Question 1

If policymakers use a pollution tax to control pollution,the tax per unit of pollution should be set

Accepted Answer

A) equal to the marginal external cost at the economically efficient level of pollution. 
B) equal to the marginal private cost of production at the economically efficient level of pollution. 
C) equal to the amount of the deadweight loss created in the absence of a pollution tax. 
D) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product. 
A) equal to the marginal external cost at the economically efficient level of pollution. 
B) equal to the marginal private cost of production at the economically efficient level of pollution. 
C) equal to the amount of the deadweight loss created in the absence of a pollution tax. 
D) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.

Question 2

Figure 15-4   Suppose there are several paper mills producing paper for a market.These mills,located upstream from a fishing village,discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river,and the use of the river for recreation and as a public water supply source.Figure 15-4 shows the paper market.Use this Figure to answer the following question(s).
-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 3

For the Coase theorem to work,there must be clear assignment of property rights.

Accepted Answer

A) True 
 B)False

Question 4

Figure 15-9   Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 15-9 illustrates the situation in the toilet paper market.
-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

Question 5

How does the construction of a market demand curve for a private good differ from that for a public good?

Accepted Answer

A) There is no difference;in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
B) There is no difference;in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price. 
C) The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price,but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
D) The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good,but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price. 
A) There is no difference;in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
B) There is no difference;in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price. 
C) The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price,but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. 
D) The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good,but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price.

Question 6

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 7

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 8

State the Coase theorem.

Accepted Answer

The Coase theorem states that if transac

Question 9

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 10

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 11

Figure 15-7  
-Refer to Figure 15-7.What is the incremental benefit of increasing the quantity of pollution reduction from QB to QE units?

Accepted Answer

A) PF 
B) PF × QE  
C) the value of the area BEF 
D) the value of the area QBBFQE 
A) PF 
B) PF × QE  
C) the value of the area BEF 
D) the value of the area QBBFQE

Question 12

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

Accepted Answer

A) True 
 B)False

If policymakers use a pollution tax to control pollution,the tax per unit of pollution should be set

For the Coase theorem to work,there must be clear assignment of property rights.

How does the construction of a market demand curve for a private good differ from that for a public good?

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

A positive externality results when

State the Coase theorem.

The supply curve of a public goods shows

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

Figure 15-7 -Refer to Figure 15-7.What is the incremental benefit of increasing the quantity of pollution reduction from Q_Bto Q_Eunits?

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets 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

If policymakers use a pollution tax to control pollution,the tax per unit of pollution should be set

For the Coase theorem to work,there must be clear assignment of property rights.

How does the construction of a market demand curve for a private good differ from that for a public good?

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

A positive externality results when

State the Coase theorem.

The supply curve of a public goods shows

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

Figure 15-7 -Refer to Figure 15-7.What is the incremental benefit of increasing the quantity of pollution reduction from QB to QE units?

In economics,the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters

Figure 15-7 -Refer to Figure 15-7.What is the incremental benefit of increasing the quantity of pollution reduction from Q_Bto Q_Eunits?