Question 1

In perfect competition,environmental externalities need not distort the allocation of resources providing

Accepted Answer

A) transactions costs are zero. 
B) average costs are constant for all output levels. 
C) firms install pollution control equipment. 
D) the government sets realistic pollution standards. 
A) transactions costs are zero. 
B) average costs are constant for all output levels. 
C) firms install pollution control equipment. 
D) the government sets realistic pollution standards.

Question 2

Consider four possible benefits of a water resources project: Which of these are social benefits of the project?
I.Provides employment to construction workers currently building houses.
II.Provides electric power to the market.
III.Provides reduced flood risk to individuals living along the river.
IV.Raises the profits of MacDonald's stands in the area that serve construction workers.

Accepted Answer

A) All of them. 
B) I,II,and III,but not IV. 
C) I and III,but not II and IV. 
D) II and III,but not I and IV. 
A) All of them. 
B) I,II,and III,but not IV. 
C) I and III,but not II and IV. 
D) II and III,but not I and IV.

Question 3

Suppose residents of Toadhop live on the Quabache River,a river prone to flooding.Suppose there are 1000 (type A)people who value flood control more than the 1000 (type B)people. Type A Demand QD = 100 - P
Type B Demand QD = 50 - P
Where Q measures the quality of flood control.If the price of a unit of flood control is $100000 and the citizens of Toadhop gather for a townhall meeting to find the socially optimal level of flood control,and they are successful,how much will each type A individual contribute in total?

Accepted Answer

A) 1875 
B) 1500 
C) 875 
D) 625 
A) 1875 
B) 1500 
C) 875 
D) 625

Question 4

In evaluating public projects,a higher interest rate (r)will favor those projects which

Accepted Answer

A) have costs and benefits occurring in the more distant future. 
B) have costs and benefits occurring in the more immediate future. 
C) have benefits occurring in the more immediate future and costs occurring in the more distant future. 
D) have benefits occurring in the more distant future and costs occurring in the more immediate future. 
A) have costs and benefits occurring in the more distant future. 
B) have costs and benefits occurring in the more immediate future. 
C) have benefits occurring in the more immediate future and costs occurring in the more distant future. 
D) have benefits occurring in the more distant future and costs occurring in the more immediate future.

Question 5

A nonexclusive good is a good that

Accepted Answer

A) is sold in low price markets. 
B) is impossible to keep people from enjoying the benefits the good provides. 
C) is produced by a perfectly competitive firm. 
D) is produced at the lowest possible cost. 
A) is sold in low price markets. 
B) is impossible to keep people from enjoying the benefits the good provides. 
C) is produced by a perfectly competitive firm. 
D) is produced at the lowest possible cost.

Question 6

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The total dollar value damage to society is

Accepted Answer

A) 400 
B) 450 
C) 500 
D) 550 
A) 400 
B) 450 
C) 500 
D) 550

Question 7

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The market equilibrium quantity is

Accepted Answer

A) 400 
B) 450 
C) 500 
D) 550 
A) 400 
B) 450 
C) 500 
D) 550

Question 8

A perfectly competitive steel mill that produces large amounts of pollution (a negative externality)will,from a social point of view,

Accepted Answer

A) produce too little steel. 
B) produce the socially optimal quantity of steel. 
C) produce too much steel. 
D) produce too much steel only if it installs pollution control equipment. 
A) produce too little steel. 
B) produce the socially optimal quantity of steel. 
C) produce too much steel. 
D) produce too much steel only if it installs pollution control equipment.

Question 9

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The "optimal" amount of environmental damage would be

Accepted Answer

A) $0 
B) $40 
C) $450 
D) $500 
A) $0 
B) $40 
C) $450 
D) $500

Question 10

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The tax that would have to exist to achieve the socially optimal level of production would be

Accepted Answer

A) $0 
B) $.50 
C) $1 
D) $2 
A) $0 
B) $.50 
C) $1 
D) $2

Question 11

In drilling a new oil well in an existing oil field,the fact that output on existing wells is reduced means that

Accepted Answer

A) existing wells have negatively sloped marginal cost curves. 
B) existing wells and new wells are owned by different people. 
C) existing wells and new wells are owned by the same people. 
D) there is a discrepancy between private and social marginal costs. 
A) existing wells have negatively sloped marginal cost curves. 
B) existing wells and new wells are owned by different people. 
C) existing wells and new wells are owned by the same people. 
D) there is a discrepancy between private and social marginal costs.

Question 12

In the case of a negative externality,the social marginal cost will

Accepted Answer

A) exceed the private marginal cost. 
B) be equal to private marginal cost. 
C) fall short of private marginal cost. 
D) bear no significant relation to private marginal cost. 
A) exceed the private marginal cost. 
B) be equal to private marginal cost. 
C) fall short of private marginal cost. 
D) bear no significant relation to private marginal cost.

Question 13

Suppose residents of Toadhop live on the Quabache River,a river prone to flooding.Suppose there are 1000 (type A)people who value flood control more than the 1000 (type B)people. Type A Demand QD = 100 - P
Type B Demand QD = 50 - P
Where Q measures the quality of flood control.If the price of a unit of flood control is $100,000 and the citizens of Toadhop gather for a townhall meeting to find the socially optimal level of flood control,and they are successful,they will pick Q equal to

Accepted Answer

A) 0 
B) 10 
C) 25 
D) 70 
A) 0 
B) 10 
C) 25 
D) 70

Question 14

Left to their own,private markets tend to

Accepted Answer

A) under-allocate resources to public goods. 
B) allocate the economically efficient amount of resources to public goods. 
C) over-allocate resources to public goods. 
A) under-allocate resources to public goods. 
B) allocate the economically efficient amount of resources to public goods. 
C) over-allocate resources to public goods.

In perfect competition,environmental externalities need not distort the allocation of resources providing

In evaluating public projects,a higher interest rate (r)will favor those projects which

A nonexclusive good is a good that

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q_D = 1000 - 100P and Q_S = -100 + 100P.The total dollar value damage to society is

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q_D = 1000 - 100P and Q_S = -100 + 100P.The market equilibrium quantity is

A perfectly competitive steel mill that produces large amounts of pollution (a negative externality)will,from a social point of view,

In drilling a new oil well in an existing oil field,the fact that output on existing wells is reduced means that

In the case of a negative externality,the social marginal cost will

Left to their own,private markets tend to

Economic Models

Utility and Choice

Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Behavioral Economics

Filters

Exam 16: Externalities and Public Goods

In perfect competition,environmental externalities need not distort the allocation of resources providing

In evaluating public projects,a higher interest rate (r)will favor those projects which

A nonexclusive good is a good that

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The total dollar value damage to society is

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The market equilibrium quantity is

A perfectly competitive steel mill that produces large amounts of pollution (a negative externality)will,from a social point of view,

In drilling a new oil well in an existing oil field,the fact that output on existing wells is reduced means that

In the case of a negative externality,the social marginal cost will

Left to their own,private markets tend to

Economic Models

Utility and Choice

Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Behavioral Economics

Filters

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q_D = 1000 - 100P and Q_S = -100 + 100P.The total dollar value damage to society is

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q_D = 1000 - 100P and Q_S = -100 + 100P.The market equilibrium quantity is