Question 1

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 50S1U1P1thS1S1P0 restored 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 2

Figure 10-9   
-Refer to Figure 10-9,Panel (b) and Panel (c) .Which of the following is correct?

Accepted Answer

A)   A tax would move the market in Panel (b) and the market in Panel (c) closer to the socially optimal outcome.
B)   A subsidy would move the market in Panel (b) and the market in Panel (c) closer to the socially optimal outcome.
C)   A tax would move the market in Panel (b) closer to the socially optimal outcome,but a subsidy would move the market in Panel (c) closer to the socially optimal outcome.
D)   A subsidy would move the market in Panel (b) closer to the socially optimal outcome,but a tax would move the market in Panel (c) closer to the socially optimal outcome.E) All of the above
F) A) and D)

Question 3

A local manufacturing plant that emitted sulfur dioxide was forced to stop production because it did not comply with local clean air standards.This decision provides an example of

Accepted Answer

A)   a direct regulation of an externality.
B)   corrective taxes.
C)   a Coase theorem solution to an externality.
D)   the misuse of a subsidy.E) A) and D)
F) B) and C)

Question 4

When market activity generates a negative externality,the level of output in the market equilibrium is lower than the socially optimal level.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a characteristic of pollution permits?

Accepted Answer

A)   Prices are set by supply and demand.
B)   Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation.
C)   Real-world markets for pollution permits include sulfur dioxide and carbon.
D)   Firms for whom pollution reduction is very expensive are willing to pay more for permits than firms for whom pollution reduction is less expensive.E) A) and B)
F) None of the above

Question 6

Figure 10-19 
-Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Accepted Answer

A)   $15.
B)   $23.
C)   $36.
D)   $89.E) C) and D)
F) B) and C)

Question 7

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Accepted Answer

A) True 
 B)False

Question 8

Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When a negative externality exists,the ...

Question 9

Research into new technologies conveys neither negative externalities nor positive externalities.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is correct?

Accepted Answer

A)   Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and decrease the price of the good produced.
B)   Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced.
C)   Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and decrease the price of the good produced.
D)   Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced.E) C) and D)
F) A) and B)

Question 11

Table 10-5
The following table shows the marginal costs for each of four firms (A,B,C,and D) to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $54,and for Firm A to eliminate a second unit of pollution it would cost an additional $67.
 
-Refer to Table 10-5.If the government charged a fee of $84 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   7
B)   8
C)   9
D)   10E) A) and B)
F) All of the above

Question 12

Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. 
-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) A) and B)
F) All of the above

Question 13

In some situations,private economic actors cannot solve the problem of externalities among themselves because of substantial costs.

Accepted Answer

The answer of In some situations,private economic actors cannot solve...

Question 14

Figure 10-6 
-Refer to Figure 10-6.Which quantity represents the socially-optimal quantity of output in this market?

Accepted Answer

A)   Q
B)   Q'
C)   Either Q or Q'.It is necessary to know whether the externality is positive or negative to determine the socially-optimal quantity.
D)   Some quantity between Q and Q'.The socially-optimal quantity depends on the negotiating skills of the interested parties.E) A) and B)
F) A) and C)

Question 15

When externalities are present,reaching an efficient outcome is especially difficult when the number of interested parties is large.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that a steel factory emits a certain amount of air pollution,which constitutes a negative externality.If the market does not internalize the externality,

Accepted Answer

A)   the supply curve would adequately reflect the marginal social cost of production.
B)   consumers will be required to pay a higher price for steel than they would have if the externality were internalized.
C)   the market equilibrium quantity will not be the socially optimal quantity.
D)   producers will produce less steel than they otherwise would if the externality were internalized.E) None of the above
F) B) and C)

Question 17

What are the three externalities that are associated with driving cars and trucks?

Accepted Answer

The negative externa...

Question 18

Buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply.

Accepted Answer

A) True 
 B)False

Question 19

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Accepted Answer

A) True 
 B)False

Question 20

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs.What could the federal government do to equate the equilibrium quantity of university research and the socially optimal quantity of university research produced?

Accepted Answer

A)   tax university researchers
B)   offer grants to university researchers
C)   eliminate subsidized student loans
D)   nothingE) All of the above
F) A) and B)

Exam 10: Externalities

Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13.If 325 units of plastics are produced and consumed,then the

Correct Answer
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Correct Answer
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The socially optimal...
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A local manufacturing plant that emitted sulfur dioxide was forced to stop production because it did not comply with local clean air standards.This decision provides an example of

Correct Answer
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When market activity generates a negative externality,the level of output in the market equilibrium is lower than the socially optimal level.

Correct Answer
verified

Correct Answer
verified

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Correct Answer
verified

When externalities are present,reaching an efficient outcome is especially difficult when the number of interested parties is large.

Correct Answer
verified

In some situations,private economic actors cannot solve the problem of externalities among themselves because of substantial costs.

Correct Answer
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Which of the following is not a characteristic of pollution permits?

Correct Answer
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Figure 10-6 -Refer to Figure 10-6.Which quantity represents the socially-optimal quantity of output in this market?

Correct Answer
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Correct Answer
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Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Correct Answer
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Suppose that a steel factory emits a certain amount of air pollution,which constitutes a negative externality.If the market does not internalize the externality,

Correct Answer
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What are the three externalities that are associated with driving cars and trucks?

Correct Answer
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The negative externa...
View Answer

Buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply.

Correct Answer
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Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency?

Correct Answer
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When a negative externality exists,the ...
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Research into new technologies conveys neither negative externalities nor positive externalities.

Correct Answer
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In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .Which of the following is correct?

Correct Answer
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Exam 10: Externalities

Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13.If 325 units of plastics are produced and consumed,then the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe socially optimal...View AnswerShow Answer

A local manufacturing plant that emitted sulfur dioxide was forced to stop production because it did not comply with local clean air standards.This decision provides an example of

Correct AnswerverifiedShow Answer

When market activity generates a negative externality,the level of output in the market equilibrium is lower than the socially optimal level.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When correcting for an externality,command-and-control policies are always preferable to market-based policies.

Correct AnswerverifiedShow Answer

When externalities are present,reaching an efficient outcome is especially difficult when the number of interested parties is large.

Correct AnswerverifiedShow Answer

In some situations,private economic actors cannot solve the problem of externalities among themselves because of substantial costs.

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of pollution permits?

Correct AnswerverifiedShow Answer

Figure 10-6 -Refer to Figure 10-6.Which quantity represents the socially-optimal quantity of output in this market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Correct AnswerverifiedShow Answer

Suppose that a steel factory emits a certain amount of air pollution,which constitutes a negative externality.If the market does not internalize the externality,

Correct AnswerverifiedShow Answer

What are the three externalities that are associated with driving cars and trucks?

Correct AnswerverifiedThe negative externa...View AnswerShow Answer

Buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply.

Correct AnswerverifiedShow Answer

Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency?

Correct Answerverified When a negative externality exists,the ...View AnswerShow Answer

Research into new technologies conveys neither negative externalities nor positive externalities.

Correct AnswerverifiedShow Answer

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .Which of the following is correct?

Correct AnswerverifiedShow Answer

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The socially optimal...
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The negative externa...
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When a negative externality exists,the ...
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