Question 1

The externality associated with technology spillovers

Accepted Answer

A)   cannot be internalized by government.
B)   is a negative externality.
C)   can be internalized, potentially, through taxation of firms that are responsible for technology spillovers.
D)   can be internalized, potentially, through patent protection.E) C) and D)
F) A) and D)

Question 2

The Coase theorem suggests that private markets may not be able to solve the problem of externalities

Accepted Answer

A)   if the government does not become involved in the process.
B)   when the number of interested parties is large and bargaining costs are high.
C)   if the firm in the market is a monopoly.
D)   if some people benefit from the externality.E) A) and D)
F) A) and C)

Question 3

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics.  Multiple Choice - Section 02: Public Policies toward Externalities
-Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Accepted Answer

A)   social optimum has been reached.
B)   market equilibrium has been reached.
C)   government must have imposed a corrective tax to guide the market to this outcome.
D)   government must have offered a corrective subsidy to guide the market to this outcome.E) B) and C)
F) All of the above

Question 4

Suppose the Environmental Protection Agency uses a corrective tax to set a price for pollution. Under this policy, is the supply curve for pollution rights vertical or is it horizontal?

Accepted Answer

The supply...

Question 5

If only a few people are affected by an externality, then it is likely that

Accepted Answer

A)   corrective taxes will provide the most efficient solution to the externality.
B)   command-and-control regulation will provide the most efficient solution to the externality.
C)   a private solution to the inefficiency will occur.
D)   a private solution will be very difficult to negotiate.E) A) and B)
F) All of the above

Question 6

When the government uses a command-and-control policy to solve an externality, it

Accepted Answer

A)   is usually the most effective policy option available.
B)   creates policies that directly regulate behavior.
C)   usually involves taxing the consumption of a commodity.
D)   typically refers to the Coase theorem to structure the policy.E) A) and B)
F) A) and D)

Question 7

Which of the following is not correct?

Accepted Answer

A)   Markets allocate scarce resources with the forces of supply and demand.
B)   The equilibrium of supply and demand is typically an efficient allocation of resources.
C)   Governments can sometimes improve market outcomes.
D)   Externalities cannot be positive.E) A) and B)
F) A) and C)

Question 8

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Accepted Answer

A)   relies on moral codes to reduce the pollution externality.
B)   relies on the Coase Theorem.
C)   discriminates against foreigners.
D)   relies on incentives to reduce the pollution externality.E) B) and D)
F) None of the above

Question 9

The goal of industrial policy should be that

Accepted Answer

A)   industries yielding the largest positive externalities should receive the biggest subsidies.
B)   any industry that produces negative externalities should be heavily taxed.
C)   any production process that produces negative externalities should be shut down.
D)   all industries that produce positive externalities should be equally subsidized.E) None of the above
F) B) and C)

Question 10

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored historic building entails the following:
-a private cost of $800,000;
-a private value of $650,000;
-a social value of $800,000.
-Refer to Scenario 10-2. Is the market equilibrium quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The market equilibri...

Question 11

Figure 10-9
 
-Refer to Figure 10-9, Panel (b)  and Panel (c) . The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, a government policy that internalized the externality would move the quantity of smokestack scrubbers installed from point

Accepted Answer

A)   Q2 to point Q3.
B)   Q3 to point Q2.
C)   Q4 to point Q5.
D)   Q5 to point Q4.E) All of the above
F) B) and C)

Question 12

A corrective tax

Accepted Answer

A)   can be used to internalize a negative externality.
B)   imposed on sellers shifts the supply curve to the left.
C)   imposed on buyers shifts the demand curve to the left.
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 13

If a market is characterized by a positive externality that is not the result of a technology spillover,

Accepted Answer

A)   the socially optimal level of output is less than the equilibrium level of output, and the optimal price is greater than the equilibrium price.
B)   the socially optimal level of output is greater than the equilibrium level of output, and the socially optimal price is less than the equilibrium price.
C)   the socially optimal level of output is greater than the equilibrium level of output, and the socially optimal price is greater than the equilibrium price.
D)   the socially optimal level of output is less than the equilibrium level of output, and the socially optimal price is less than the equilibrium price.E) A) and C)
F) All of the above

Question 14

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Accepted Answer

A) True 
 B)False

Question 15

All remedies for externalities share the goal of

Accepted Answer

A)   moving the allocation of resources toward the market equilibrium.
B)   moving the allocation of resources toward the socially optimal equilibrium.
C)   increasing the allocation of resources.
D)   decreasing the allocation of resources.E) B) and C)
F) None of the above

Question 16

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Accepted Answer

A)   They are equal.
B)   The after-tax equilibrium quantity is greater than the socially optimal quantity.
C)   The after-tax equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) A) and C)
F) A) and B)

Question 17

Table 10-2
The following table shows the private value, private cost, and social value for a market with a positive externality.
 
-Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

Accepted Answer

A)   $3
B)   $5
C)   $7
D)   $9E) All of the above
F) B) and D)

Question 18

Table 10-2
The following table shows the private value, private cost, and social value for a market with a positive externality.
 
-Refer to Table 10-2. What is the equilibrium quantity of output in this market?

Accepted Answer

A)   3 units
B)   4 units
C)   5 units
D)   6 unitsE) B) and C)
F) C) and D)

Question 19

Which of the following statements is correct?

Accepted Answer

A)   The use of pollution permits and corrective taxes reduces the cost of environmental protection.
B)   Rich countries usually have cleaner environments than poor countries because a clean environment is like other normal goods in that it has a positive income elasticity.
C)   Clean water and clean air are goods to which the law of demand applies.
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 20

Cameron lives in an apartment building and gets a $700 benefit from playing his stereo. Renee, who lives next door to Cameron and often loses sleep due to the music coming from Cameron's stereo, bears a $1,000 cost from the noise. At which of the following offers from Renee could both Renee and Cameron benefit from the silencing of Cameron's stereo?

Accepted Answer

A)   $250
B)   $550
C)   $750
D)   $1,020E) None of the above
F) B) and D)

Exam 10: Externalities

When the government uses a command-and-control policy to solve an externality, it

Correct Answer
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The Coase theorem suggests that private markets may not be able to solve the problem of externalities

Correct Answer
verified

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. What is the equilibrium quantity of output in this market?

Correct Answer
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Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

Correct Answer
verified

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Correct Answer
verified

Suppose the Environmental Protection Agency uses a corrective tax to set a price for pollution. Under this policy, is the supply curve for pollution rights vertical or is it horizontal?

Correct Answer
verified
The supply...
View Answer

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Correct Answer
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Which of the following is not correct?

Correct Answer
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If only a few people are affected by an externality, then it is likely that

Correct Answer
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Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Correct Answer
verified

Correct Answer
verified
The market equilibri...
View Answer

The externality associated with technology spillovers

Correct Answer
verified

If a market is characterized by a positive externality that is not the result of a technology spillover,

Correct Answer
verified

All remedies for externalities share the goal of

Correct Answer
verified

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Correct Answer
verified

Correct Answer
verified

A corrective tax

Correct Answer
verified

The goal of industrial policy should be that

Correct Answer
verified

Exam 10: Externalities

When the government uses a command-and-control policy to solve an externality, it

Correct AnswerverifiedShow Answer

The Coase theorem suggests that private markets may not be able to solve the problem of externalities

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. What is the equilibrium quantity of output in this market?

Correct AnswerverifiedShow Answer

Table 10-2 The following table shows the private value, private cost, and social value for a market with a positive externality. -Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

Correct AnswerverifiedShow Answer

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Correct AnswerverifiedShow Answer

Suppose the Environmental Protection Agency uses a corrective tax to set a price for pollution. Under this policy, is the supply curve for pollution rights vertical or is it horizontal?

Correct AnswerverifiedThe supply...View AnswerShow Answer

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

If only a few people are affected by an externality, then it is likely that

Correct AnswerverifiedShow Answer

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe market equilibri...View AnswerShow Answer

The externality associated with technology spillovers

Correct AnswerverifiedShow Answer

If a market is characterized by a positive externality that is not the result of a technology spillover,

Correct AnswerverifiedShow Answer

All remedies for externalities share the goal of

Correct AnswerverifiedShow Answer

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

The goal of industrial policy should be that

Correct AnswerverifiedShow Answer

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The supply...
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The market equilibri...
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