Question 1

Limitations of bargaining include

Accepted Answer

A)  Its impracticality 
B)  Ambiguity in the assignment of property rights 
C)  Difficulties associated with enforcing contracts 
D)  All of these 
A)  Its impracticality 
B)  Ambiguity in the assignment of property rights 
C)  Difficulties associated with enforcing contracts 
D)  All of these

Question 2

Common property resources include

Accepted Answer

A)  Movies 
B)  Fast food 
C)  Oceans 
D)  Professional baseball games 
A)  Movies 
B)  Fast food 
C)  Oceans 
D)  Professional baseball games

Question 3

The Coase Theorem states that

Accepted Answer

A)  If bargaining is difficult, then regardless of how property rights are assigned, voluntary agreements between parties will remedy the market failures associated with externalities and restore economic efficiency 
B)  If bargaining is frictionless, then the initial assignment of property rights determines the market failures associated by externalities and voluntary agreements between private parties are useless 
C)  If bargaining is frictionless, then regardless of how property rights are assigned, voluntary agreements between private parties will remedy the market failures associated with externalities and restore economic efficiency 
D)  If bargaining is frictionless, market failures must be remedied by government intervention 
A)  If bargaining is difficult, then regardless of how property rights are assigned, voluntary agreements between parties will remedy the market failures associated with externalities and restore economic efficiency 
B)  If bargaining is frictionless, then the initial assignment of property rights determines the market failures associated by externalities and voluntary agreements between private parties are useless 
C)  If bargaining is frictionless, then regardless of how property rights are assigned, voluntary agreements between private parties will remedy the market failures associated with externalities and restore economic efficiency 
D)  If bargaining is frictionless, market failures must be remedied by government intervention

Question 4

A good is nonrival if

Accepted Answer

A)  There is no way to prevent a person from consuming or using it 
B)  More than one person can consume it at the same time without affecting its value to others 
C)  Consumption of it involves perfect rivalry 
D)  Consumption is completely excludable 
A)  There is no way to prevent a person from consuming or using it 
B)  More than one person can consume it at the same time without affecting its value to others 
C)  Consumption of it involves perfect rivalry 
D)  Consumption is completely excludable

Question 5

A tradable emissions permit

Accepted Answer

A)  Entitles a firm to generate a specified amount of a given pollutant 
B)  Is transferable 
C)  Can be used to promote least-cost abatement 
D)  All of these 
A)  Entitles a firm to generate a specified amount of a given pollutant 
B)  Is transferable 
C)  Can be used to promote least-cost abatement 
D)  All of these

Question 6

A good is nonexcludable if

Accepted Answer

A)  There is no way to prevent a person from consuming or using it 
B)  More than one person can consume it at the same time without affecting its value to others 
C)  Consumption of it involves perfect rivalry 
D)  Consumption is completely excludable 
A)  There is no way to prevent a person from consuming or using it 
B)  More than one person can consume it at the same time without affecting its value to others 
C)  Consumption of it involves perfect rivalry 
D)  Consumption is completely excludable

Question 7

Three hundred paper mills compete in the paper market.The total cost of production (in dollars)for each mill is given by the formula   ,where Qmill indicates the mills annual production in thousands of tons.The marginal external cost of a mill's production (in dollars)is given by the formula   Finally,annual market demand (in thousands of tons)is given by the formula   Find the competitive price.

Accepted Answer

A)  $1,400 
B)  $920 
C)  $7,000 
D)  $1995 
A)  $1,400 
B)  $920 
C)  $7,000 
D)  $1995

Question 8

The economic gain that a positive externality provides to others is called

Accepted Answer

A)  An internal benefit 
B)  An external benefit 
C)  An external cost 
D)  An internal cost 
A)  An internal benefit 
B)  An external benefit 
C)  An external cost 
D)  An internal cost

Question 9

Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula   Patrols cost $25 per hour.Find the marginal social benefit function.

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 10

The economist that originated the idea that government can correct externalities through taxes and subsidization is

Accepted Answer

A)  John Nash 
B)  Arthur Cecil Pigou 
C)  Ronald Coase 
D)  Theodore Groves 
A)  John Nash 
B)  Arthur Cecil Pigou 
C)  Ronald Coase 
D)  Theodore Groves

Question 11

A liability rule

Accepted Answer

A)  Involves the use of taxes or fees to remedy negative externalities 
B)  Involves the use of subsidies to remedy negative externalities 
C)  Is a legal principle requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses 
D)  Requires that victims of an externality pay a tax to the producers of the externality 
A)  Involves the use of taxes or fees to remedy negative externalities 
B)  Involves the use of subsidies to remedy negative externalities 
C)  Is a legal principle requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses 
D)  Requires that victims of an externality pay a tax to the producers of the externality

Question 12

Three hundred paper mills compete in the paper market.The total cost of production (in dollars)for each mill is given by the formula   ,where Qmill indicates the mills annual production in thousands of tons.The marginal external cost of a mill's production (in dollars)is given by the formula   Finally,annual market demand (in thousands of tons)is given by the formula   Find the function for the marginal social cost.

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 13

Your neighbor likes to blast 1970's rock music and the louder the better.The loud music imposes a cost on you because it disrupts your study of economics.Let D stand for the volume of his music in decibels,B for his benefits and C for your costs,where B and C are in dollars.For any given volume,D,your neighbor's benefit is   and your cost is   What is your marginal cost at the socially efficient noise level?

Accepted Answer

A)  $0.75 
B)  $0.29 
C)  $0.24 
D)  $0.25 
A)  $0.75 
B)  $0.29 
C)  $0.24 
D)  $0.25

Question 14

Pigouvian taxation

Accepted Answer

A)  Involves the use of taxes or fees to remedy negative externalities 
B)  Involves the use of subsidies to remedy negative externalities 
C)  Is a legal principles requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses 
D)  Requires that victims of an externality pay a tax to the producers of the externality 
A)  Involves the use of taxes or fees to remedy negative externalities 
B)  Involves the use of subsidies to remedy negative externalities 
C)  Is a legal principles requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses 
D)  Requires that victims of an externality pay a tax to the producers of the externality

Question 15

A positive externality is created if

Accepted Answer

A)  An action harms someone not involved in the market transaction 
B)  An action benefits someone not involved in the market transaction 
C)  Neither helps nor hurts someone not involved in the market transaction 
D)  An action harms someone involved in the market transaction 
A)  An action harms someone not involved in the market transaction 
B)  An action benefits someone not involved in the market transaction 
C)  Neither helps nor hurts someone not involved in the market transaction 
D)  An action harms someone involved in the market transaction

Question 16

Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula   Patrols cost $25 per hour.If each store provided security independently,how much would each store provide (rounded to the nearest whole number)?

Accepted Answer

A)  88 person-hours of patrols per week 
B)  168 person-hours of patrols per week 
C)  22 person-hours of patrols per week 
D)  97 person-hours of patrols per week 
A)  88 person-hours of patrols per week 
B)  168 person-hours of patrols per week 
C)  22 person-hours of patrols per week 
D)  97 person-hours of patrols per week

Question 17

A Groves mechanism

Accepted Answer

A)  Is a procedure for setting the level of the private good that induces everyone to report their preferences correctly 
B)  Produces a socially inefficient outcome 
C)  Is a procedure for setting the level of the public good that induces everyone to report their preferences incorrectly 
D)  Is a procedure for setting the level of the public good that induces everyone to report their preferences correctly 
A)  Is a procedure for setting the level of the private good that induces everyone to report their preferences correctly 
B)  Produces a socially inefficient outcome 
C)  Is a procedure for setting the level of the public good that induces everyone to report their preferences incorrectly 
D)  Is a procedure for setting the level of the public good that induces everyone to report their preferences correctly

Question 18

A private good

Accepted Answer

A)  Is a good for which consumption involves perfect rivalry 
B)  Is nonexcludable 
C)  Is often provided by the government 
D)  Is often not provided by the government 
A)  Is a good for which consumption involves perfect rivalry 
B)  Is nonexcludable 
C)  Is often provided by the government 
D)  Is often not provided by the government

Question 19

Your neighbor likes to blast 1970's rock music and the louder the better.The loud music imposes a cost on you because it disrupts your study of economics.Let D stand for the volume of his music in decibels,B for his benefits and C for your costs,where B and C are in dollars.For any given volume,D,your neighbor's benefit is   and your cost is   With an efficient Pigouvian tax,what noise level will your neighbor choose?

Accepted Answer

A)  90 decibels 
B)  95 decibels 
C)  115 decibels 
D)  345 decibels 
A)  90 decibels 
B)  95 decibels 
C)  115 decibels 
D)  345 decibels

Question 20

Your neighbor likes to blast 1970's rock music and the louder the better.The loud music imposes a cost on you because it disrupts your study of economics.Let D stand for the volume of his music in decibels,B for his benefits and C for your costs,where B and C are in dollars.For any given volume,D,your neighbor's benefit is   and your cost is   With an efficient Pigouvian tax,how much will your neighbor pay in taxes in total?

Accepted Answer

A)  $22.50 
B)  $23.75 
C)  $28.75 
D)  $71.25 
A)  $22.50 
B)  $23.75 
C)  $28.75 
D)  $71.25

Limitations of bargaining include

Common property resources include

The Coase Theorem states that

A good is nonrival if

A tradable emissions permit

A good is nonexcludable if

The economic gain that a positive externality provides to others is called

Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula Patrols cost $25 per hour.Find the marginal social benefit function.

The economist that originated the idea that government can correct externalities through taxes and subsidization is

A liability rule

Pigouvian taxation

A positive externality is created if

A Groves mechanism

A private good

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Filters

Exam 20: Externalities and Public Goods

Limitations of bargaining include

Common property resources include

The Coase Theorem states that

A good is nonrival if

A tradable emissions permit

A good is nonexcludable if

The economic gain that a positive externality provides to others is called

Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula Patrols cost $25 per hour.Find the marginal social benefit function.

The economist that originated the idea that government can correct externalities through taxes and subsidization is

A liability rule

Pigouvian taxation

A positive externality is created if

A Groves mechanism

A private good

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Filters