Question 1

When a tax on output is imposed to internalize the external costs of pollution,the supply curve shifts down by the amount of the tax.

Accepted Answer

A) True 
 B)False

Question 2

Because producers do not bear the external cost of pollution

Accepted Answer

A)   the economically efficient level of production is achieved.
B)   private production is below the economically efficient level.
C)   private production exceeds the economically efficient level.
D)   the market price is too high.E) B) and D)
F) A) and D)

Question 3

State whether each of the following goods and services is nonrival,nonexcludable or both:
a.A toll road
b.A public park
c.A lighthouse
d.An art museum
e.A radio broadcast of "A Prairie Home Companion"

Accepted Answer

a.Nonrival,although rivalry could exist ...

Question 4

What is a "social cost" of production?

Accepted Answer

A)   the cost of the natural resources used up in production
B)   the total costs of producing a product, both implicit and explicit costs
C)   the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product
D)   the cost of the environmental damage created by productionE) A) and D)
F) B) and D)

Question 5

If there is pollution in producing a product,then the market equilibrium price

Accepted Answer

A)   is too high and equilibrium quantity is too low.
B)   and equilibrium quantity are too low.
C)   and equilibrium quantity are too high.
D)   is too low and equilibrium quantity is too high.E) A) and D)
F) A) and B)

Question 6

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

Accepted Answer

A) True 
 B)False

Question 7

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Accepted Answer

Internalizing an externality refers to t...

Question 8

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Accepted Answer

A) True 
 B)False

Question 9

What is an externality?

Accepted Answer

An externality is a benefit or...

Question 10

Figure 5-9 2- 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" class="answers-bank-image d-inline" rel="preload" > 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 5-9 illustrates the situation in the toilet paper market.
-Refer to Figure 5-9.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 outputE) A) and B)
F) B) and C)

Question 11

How does a negative externality in production reduce economic efficiency?

Accepted Answer

If there is a negative externality in pr...

Question 12

The Coase theorem states that

Accepted Answer

A)   government intervention is always needed if externalities are present.
B)   assigning property rights is the only thing the government should do in a market economy.
C)   if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities.
D)   a free market equilibrium is the best solution to address externalities.E) None of the above
F) All of the above

Question 13

Article Summary
According to a study by the Center for Neighborhood Technology, homes located within one-half mile of frequently-used public transportation held their value much better during the recent housing market downturn than did those without easy access to public transportation, and the greater home values reflect greater demand for neighborhoods in close proximity to public transportation. In addition to higher home values, the study found that close proximity to public transportation offers lower transportation costs, a wider variety of travel options, and access to more employment opportunities.
Source: Meg Handley, "Study: Proximity to Public Transit Boosts Home Values," U.S. News & World Report, March 22, 2013.
-Refer to the Article Summary.Higher home values which result from close proximity to public transportation are an example of a ________ due to the public transportation.

Accepted Answer

A)   positive externality.
B)   negative externality.
C)   private cost.
D)   social cost.E) A) and B)
F) All of the above

Question 14

Figure 5-7 
-Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A)   the supply of pollution reduction curve.
B)   the demand for pollution reduction curve.
C)   the negative externality curve.
D)   the value of pollution reduction curve.E) None of the above
F) A) and C)

Question 15

Steven Cheung examined the relationship between beekeepers and apple growers.Cheung noted that: "Pollination contracts usually include stipulations regarding the number and strength of ...[bee] colonies,the rental fee per hive,the time of delivery...the protection of bees from pesticides,and the strategic placing of hives." Cheung's suggests that the relationship between beekeepers and apple growers is an example of

Accepted Answer

A)   the Coase Theorem.
B)   how excessive legal costs can prevent economic efficiency from being achieved.
C)   negative externalities.
D)   government intervention improving economic efficiency.E) B) and C)
F) All of the above

Question 16

When production generates a negative externality,the true cost of production is the

Accepted Answer

A)   private cost of production.
B)   public cost of production.
C)   social cost of production.
D)   average cost of production.E) A) and C)
F) A) and B)

Question 17

Figure 5-3 o - Qm units. B)  over produces by Qo - Qm units. C)  over produces by Qn - Qm units. D)  under produces by Qn - Qm units." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-3.In the absence of any government intervention,the private market

Accepted Answer

A)   under produces by Qo - Qm units.
B)   over produces by Qo - Qm units.
C)   over produces by Qn - Qm units.
D)   under produces by Qn - Qm units.E) None of the above
F) All of the above

Question 18

Figure 5-3 2. B)  D2 + D1 at each output level C)  D2 - D1 at each output level. D)  the demand curve D1." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-3.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.E) B) and D)
F) None of the above

Question 19

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 internalizes the cost of externalities caused by the utilityE) A) and B)
F) A) and C)

Question 20

The tragedy of the commons was avoided in the Middle Ages by

Accepted Answer

A)   selling common grounds to individuals.
B)   the local police who monitored entry into the commons.
C)   social pressure to uphold traditionally accepted limits on family use of the commons.
D)   the government which imposed a tax for the use of the commons.E) None of the above
F) C) and D)

Exam 5: Externalities, environmental Policy, and Public Goods

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Correct Answer
verified
Internalizing an externality refers to t...
View Answer

The Coase theorem states that

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3.In the absence of any government intervention,the private market

Correct Answer
verified

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

Correct Answer
verified

When a tax on output is imposed to internalize the external costs of pollution,the supply curve shifts down by the amount of the tax.

Correct Answer
verified

Because producers do not bear the external cost of pollution

Correct Answer
verified

What is a "social cost" of production?

Correct Answer
verified

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3.The size of marginal external benefits can be determined by

Correct Answer
verified

Figure 5-7 -Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Correct Answer
verified

Correct Answer
verified

When production generates a negative externality,the true cost of production is the

Correct Answer
verified

If there is pollution in producing a product,then the market equilibrium price

Correct Answer
verified

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Correct Answer
verified

Correct Answer
verified

State whether each of the following goods and services is nonrival,nonexcludable or both: a.A toll road b.A public park c.A lighthouse d.An art museum e.A radio broadcast of "A Prairie Home Companion"

Correct Answer
verified
a.Nonrival,although rivalry could exist ...
View Answer

How does a negative externality in production reduce economic efficiency?

Correct Answer
verified
If there is a negative externality in pr...
View Answer

Correct Answer
verified

What is an externality?

Correct Answer
verified
An externality is a benefit or...
View Answer

The tragedy of the commons was avoided in the Middle Ages by

Correct Answer
verified

Exam 5: Externalities, environmental Policy, and Public Goods

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Correct AnswerverifiedInternalizing an externality refers to t...View AnswerShow Answer

The Coase theorem states that

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3.In the absence of any government intervention,the private market

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a tax on output is imposed to internalize the external costs of pollution,the supply curve shifts down by the amount of the tax.

Correct AnswerverifiedShow Answer

Because producers do not bear the external cost of pollution

Correct AnswerverifiedShow Answer

What is a "social cost" of production?

Correct AnswerverifiedShow Answer

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3.The size of marginal external benefits can be determined by

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When production generates a negative externality,the true cost of production is the

Correct AnswerverifiedShow Answer

If there is pollution in producing a product,then the market equilibrium price

Correct AnswerverifiedShow Answer

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

State whether each of the following goods and services is nonrival,nonexcludable or both: a.A toll road b.A public park c.A lighthouse d.An art museum e.A radio broadcast of "A Prairie Home Companion"

Correct Answerverifieda.Nonrival,although rivalry could exist ...View AnswerShow Answer

How does a negative externality in production reduce economic efficiency?

Correct AnswerverifiedIf there is a negative externality in pr...View AnswerShow Answer

Correct AnswerverifiedShow Answer

What is an externality?

Correct AnswerverifiedAn externality is a benefit or...View AnswerShow Answer

The tragedy of the commons was avoided in the Middle Ages by

Correct AnswerverifiedShow Answer

Correct Answer
verified
Internalizing an externality refers to t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.Nonrival,although rivalry could exist ...
View Answer

Correct Answer
verified
If there is a negative externality in pr...
View Answer

Correct Answer
verified

Correct Answer
verified
An externality is a benefit or...
View Answer

Correct Answer
verified