6

-Refer to Figure 15-3. In the absence of any government intervention, the private market

Accepted Answer

A)  underproduces by Qo - Qm units. 
B)  overproduces by Qo - Qm units. 
C)  overproduces by Qn - Qm units. 
D)  underproduces by Qn - Qm units. 
A)  underproduces by Qo - Qm units. 
B)  overproduces by Qo - Qm units. 
C)  overproduces by Qn - Qm units. 
D)  underproduces by Qn - Qm units.

Question 7

'When it comes to public goods, individuals do not reveal their true preferences because it is not in their self-interest to do so.' Evaluate this statement.

Accepted Answer

The statement is true. For example, in t

Question 8

-Refer to Figure 15-2. The deadweight loss due to the externality is represented by the area

Accepted Answer

A)  abc. 
B)  abf. 
C)  abd. 
D)  ade. 
A)  abc. 
B)  abf. 
C)  abd. 
D)  ade.

Question 9

Public goods are distinguished by two primary characteristics. What are they?

Accepted Answer

A)  non-rivalry and non-excludability 
B)  government intervention and low prices 
C)  market failure and high prices 
D)  rivalry and exclusivity 
A)  non-rivalry and non-excludability 
B)  government intervention and low prices 
C)  market failure and high prices 
D)  rivalry and exclusivity

Question 10

When there is a negative externality, the competitive output is more than the economically efficient output level.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Figure 15-4. What does S1 represent?

Accepted Answer

A)  the market supply curve that reflects social cost 
B)  the market supply curve that reflects only external cost 
C)  the market supply curve that reflects only private benefit 
D)  the market supply curve that reflects private cost 
A)  the market supply curve that reflects social cost 
B)  the market supply curve that reflects only external cost 
C)  the market supply curve that reflects only private benefit 
D)  the market supply curve that reflects private cost

Question 12

A public good that is a good that is both rival and excludable.

Accepted Answer

A) True 
 B)False

Question 13

Parents who do not have their children immunised and attempt to benefit from other parents who did have their own children immunised are exhibiting an economic behaviour known as

Accepted Answer

A)  excludability. 
B)  public rivalry. 
C)  free riding. 
D)  internalising an external cost. 
A)  excludability. 
B)  public rivalry. 
C)  free riding. 
D)  internalising an external cost.

Question 14

-Refer to Figure 15-1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows

Accepted Answer

A)  the effect of a positive externality in the production of a good. 
B)  the effect of a negative externality in the production of a good. 
C)  the effect of an external cost imposed on a producer. 
D)  the effect of an external benefit such as a subsidy granted to consumers of a good. 
A)  the effect of a positive externality in the production of a good. 
B)  the effect of a negative externality in the production of a good. 
C)  the effect of an external cost imposed on a producer. 
D)  the effect of an external benefit such as a subsidy granted to consumers of a good.

Question 15

Ronald Coase is famous for the Coase theorem, which is based on the premise that there is an economically efficient level of pollution reduction. Many economists believe that the tradable emissions allowance program that has been used to deal with the problem of acid rain has been successful in reducing emissions of sulphur dioxide in an economically efficient manner. Why isn't this program an example of the Coase theorem?

Accepted Answer

The Coase theorem states that if transac

Question 16

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

Accepted Answer

A)  $2 per ton. 
B)  $9 per ton. 
C)  $21 per ton. 
D)  $47 per ton. 
A)  $2 per ton. 
B)  $9 per ton. 
C)  $21 per ton. 
D)  $47 per ton.

Question 17

A public good is

Accepted Answer

A)  a good that is rival and excludable. 
B)  good that is non-rival and non-excludable. 
C)  a good that is non-rival and excludable. 
D)  a good that is rival and non-excludable. 
A)  a good that is rival and excludable. 
B)  good that is non-rival and non-excludable. 
C)  a good that is non-rival and excludable. 
D)  a good that is rival and non-excludable.

Question 18

-Refer to Figure 15-8. Suppose the emissions reduction target is currently established at 8 million tons. Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?

Accepted Answer

A)  No, because there is a net cost represented by the area B + C. 
B)  Yes, because the marginal benefit exceeds the marginal costs. 
C)  Yes, because toxic fumes are dangerous and must be eliminated at any cost. 
D)  No, because the firms will pass the additional cost on to consumers. 
A)  No, because there is a net cost represented by the area B + C. 
B)  Yes, because the marginal benefit exceeds the marginal costs. 
C)  Yes, because toxic fumes are dangerous and must be eliminated at any cost. 
D)  No, because the firms will pass the additional cost on to consumers.

Question 19

Which of the following could be evidence of a market failure?

Accepted Answer

A)  Resources in an economy are not fully utilised. 
B)  The market price of a product is above the average cost of production. 
C)  There is only a handful of firms competing against each other in an industry. 
D)  Market prices do not reflect true production costs. 
A)  Resources in an economy are not fully utilised. 
B)  The market price of a product is above the average cost of production. 
C)  There is only a handful of firms competing against each other in an industry. 
D)  Market prices do not reflect true production costs.

Question 20

When products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.

Accepted Answer

A) True 
 B)False

Which of the following is an example of a common resource?

A positive externality results when

A product is considered to be non-excludable if

When a tax on output is imposed to internalise the external costs of pollution, the supply curve shifts down by the amount of the tax.

Private costs

-Refer to Figure 15-3. In the absence of any government intervention, the private market

'When it comes to public goods, individuals do not reveal their true preferences because it is not in their self-interest to do so.' Evaluate this statement.

-Refer to Figure 15-2. The deadweight loss due to the externality is represented by the area

Public goods are distinguished by two primary characteristics. What are they?

When there is a negative externality, the competitive output is more than the economically efficient output level.

-Refer to Figure 15-4. What does S₁represent?

A public good that is a good that is both rival and excludable.

Parents who do not have their children immunised and attempt to benefit from other parents who did have their own children immunised are exhibiting an economic behaviour known as

-Refer to Figure 15-1. Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality. The economically efficient output is Q₂. In that case, the diagram shows

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

A public good is

-Refer to Figure 15-8. Suppose the emissions reduction target is currently established at 8 million tons. Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?

Which of the following could be evidence of a market failure?

When products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.

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

Which of the following is an example of a common resource?

A positive externality results when

A product is considered to be non-excludable if

When a tax on output is imposed to internalise the external costs of pollution, the supply curve shifts down by the amount of the tax.

Private costs

-Refer to Figure 15-3. In the absence of any government intervention, the private market

'When it comes to public goods, individuals do not reveal their true preferences because it is not in their self-interest to do so.' Evaluate this statement.

-Refer to Figure 15-2. The deadweight loss due to the externality is represented by the area

Public goods are distinguished by two primary characteristics. What are they?

When there is a negative externality, the competitive output is more than the economically efficient output level.

-Refer to Figure 15-4. What does S1 represent?

A public good that is a good that is both rival and excludable.

Parents who do not have their children immunised and attempt to benefit from other parents who did have their own children immunised are exhibiting an economic behaviour known as

-Refer to Figure 15-1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

A public good is

-Refer to Figure 15-8. Suppose the emissions reduction target is currently established at 8 million tons. Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?

Which of the following could be evidence of a market failure?

When products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.

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 15-4. What does S₁represent?

-Refer to Figure 15-1. Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality. The economically efficient output is Q₂. In that case, the diagram shows