Question 1

The cost borne by a producer in the production of a good or service is called

Accepted Answer

A) private cost. 
B) public cost. 
C) social cost. 
D) internal cost. 
A) private cost. 
B) public cost. 
C) social cost. 
D) internal cost.

Question 2

Which of the following is an example of a Pigovian tax?

Accepted Answer

A) payments by utilities to obtain tradable emissions allowances 
B) a payroll tax 
C) payments for licenses to pollute 
D) a tax imposed on a utility that internalises the cost of externalities caused by the utility 
A) payments by utilities to obtain tradable emissions allowances 
B) a payroll tax 
C) payments for licenses to pollute 
D) a tax imposed on a utility that internalises the cost of externalities caused by the utility

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following activities creates a negative externality?

Accepted Answer

A) cleaning up the sidewalk on your block 
B) graduating from university 
C) repainting the house you live in to improve its appearance 
D) keeping a junked car parked on your front lawn 
A) cleaning up the sidewalk on your block 
B) graduating from university 
C) repainting the house you live in to improve its appearance 
D) keeping a junked car parked on your front lawn

Question 5

An externality refers to economic events outside a market.

Accepted Answer

A) True 
 B)False

Question 6

'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 the

Question 7

Which of the following is an example of a quasi-public good?

Accepted Answer

A) cable television 
B) organic apples 
C) stock of knowledge in the public domain 
D) crime prevention 
A) cable television 
B) organic apples 
C) stock of knowledge in the public domain 
D) crime prevention

Question 8

A private good is

Accepted Answer

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

Question 9

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.Why is there a deadweight loss?

Accepted Answer

A) because the marginal social cost of producing each additional unit in excess of Q2 exceeds the marginal benefit 
B) because the marginal private cost of producing each additional unit in excess of Q2 exceeds the marginal benefit 
C) because the marginal social benefit of producing each additional unit in excess of Q2 exceeds the private cost 
D) because the marginal private benefit of producing each additional unit in excess of Q2 exceeds the social cost 
A) because the marginal social cost of producing each additional unit in excess of Q2 exceeds the marginal benefit 
B) because the marginal private cost of producing each additional unit in excess of Q2 exceeds the marginal benefit 
C) because the marginal social benefit of producing each additional unit in excess of Q2 exceeds the private cost 
D) because the marginal private benefit of producing each additional unit in excess of Q2 exceeds the social cost

Question 10

Figure 15-7  
-Refer to Figure 15-7.Which of the following statements is true?

Accepted Answer

A) At QE,the benefits of reducing pollution outweighs the cost of pollution reduction. 
B) At QB,society is underallocating resources to pollution reduction. 
C) The optimal quantity of pollution reduction is QB. 
D) The optimal quantity of pollution reduction is QE. 
A) At QE,the benefits of reducing pollution outweighs the cost of pollution reduction. 
B) At QB,society is underallocating resources to pollution reduction. 
C) The optimal quantity of pollution reduction is QB. 
D) The optimal quantity of pollution reduction is QE.

Question 11

Economists argue that the level of pollution should be

Accepted Answer

A) reduced completely to zero because by definition,it is a negative external effect. 
B) ignored because it has always been present since the beginning of history. 
C) reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society. 
D) best determined by elected officials who can speak on behalf of the public. 
A) reduced completely to zero because by definition,it is a negative external effect. 
B) ignored because it has always been present since the beginning of history. 
C) reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society. 
D) best determined by elected officials who can speak on behalf of the public.

Question 12

Issuing marketable emission allowance permits to polluting firms will result in those firms polluting more than is socially desirable.

Accepted Answer

A) True 
 B)False

Question 13

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following displays rivalry and excludability in consumption?

Accepted Answer

A) public goods 
B) private goods 
C) quasi-public goods 
D) common resources 
A) public goods 
B) private goods 
C) quasi-public goods 
D) common resources

Question 15

If there are no externalities,a competitive market achieves economic efficiency.If there is a negative externality,economic efficiency will not be achieved because

Accepted Answer

A) too little of the good will be produced. 
B) too much of the good will be produced. 
C) a deadweight loss will occur that is equal to the area under the demand curve for the good. 
D) economic surplus is maximised. 
A) too little of the good will be produced. 
B) too much of the good will be produced. 
C) a deadweight loss will occur that is equal to the area under the demand curve for the good. 
D) economic surplus is maximised.

Question 16

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 17

The private cost of a good or service is the cost borne by the producer.

Accepted Answer

A) True 
 B)False

Question 18

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

Accepted Answer

The tragedy of the commons refers to sit

Question 19

Figure 15-3  
-Refer to Figure 15-3.The size of marginal external benefits can be determined by

Accepted Answer

A) the demand curve D2. 
B) D2 + D1 at each output level 
C) D2 - D1 at each output level. 
D) the demand curve D1. 
A) the demand curve D2. 
B) D2 + D1 at each output level 
C) D2 - D1 at each output level. 
D) the demand curve D1.

Question 20

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

Accepted Answer

A) The equilibrium in the market is not efficient;the marginal benefit from electricity is greater than the marginal social cost. 
B) A deadweight loss occurs;at equilibrium,the additional social cost of production is greater than the additional benefit to consumers. 
C) The equilibrium in the market is not efficient;because of the cost of the acid rain,economic efficiency would be greater if more electricity were produced. 
D) The equilibrium in the market is not efficient;consumer surplus is equal to producer surplus. 
A) The equilibrium in the market is not efficient;the marginal benefit from electricity is greater than the marginal social cost. 
B) A deadweight loss occurs;at equilibrium,the additional social cost of production is greater than the additional benefit to consumers. 
C) The equilibrium in the market is not efficient;because of the cost of the acid rain,economic efficiency would be greater if more electricity were produced. 
D) The equilibrium in the market is not efficient;consumer surplus is equal to producer surplus.

The cost borne by a producer in the production of a good or service is called

Which of the following is an example of a Pigovian tax?

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

Which of the following activities creates a negative externality?

An externality refers to economic events outside a 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.

Which of the following is an example of a quasi-public good?

A private good is

Figure 15-7 -Refer to Figure 15-7.Which of the following statements is true?

Economists argue that the level of pollution should be

Issuing marketable emission allowance permits to polluting firms will result in those firms polluting more than is socially desirable.

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Which of the following displays rivalry and excludability in consumption?

If there are no externalities,a competitive market achieves economic efficiency.If there is a negative externality,economic efficiency will not be achieved because

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

The private cost of a good or service is the cost borne by the producer.

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

Figure 15-3 -Refer to Figure 15-3.The size of marginal external benefits can be determined by

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

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

The cost borne by a producer in the production of a good or service is called

Which of the following is an example of a Pigovian tax?

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

Which of the following activities creates a negative externality?

An externality refers to economic events outside a 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.

Which of the following is an example of a quasi-public good?

A private good is

Figure 15-7 -Refer to Figure 15-7.Which of the following statements is true?

Economists argue that the level of pollution should be

Issuing marketable emission allowance permits to polluting firms will result in those firms polluting more than is socially desirable.

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Which of the following displays rivalry and excludability in consumption?

If there are no externalities,a competitive market achieves economic efficiency.If there is a negative externality,economic efficiency will not be achieved because

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

The private cost of a good or service is the cost borne by the producer.

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.

Figure 15-3 -Refer to Figure 15-3.The size of marginal external benefits can be determined by

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

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