Question 1

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. What are the market equilibrium quantity and price?

Accepted Answer

The market equilibri...

Question 2

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 D)
F) All of the above

Question 3

Does the restoration of historic buildings create a positive externality or does it create a negative externality?

Accepted Answer

The restoration of h...

Question 4

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) B) and D)
F) B) and C)

Question 5

A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Accepted Answer

A)  social value = private value = private cost 
B)  private cost 
C)  social cost = private cost = private value 
D)  social cost = private cost = private value = social value.E) A) and B)
F) All of the above

Question 6

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, the external benefit of smokestack scrubber installation is represented by

Accepted Answer

A)  Q3 - Q2.
B)  Q5 - Q4.
C)  P3a - P3b.
D)  P4a - P4b.E) C) and D)
F) None of the above

Question 7

Figure 10-4 4, then total economic well-being would be maximized if output A) decreased to Q1. B) decreased to Q2. C) decreased to Q3. D) stayed at Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4. If this market is currently producing at Q4, then total economic well-being would be maximized if output

Accepted Answer

A)  decreased to Q1.
B)  decreased to Q2.
C)  decreased to Q3.
D)  stayed at Q4.E) None of the above
F) A) and B)

Question 8

An externality

Accepted Answer

A)  results in an equilibrium that does not maximize the total benefits to society.
B)  causes demand to exceed supply.
C)  strengthens the role of the "invisible hand" in the marketplace.
D)  affects buyers but not sellers.E) A) and D)
F) A) and C)

Question 9

Figure 10-10 th unit of output is $12. B) The social cost of producing the 120th unit of output is $22. C) The external cost of producing the 120th unit of output is $2. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-10. Which of the following statements is correct?

Accepted Answer

A)  The private cost of producing the 120th unit of output is $12.
B)  The social cost of producing the 120th unit of output is $22.
C)  The external cost of producing the 120th unit of output is $2.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 10

Figure 10-4 1. B) Q2. C) Q3. D) Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4. The socially optimal quantity would be

Accepted Answer

A)  Q1.
B)  Q2.
C)  Q3.
D)  Q4.E) A) and B)
F) All of the above

Question 11

Thurman is a writer who works from his home. Thurman lives next door to Phil, the drummer for a local band. Phil needs a lot of practice to earn $250, which is his share of the band's profit. Thurman gets distracted by Phil's drumming but he needs to get his writing done to earn $500 for his current article. Which of the following is an efficient solution?

Accepted Answer

A)  Phil offers Thurman $499 to allow Phil to continue drumming. Thurman accepts and both are better off.
B)  Phil offers Thurman $249 to allow Phil to continue drumming. Thurman accepts and both are better off.
C)  Thurman offers Phil $251 to stop practicing his drumming. Phil agrees and both are better off.
D)  Thurman offers Phil $501 to stop practicing his drumming. Phil agrees and both are better off.E) B) and C)
F) A) and B)

Question 12

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 13

Which of the following statements about the Coase theorem is true?

Accepted Answer

A)  Underlying the results of the Coase theorem is the idea that private parties can bargain without cost over the allocation of resources.
B)  The Coase theorem asserts that private solutions to externalities invariably lead to inefficient allocations of resources.
C)  The Coase theorem applies to negative externalities, but not to positive externalities.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 14

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

Accepted Answer

A)  pay your roommate at least $25 but no more than $50 to clean up after herself.
B)  pay your roommate at least $51 to clean up after herself.
C)  charge your roommate at least $25 to have you clean up after her.
D)  charge your roommate at least $50 but no more than $100 to keep you from complaining about the mess.E) A) and B)
F) None of the above

Question 15

Regulations to reduce pollution

Accepted Answer

A)  cause pollution levels to drop below the regulated amount.
B)  are typically a more costly solution to society than a corrective tax.
C)  allow firms with the lowest cost to reduce pollution by more than those with the highest costs.
D)  are a better solution for the environment than a corrective tax.E) A) and C)
F) None of the above

Question 16

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Accepted Answer

A)  corrective tax.
B)  subsidy.
C)  command-and-control policy.
D)  market-based policy.E) A) and D)
F) A) and C)

Question 17

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 there an externality associated with this market? If your answer is "Yes," is the externality positive or negative?

Accepted Answer

There is a positive ...

Question 18

Some government policies provide incentives for private decision makers to choose to solve the problem of externalities on their own. What term do we use to describe such policies?

Accepted Answer

We use the term mark...

Question 19

Figure 10-7 1. B) Q2. C) Q3. D) Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-7. Which quantity represents the social optimum for this market?

Accepted Answer

A)  Q1.
B)  Q2.
C)  Q3.
D)  Q4.E) A) and D)
F) A) and C)

Question 20

Figure 10-12 
-Refer to Figure 10-12. Which of the following is an appropriate label for Line 1?

Accepted Answer

A)  social cost minus social value
B)  social value minus private cost
C)  demand
D)  private costE) C) and D)
F) A) and B)

Exam 10: Externalities

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There is a positive ...
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Figure 10-12 -Refer to Figure 10-12. Which of the following is an appropriate label for Line 1?

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Does the restoration of historic buildings create a positive externality or does it create a negative externality?

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The restoration of h...
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Correct Answer
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Regulations to reduce pollution

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Figure 10-4 -Refer to Figure 10-4. If this market is currently producing at Q₄, then total economic well-being would be maximized if output

Correct Answer
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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, the external benefit of smokestack scrubber installation is represented by

Correct Answer
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Figure 10-4 -Refer to Figure 10-4. The socially optimal quantity would be

Correct Answer
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Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

Correct Answer
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Figure 10-10 -Refer to Figure 10-10. Which of the following statements is correct?

Correct Answer
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Correct Answer
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An externality

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

Correct Answer
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A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Correct Answer
verified

Which of the following statements about the Coase theorem is true?

Correct Answer
verified

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Correct Answer
verified

Some government policies provide incentives for private decision makers to choose to solve the problem of externalities on their own. What term do we use to describe such policies?

Correct Answer
verified
We use the term mark...
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Figure 10-7 -Refer to Figure 10-7. Which quantity represents the social optimum for this market?

Correct Answer
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Correct Answer
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The market equilibri...
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Exam 10: Externalities

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Correct AnswerverifiedThere is a positive ...View AnswerShow Answer

Figure 10-12 -Refer to Figure 10-12. Which of the following is an appropriate label for Line 1?

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Does the restoration of historic buildings create a positive externality or does it create a negative externality?

Correct AnswerverifiedThe restoration of h...View AnswerShow Answer

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Regulations to reduce pollution

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Figure 10-4 -Refer to Figure 10-4. If this market is currently producing at Q4, then total economic well-being would be maximized if output

Correct AnswerverifiedShow Answer

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, the external benefit of smokestack scrubber installation is represented by

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4. The socially optimal quantity would be

Correct AnswerverifiedShow Answer

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

Correct AnswerverifiedShow Answer

Figure 10-10 -Refer to Figure 10-10. Which of the following statements is correct?

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Correct AnswerverifiedShow Answer

An externality

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

Correct AnswerverifiedShow Answer

A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Correct AnswerverifiedShow Answer

Which of the following statements about the Coase theorem is true?

Correct AnswerverifiedShow Answer

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Correct AnswerverifiedShow Answer

Some government policies provide incentives for private decision makers to choose to solve the problem of externalities on their own. What term do we use to describe such policies?

Correct AnswerverifiedWe use the term mark...View AnswerShow Answer

Figure 10-7 -Refer to Figure 10-7. Which quantity represents the social optimum for this market?

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Correct AnswerverifiedThe market equilibri...View AnswerShow Answer

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There is a positive ...
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The restoration of h...
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Figure 10-4 -Refer to Figure 10-4. If this market is currently producing at Q₄, then total economic well-being would be maximized if output

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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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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We use the term mark...
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Correct Answer
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The market equilibri...
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