Question 1

As pollution emission levels increase, the marginal social cost of pollution

Accepted Answer

A)  increases. 
B)  decreases. 
C)  does not change. 
D)  falls to zero.

Question 2

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. The ________ imposed as a result of producing the efficient level of fertilizer is $250.

Accepted Answer

A)  marginal social cost 
B)  total damage 
C)  marginal private cost 
D)  tax

Question 3

If firms have to account for external costs of production, then they will ________ compared with what they would do if they did not have to account for the external costs.

Accepted Answer

A)  underproduce and underprice 
B)  underproduce and overprice 
C)  overproduce and underprice 
D)  overproduce and overprice

Question 4

The optimal level of provision of public goods is where societyʹs total willingness to pay per unit is equal to the

Accepted Answer

A)  total cost of producing the good. 
B)  average cost of producing the good. 
C)  variable cost of producing the good. 
D)  marginal cost of producing the good.

Question 5

Refer to the data provided in Table 16.3 below to answer the following question(s).
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.3
 
-Refer to Table 16.3. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, how many permits will be traded between the two firms?

Accepted Answer

A)  A will buy two permits from B. 
B)  B will buy two permits from A. 
C)  A will buy one permit from B. 
D)  B will buy one permit from A.

Question 6

Taxes on a producing firm's ________ are meant to force decision makers to consider the full costs of their actions.

Accepted Answer

A)  positive externalities 
B)  marginal production 
C)  spillovers 
D)  total production

Question 7

Ronald Coase argued that property rights should never be assigned to the party that is generating a negative externality.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following contains most of the characteristics of a public good?

Accepted Answer

A)  education 
B)  trash collection 
C)  a public library 
D)  national defense

Question 9

Refer to the information in Figure 16.5 below to answer the question(s) that follow.  Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the situation under the tax, Alpha would ________ and Beta would ________.

Accepted Answer

A)  be able to increase emissions; have to further reduce emissions 
B)  be able to increase emissions; be able to increase emissions 
C)  have to further reduce emissions; have to further reduce emissions 
D)  have to further reduce emissions; be able to increase emissions

Question 10

Relating to the Economics in Practice on page 337: A number of companies are using their own internal carbon taxes to reflect the social cost of carbon emissions on the environment. The price per ton of carbon emissions that they are using

Accepted Answer

A)  has been set by the government. 
B)  has been agreed to by the private sector. 
C)  is not standardized. 
D)  is the price established by the EPA.

Question 11

If the government wishes to encourage firms to internalize externalities, they should ________ activities resulting in negative externalities and ________ activities resulting in positive externalities

Accepted Answer

A)  tax; subsidize 
B)  subsidize; tax 
C)  ban; generate 
D)  place an injunction against; tax

Question 12

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. To force this firm to produce the ________ level of output, the government should ________ of $5.00 per bag of fertilizer.

Accepted Answer

A)  efficient; impose a tax 
B)  market; issue a subsidy 
C)  efficient; issue a subsidy 
D)  market; impose a tax

Question 13

An externality is

Accepted Answer

A)  a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. 
B)  the total cost to society of producing an additional unit of a good or service. 
C)  the amount a consumer pays to consume an additional amount of a particular good. 
D)  a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays.

Question 14

The Coase theorem states that

Accepted Answer

A)  the private sector will fail to produce the efficient amount of a public good because of the free-rider problem. 
B)  under certain conditions, private parties can arrive at the efficient solution without government involvement. 
C)  if there are external costs in production, the government must intervene in the market to assure that the efficient level of output is produced. 
D)  public goods should be produced up to the point where the additional benefit received by society equals the additional cost of producing the good.

Question 15

We assume the marginal benefit of consumption ________ as we consume fewer units of a good.

Accepted Answer

A)  remains constant 
B)  increases 
C)  decreases 
D)  could either increase or decrease

Question 16

Assuming no externalities exist, if a good's price is less than its marginal cost, then the benefits consumers derive are

Accepted Answer

A)  greater than the cost of resources needed to produce it and less should be produced. 
B)  greater than the cost of resources needed to produce it and more should be produced. 
C)  less than the cost of resources needed to produce it and less should be produced. 
D)  less than the cost of resources needed to produce it and more should be produced.

Question 17

The many types of pollution do not include ________ pollution.

Accepted Answer

A)  air 
B)  price 
C)  water 
D)  sound

Question 18

You spend $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true?

Accepted Answer

A)  You are spending too much on your yard, because your neighbor derives only $50 worth of benefits. 
B)  You should refuse to spend anything on your yard unless your neighbor pays you $50 a month. 
C)  If you took into consideration the benefits your neighbor derived, the efficient level of lawn maintenance would be greater than $300 a month. 
D)  If you took into consideration the benefits your neighbor derived, the efficient level of lawn maintenance would be less than $300 a month.

Question 19

Vaccinations convey ________ to third parties.

Accepted Answer

A)  positive externalities 
B)  negative externalities 
C)  economies of scale 
D)  public goods

Question 20

Every good that the government provides is an example of a public good.

Accepted Answer

A) True 
 B)False

Exam 16: Externalities, Public Goods, and Common Resources

As pollution emission levels increase, the marginal social cost of pollution

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ imposed as a result of producing the efficient level of fertilizer is $250.

If firms have to account for external costs of production, then they will ________ compared with what they would do if they did not have to account for the external costs.

The optimal level of provision of public goods is where societyʹs total willingness to pay per unit is equal to the

Taxes on a producing firm's ________ are meant to force decision makers to consider the full costs of their actions.

Ronald Coase argued that property rights should never be assigned to the party that is generating a negative externality.

Which of the following contains most of the characteristics of a public good?

Relating to the Economics in Practice on page 337: A number of companies are using their own internal carbon taxes to reflect the social cost of carbon emissions on the environment. The price per ton of carbon emissions that they are using

If the government wishes to encourage firms to internalize externalities, they should activities resulting in negative externalities and activities resulting in positive externalities

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. To force this firm to produce the level of output, the government should of $5.00 per bag of fertilizer.

An externality is

The Coase theorem states that

We assume the marginal benefit of consumption ________ as we consume fewer units of a good.

Assuming no externalities exist, if a good's price is less than its marginal cost, then the benefits consumers derive are

The many types of pollution do not include ________ pollution.

You spend $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true?

Vaccinations convey ________ to third parties.

Every good that the government provides is an example of a public good.

Exam 16: Externalities, Public Goods, and Common Resources

As pollution emission levels increase, the marginal social cost of pollution

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ imposed as a result of producing the efficient level of fertilizer is $250.

If firms have to account for external costs of production, then they will ________ compared with what they would do if they did not have to account for the external costs.

The optimal level of provision of public goods is where societyʹs total willingness to pay per unit is equal to the

Taxes on a producing firm's ________ are meant to force decision makers to consider the full costs of their actions.

Ronald Coase argued that property rights should never be assigned to the party that is generating a negative externality.

Which of the following contains most of the characteristics of a public good?

Relating to the Economics in Practice on page 337: A number of companies are using their own internal carbon taxes to reflect the social cost of carbon emissions on the environment. The price per ton of carbon emissions that they are using

If the government wishes to encourage firms to internalize externalities, they should ________ activities resulting in negative externalities and ________ activities resulting in positive externalities

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. To force this firm to produce the ________ level of output, the government should ________ of $5.00 per bag of fertilizer.

An externality is

The Coase theorem states that

We assume the marginal benefit of consumption ________ as we consume fewer units of a good.

Assuming no externalities exist, if a good's price is less than its marginal cost, then the benefits consumers derive are

The many types of pollution do not include ________ pollution.

You spend $300 every month to keep your lawn and garden maintained. Your neighbor has told you that she derives $50 a month in enjoyment from being able to look at your beautiful yard. Which of the following is true?

Vaccinations convey ________ to third parties.

Every good that the government provides is an example of a public good.

If the government wishes to encourage firms to internalize externalities, they should activities resulting in negative externalities and activities resulting in positive externalities

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. To force this firm to produce the level of output, the government should of $5.00 per bag of fertilizer.