Question 1

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Accepted Answer

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

Question 2

Figure 10-10 th unit is equal to the cost incurred by the seller of the 120th unit. B) 120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit. C) 160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit. D) 160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-10. The socially optimal quantity of output is

Accepted Answer

A)  120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by the seller of the 120th unit.
B)  120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit.
C)  160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit.
D)  160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit.E) B) and D)
F) B) and C)

Question 3

The Coase theorem states that

Accepted Answer

A)  under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present.
B)  government intervention is always required to reach an efficient outcome when an externality is present.
C)  government intervention cannot lead to an efficient outcome when an externality is present.
D)  only negative externalities can be resolved using government intervention.E) A) and D)
F) A) and C)

Question 4

Patents do not

Accepted Answer

A)  provide firms an incentive to research.
B)  assign property rights to inventors.
C)  protect the rights of inventors for their lifetimes.
D)  internalize externalities.E) A) and B)
F) A) and C)

Question 5

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

Accepted Answer

A)  the market for good x is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone.
B)  the market for good x is characterized by a positive externality.
C)  the market for good x is characterized by a negative externality.
D)  the supply curve for good x fails to reflect the cost to society of producing that good.E) B) and C)
F) All of the above

Question 6

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

Accepted Answer

A) True 
 B)False

Question 7

Figure 10-4 3 A) the marginal consumer values this product less than the social cost of producing it. B) every consumer values this product less than the social cost of producing it. C) the cost to society is equal to the value to society. D) the marginal consumer values this product more than the private cost." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4. At Q3

Accepted Answer

A)  the marginal consumer values this product less than the social cost of producing it.
B)  every consumer values this product less than the social cost of producing it.
C)  the cost to society is equal to the value to society.
D)  the marginal consumer values this product more than the private cost.E) A) and B)
F) A) and C)

Question 8

An externality is the impact of

Accepted Answer

A)  society's decisions on the well-being of society.
B)  a person's actions on that person's well-being.
C)  one person's actions on the well-being of a bystander.
D)  society's decisions on the poorest person in the society.E) A) and C)
F) All of the above

Question 9

Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.

Accepted Answer

A) True 
 B)False

Question 10

Use a graph to illustrate the quantity of pollution that would be emitted (a) after a corrective tax has been imposed and (b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Yes, these two quantities cou...

Question 11

Which of the following is true of markets characterized by positive externalities?

Accepted Answer

A)  Social value exceeds private value, and market quantity exceeds the socially optimal quantity.
B)  Social value is less than private value, and market quantity exceeds the socially optimal quantity.
C)  Social value exceeds private value, and market quantity is less than the socially optimal quantity.
D)  Social value seldom exceeds private value; therefore, social quantity is less than private quantity.E) B) and C)
F) A) and B)

Question 12

Figure 10-9   
-Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Accepted Answer

A)  Panel (a) .
B)  Panel (b) .
C)  Panel (c) .
D)  Both (b)  and (c)  are correct.E) A) and B)
F) A) and C)

Question 13

Externalities can be corrected by each of the following except

Accepted Answer

A)  self-interest.
B)  moral codes and social sanctions.
C)  charity.
D)  normal market adjustments.E) B) and D)
F) All of the above

Question 14

In a market economy, government intervention

Accepted Answer

A)  will always improve market outcomes.
B)  reduces efficiency in the presence of externalities.
C)  may improve market outcomes in the presence of externalities.
D)  is necessary to control individual greed.E) None of the above
F) A) and D)

Question 15

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Accepted Answer

A) True 
 B)False

Question 16

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1thS1S1P0 fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
-Refer to Scenario 10-4. In order to maximize the total benefit of fire extinguishers to society as a whole, should the number of fire extinguishers produced be less than, equal to, or greater than 500? Explain.

Accepted Answer

For the 500^th fire extinguisher, the socia...

Question 17

Figure 10-4 
-Refer to Figure 10-4. This market is characterized by

Accepted Answer

A)  government intervention.
B)  a positive externality.
C)  a negative externality.
D)  None of the above is correct.E) All of the above
F) B) and C)

Question 18

Figure 10-15 
-Refer to Figure 10-15. Which graph illustrates a pollution permit program?

Accepted Answer

A)  the left graph
B)  the right graph
C)  both graphs
D)  neither graphE) None of the above
F) A) and C)

Question 19

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Correct Answer
verified

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a pollution permit program?

Correct Answer
verified

Externalities can be corrected by each of the following except

Correct Answer
verified

An externality is the impact of

Correct Answer
verified

The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Correct Answer
verified

Which of the following is true of markets characterized by positive externalities?

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4. At Q₃

Correct Answer
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Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Correct Answer
verified

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

Correct Answer
verified

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

Correct Answer
verified

Patents do not

Correct Answer
verified

In a market economy, government intervention

Correct Answer
verified

Correct Answer
verified
For the 500^th fire extinguisher, the socia...
View Answer

Figure 10-10 -Refer to Figure 10-10. The socially optimal quantity of output is

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4. This market is characterized by

Correct Answer
verified

The Coase theorem states that

Correct Answer
verified

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

Correct Answer
verified

Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.

Correct Answer
verified

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Correct Answer
verified

Use a graph to illustrate the quantity of pollution that would be emitted (a) after a corrective tax has been imposed and (b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Correct Answer
verified
Yes, these two quantities cou...
View Answer

Exam 10: Externalities

According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a pollution permit program?

Correct AnswerverifiedShow Answer

Externalities can be corrected by each of the following except

Correct AnswerverifiedShow Answer

An externality is the impact of

Correct AnswerverifiedShow Answer

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Correct AnswerverifiedShow Answer

Which of the following is true of markets characterized by positive externalities?

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4. At Q3

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

Correct AnswerverifiedShow Answer

Patents do not

Correct AnswerverifiedShow Answer

In a market economy, government intervention

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFor the 500th fire extinguisher, the socia...View AnswerShow Answer

Figure 10-10 -Refer to Figure 10-10. The socially optimal quantity of output is

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4. This market is characterized by

Correct AnswerverifiedShow Answer

The Coase theorem states that

Correct AnswerverifiedShow Answer

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

Correct AnswerverifiedShow Answer

Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.

Correct AnswerverifiedShow Answer

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

Correct AnswerverifiedShow Answer

Use a graph to illustrate the quantity of pollution that would be emitted (a) after a corrective tax has been imposed and (b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Correct Answerverified Yes, these two quantities cou...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Correct Answer
verified

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4. At Q₃

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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For the 500^th fire extinguisher, the socia...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Yes, these two quantities cou...
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