Question 1

Which one of the following statements is false?

Accepted Answer

A)  A nonrival good is a good where consumption by one person does not reduce the quantity that can be consumed by others. 
B)  An exclusive good is a good to which consumers may be denied access. 
C)  A good that, once produced is not accessible to all customers, is nonexclusive good 
D)  A rival good is a good where consumption by one person reduces the quantity that can be consumed by others. 
A)  A nonrival good is a good where consumption by one person does not reduce the quantity that can be consumed by others. 
B)  An exclusive good is a good to which consumers may be denied access. 
C)  A good that, once produced is not accessible to all customers, is nonexclusive good 
D)  A rival good is a good where consumption by one person reduces the quantity that can be consumed by others.

Question 2

Suppose that the marginal private benefit of a new vaccine could be measured as $M P B = 10 - Q$ . Suppose that the marginal social benefit could be measured as $M S B = 12 - Q$ . Suppose that the private marginal cost curve could be measured as $M P C = Q$ . What amount of a per-unit subsidy would encourage the optimal societal consumption of the vaccine?

Accepted Answer

A)  $1. 
B)  $2. 
C)  $4. 
D)  $6. 
A)  $1. 
B)  $2. 
C)  $4. 
D)  $6.

Question 3

A nonexclusive good

Accepted Answer

A)  is also non-rival. 
B)  is also rival. 
C)  must be free. 
D)  is one where once the good is produced, no one can be prohibited from consuming the good. 
A)  is also non-rival. 
B)  is also rival. 
C)  must be free. 
D)  is one where once the good is produced, no one can be prohibited from consuming the good.

Question 4

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve for the industry can be expressed as P = 60-Q. If the industry currently does not take into account the negative externality in its supply decisions, the industry is ________________ by _____________ units relative to the social optimum.

Accepted Answer

A)  under-producing; 5 
B)  over-producing; 5 
C)  under-producing; 8 
D)  over-producing; 8 
A)  under-producing; 5 
B)  over-producing; 5 
C)  under-producing; 8 
D)  over-producing; 8

Question 5

A governmental limit on the amount of pollution that may be emitted is referred to as

Accepted Answer

A)  a public good. 
B)  an emissions standard. 
C)  an emissions fee. 
D)  a positive externality. 
A)  a public good. 
B)  an emissions standard. 
C)  an emissions fee. 
D)  a positive externality.

Question 6

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve can be expressed as $P = 60 - Q$ . The net social benefit at the market equilibrium (i.e. the equilibrium where production decisions do not take into account the externality) is:

Accepted Answer

A)  $0. 
B)  $112.5 
C)  $150. 
D)  $225 
A)  $0. 
B)  $112.5 
C)  $150. 
D)  $225

Question 7

If the detriment to society from a negative externality is measure as $5 per unit of output of a particular good, the best way of moving closer to the social optimum would be to

Accepted Answer

A)  subsidize consumers who purchase the good by $5 per unit to offset the negative externality that they may endure. 
B)  limit the production of the good to four days per week. 
C)  calculate the negative value of the externality and assess a fine on each producer to pay for clean up in proportion to their profits from production of the good. 
D)  assess a simple tax of $5 per unit of production on suppliers of the good. 
A)  subsidize consumers who purchase the good by $5 per unit to offset the negative externality that they may endure. 
B)  limit the production of the good to four days per week. 
C)  calculate the negative value of the externality and assess a fine on each producer to pay for clean up in proportion to their profits from production of the good. 
D)  assess a simple tax of $5 per unit of production on suppliers of the good.

Question 8

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the deadweight loss from producing at the market equilibrium is

Accepted Answer

A)  $30 
B)  $37.5. 
C)  $55. 
D)  $67.5. 
A)  $30 
B)  $37.5. 
C)  $55. 
D)  $67.5.

Question 9

Efficient provision of a public good occurs when

Accepted Answer

A)  the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve is the sum of all the individual demand curves for the good. 
B)  the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve reflects the costs and benefits of producing the good. 
C)  each individual votes on the amount that is to be spent on public goods. 
D)  the free market is left to determine the social costs and benefits. 
A)  the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve is the sum of all the individual demand curves for the good. 
B)  the marginal cost and the marginal social benefit curves intersect; the marginal social benefit curve reflects the costs and benefits of producing the good. 
C)  each individual votes on the amount that is to be spent on public goods. 
D)  the free market is left to determine the social costs and benefits.

Question 10

Which of the following is not a good example of common property?

Accepted Answer

A)  The internet. 
B)  A hunting ground. 
C)  A reservoir of oil. 
D)  A dormitory room. 
A)  The internet. 
B)  A hunting ground. 
C)  A reservoir of oil. 
D)  A dormitory room.

Question 11

An example of a good that is nonexclusive but rival is

Accepted Answer

A)  hunting in a public game area. 
B)  national defense. 
C)  public radio. 
D)  a pay-TV channel. 
A)  hunting in a public game area. 
B)  national defense. 
C)  public radio. 
D)  a pay-TV channel.

Question 12

Negative externalities

Accepted Answer

A)  create a deadweight loss as do positive externalities. 
B)  move the economy closer to the social optimum. 
C)  create a deadweight loss and move the equilibrium away from the social optimum. 
D)  should be eliminated completely to move to the social optimum. 
A)  create a deadweight loss as do positive externalities. 
B)  move the economy closer to the social optimum. 
C)  create a deadweight loss and move the equilibrium away from the social optimum. 
D)  should be eliminated completely to move to the social optimum.

Question 13

________________ states that regardless of how property rights are assigned with an externality, the allocation of resources will be will be efficient when the parties can costlessly bargain with each other.

Accepted Answer

A)  Bargaining power 
B)  Opportunity cost 
C)  The Coase Theorem 
D)  Common Property 
A)  Bargaining power 
B)  Opportunity cost 
C)  The Coase Theorem 
D)  Common Property

Question 14

A rival good is one

Accepted Answer

A)  wherein consumption by one person reduces the amount that can be consumed by others. 
B)  wherein two individuals may fight to gain access to the good. 
C)  which is made more or less freely available by the supplier. 
D)  wherein consumption by one person increases the amount that can be consumed by others. 
A)  wherein consumption by one person reduces the amount that can be consumed by others. 
B)  wherein two individuals may fight to gain access to the good. 
C)  which is made more or less freely available by the supplier. 
D)  wherein consumption by one person increases the amount that can be consumed by others.

Question 15

Which of the following is a real-world example of a positive externality?

Accepted Answer

A)  You are craving a soda for lunch. However, the customer ahead of you in line at the hot dog stand buys the last can. 
B)  National defense is available even for people who do not pay income taxes. 
C)  A person seated in a non-smoking section of a restaurant decides to sneak a few puffs of a cigarette. 
D)  A child receives a vaccination to prevent the spread of measles. 
A)  You are craving a soda for lunch. However, the customer ahead of you in line at the hot dog stand buys the last can. 
B)  National defense is available even for people who do not pay income taxes. 
C)  A person seated in a non-smoking section of a restaurant decides to sneak a few puffs of a cigarette. 
D)  A child receives a vaccination to prevent the spread of measles.

Which one of the following statements is false?

A nonexclusive good

A governmental limit on the amount of pollution that may be emitted is referred to as

If the detriment to society from a negative externality is measure as $5 per unit of output of a particular good, the best way of moving closer to the social optimum would be to

Efficient provision of a public good occurs when

Which of the following is not a good example of common property?

An example of a good that is nonexclusive but rival is

Negative externalities

________________ states that regardless of how property rights are assigned with an externality, the allocation of resources will be will be efficient when the parties can costlessly bargain with each other.

A rival good is one

Which of the following is a real-world example of a positive externality?

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

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Exam 17: Externalities and Public Goods

Which one of the following statements is false?

A nonexclusive good

A governmental limit on the amount of pollution that may be emitted is referred to as

If the detriment to society from a negative externality is measure as $5 per unit of output of a particular good, the best way of moving closer to the social optimum would be to

Efficient provision of a public good occurs when

Which of the following is not a good example of common property?

An example of a good that is nonexclusive but rival is

Negative externalities

________________ states that regardless of how property rights are assigned with an externality, the allocation of resources will be will be efficient when the parties can costlessly bargain with each other.

A rival good is one

Which of the following is a real-world example of a positive externality?

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Filters