Question 1

Figure 10-1 
-Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates

Accepted Answer

A)   positive externalities.
B)   negative externalities.
C)   no externalities.
D)   no equilibrium in the market.E) C) and D)
F) B) and D)

Question 2

Why can't private individuals always internalize an externality without the help of government?

Accepted Answer

A)   Legal restrictions prevent side payments between individuals.
B)   Transactions costs may be too high.
C)   Side payments between individuals are inefficient.
D)   Side payments between individuals are insufficient.E) B) and C)
F) None of the above

Question 3

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If there are no government subsidies for MBAs, then which of the following statements is correct?

Accepted Answer

A)   The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
B)   The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAs.
C)   The equilibrium quantity of MBAs will be less than the socially optimal quantity of MBAs.
D)   There is not enough information to answer the question.E) None of the above
F) A) and B)

Question 4

Figure 10-15 
-Refer to Figure 10-15. Which graph illustrates a corrective tax?

Accepted Answer

A)   the left graph
B)   the right graph
C)   both graphs
D)   neither graphE) A) and B)
F) C) and D)

Question 5

Which of the following is NOT a way of internalizing technology spillovers?

Accepted Answer

A)   subsidies
B)   patent protection
C)   industrial policy
D)   taxesE) A) and D)
F) B) and C)

Question 6

Figure 10-9 
-Refer to Figure 10-9. Which graph represents a market with a negative externality?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   Both (b)  and (c)  are correct.E) None of the above
F) A) and C)

Question 7

In many cases the Coase theorem does not work well because

Accepted Answer

A)   there are too few parties at the negotiation table.
B)   the government does not know about the Coase theorem.
C)   transaction costs are too high.
D)   transaction costs are too low.E) A) and B)
F) A) and C)

Question 8

In the absence of externalities, the "invisible hand" leads a market to maximize

Accepted Answer

A)   producer profit from that market.
B)   total benefit to society from that market.
C)   both equality and efficiency in that market.
D)   output of goods or services in that market.E) All of the above
F) C) and D)

Question 9

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Accepted Answer

The Coase ...

Question 10

In summarizing the research on the externalities associated with driving cars, a 2007 Journal of Economic Literature article concluded that the optimal corrective tax on gasoline in the United States, in 2012 dollars, would be about

Accepted Answer

A)   $0.40 per gallon.
B)   $0.90 per gallon.
C)   $2.10 per gallon.
D)   $2.70 per gallon.E) A) and D)
F) B) and C)

Question 11

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following:
-a private cost of $3.10;
-a social cost of $3.55;
-a value to consumers of $3.70.
-Refer to Scenario 10-1. Suppose the equilibrium quantity of gasoline is 1,150 gallons; that is, QMARKET = 1,150. Then the equilibrium price of a gallon could be

Accepted Answer

A)   $2.80.
B)   $3.00.
C)   $3.30.
D)   $3.80.E) B) and C)
F) A) and B)

Question 12

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 socially optimal quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The socially optimal...

Question 13

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots 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) All of the above
F) A) and B)

Question 14

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Accepted Answer

A) True 
 B)False

Question 15

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0fire 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. Is the market-equilibrium quantity of fire extinguishers less than, equal to, or greater than 500? Explain.

Accepted Answer

For the 500^t^hfire extinguisher, ...

Question 16

To produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, which increases the yields of these fields at no additional cost to the farmer. What might be a reasonable private solution to this externality, and how might the solution be reached?

Accepted Answer

One solution would be to have one person...

Question 17

Table 10-4 
-Refer to Table 10-4. The social cost of the 2nd unit of output that is produced is

Accepted Answer

A)   $23.
B)   $7.
C)   $30.
D)   $38.E) All of the above
F) B) and C)

Question 18

Negative externalities occur when one person's actions

Accepted Answer

A)   cause another person to lose money in a stock market transaction.
B)   cause his or her employer to lose business.
C)   reveal his or her preference for foreign-produced goods.
D)   adversely affect the well-being of a bystander who is not a party to the action.E) A) and C)
F) None of the above

Question 19

Research into new technologies provides a

Accepted Answer

A)   negative externality, and too few resources are devoted to research as a result.
B)   negative externality, and too many resources are devoted to research as a result.
C)   positive externality, and too few resources are devoted to research as a result.
D)   positive externality, and too many resources are devoted to research as a result.E) C) and D)
F) A) and B)

Question 20

According to the Coase Theorem, individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

Accepted Answer

A) True 
 B)False

Exam 10: Externalities

Correct Answer
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The socially optimal...
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In the absence of externalities, the "invisible hand" leads a market to maximize

Correct Answer
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Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with a negative externality?

Correct Answer
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According to the Coase Theorem, individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

Correct Answer
verified

Research into new technologies provides a

Correct Answer
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Which of the following is NOT a way of internalizing technology spillovers?

Correct Answer
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Correct Answer
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One solution would be to have one person...
View Answer

Correct Answer
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If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Correct Answer
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Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct Answer
verified

Negative externalities occur when one person's actions

Correct Answer
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Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If there are no government subsidies for MBAs, then which of the following statements is correct?

Correct Answer
verified

Why can't private individuals always internalize an externality without the help of government?

Correct Answer
verified

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Correct Answer
verified
The Coase ...
View Answer

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a corrective tax?

Correct Answer
verified

Correct Answer
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For the 500^t^hfire extinguisher, ...
View Answer

In summarizing the research on the externalities associated with driving cars, a 2007 Journal of Economic Literature article concluded that the optimal corrective tax on gasoline in the United States, in 2012 dollars, would be about

Correct Answer
verified

Figure 10-1 -Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates

Correct Answer
verified

Table 10-4 -Refer to Table 10-4. The social cost of the 2nd unit of output that is produced is

Correct Answer
verified

In many cases the Coase theorem does not work well because

Correct Answer
verified

Exam 10: Externalities

Correct AnswerverifiedThe socially optimal...View AnswerShow Answer

In the absence of externalities, the "invisible hand" leads a market to maximize

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with a negative externality?

Correct AnswerverifiedShow Answer

According to the Coase Theorem, individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

Correct AnswerverifiedShow Answer

Research into new technologies provides a

Correct AnswerverifiedShow Answer

Which of the following is NOT a way of internalizing technology spillovers?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedOne solution would be to have one person...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Correct AnswerverifiedShow Answer

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Correct AnswerverifiedShow Answer

Negative externalities occur when one person's actions

Correct AnswerverifiedShow Answer

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If there are no government subsidies for MBAs, then which of the following statements is correct?

Correct AnswerverifiedShow Answer

Why can't private individuals always internalize an externality without the help of government?

Correct AnswerverifiedShow Answer

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Correct AnswerverifiedThe Coase ...View AnswerShow Answer

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a corrective tax?

Correct AnswerverifiedShow Answer

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

In summarizing the research on the externalities associated with driving cars, a 2007 Journal of Economic Literature article concluded that the optimal corrective tax on gasoline in the United States, in 2012 dollars, would be about

Correct AnswerverifiedShow Answer

Figure 10-1 -Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates

Correct AnswerverifiedShow Answer

Table 10-4 -Refer to Table 10-4. The social cost of the 2nd unit of output that is produced is

Correct AnswerverifiedShow Answer

In many cases the Coase theorem does not work well because

Correct AnswerverifiedShow Answer

Correct Answer
verified
The socially optimal...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
One solution would be to have one person...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Coase ...
View Answer

Correct Answer
verified

Correct Answer
verified
For the 500^t^hfire extinguisher, ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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