Question 1

When technology spillover occurs,
A)it is the government's responsibility to own firms that are engaged in high-tech research.
B)a firm's research yields technological knowledge that can then be used by society as a whole.
C)those firms engaged in technology research should be taxed by the government.
D)firms invest in the latest production technology and the cost of that technology "spills over" to the prices consumers must pay for the product.

Accepted Answer

Technology spillover occurs when a firm's research yields technological knowledge that can then be used by society as a whole. This means that technological advancements made by certain companies can benefit other firms and industries as well, leading to overall progress and development. It is not the responsibility of the government to own firms engaged in high-tech research, nor should firms be taxed for engaging in technology research. The cost of production technology may affect the prices consumers pay, but this is not directly related to technology spillover.

Question 2

Which of the following is an example of a positive externality?
A)Sue not catching the flu because she got a flu vaccine
B)Mary not catching the flu from Sue because Sue got a flu vaccine
C)Sue catching the flu because she did not get a flu vaccine
D)Mary catching the flu from Sue because Sue did not get a flu vaccine

Accepted Answer

Mary benefits from Sue getting the flu vaccine because it reduces the likelihood of her catching the flu from Sue. This is a positive externality because Mary did not incur any cost or effort to receive this benefit.

Question 3

Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?
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.

Accepted Answer

Since there is a positive externality created by flower gardens, the social benefit of each extra plant is greater than the private benefit (which only considers the individual's enjoyment of the flower). As a result, the market equilibrium quantity will be less than the socially optimal quantity. Therefore, there will be an underproduction of plants at the equilibrium level.

Question 4

If education produces positive externalities and the government does not intervene in the market, we would expect
A)the equilibrium price to be higher than the optimal price.
B)the equilibrium quantity to be lower than the optimal level.
C)the equilibrium quantity to be higher than the optimal level.
D)both a and b are correct

Accepted Answer

The answer of If education produces positive externalities and the...

Question 5

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?
A)social cost
B)opportunity cost of technology
C)internalization of an externality
D)technology spillover

Accepted Answer

Technology spillover occurs when one firm's research or development results in knowledge or technology that benefits society as a whole, or other firms outside of the original firm, without any direct compensation or payment. These spillover effects are a positive externality and can lead to faster technological progress and growth for the economy as a whole.

Question 6

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. If there are no subsidies, what is the relationship between the equilibrium quantity of university research and the optimal quantity of university research produced?
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.

Accepted Answer

Without subsidies, the market will only account for the private benefits and costs of university research. However, there are positive externalities that are not taken into consideration. This means that the equilibrium quantity of university research produced will be less than the socially optimal quantity. Therefore, choice C is the correct answer.

Question 7

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should
A)impose a corrective tax on any firm producing a technology spillover.
B)offer tax credits to consumers who are adversely affected by the new technology.
C)subsidize producers by an amount equal to the value of the technology spillover.
D)provide research grants to those firms not currently engaging in research to increase competition in the industry.

Accepted Answer

The answer of If the government wanted to ensure that...

Question 8

Suppose that flu shots create a positive externality equal to $12 per shot. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?
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.

Accepted Answer

A positive externality means that the social benefit of a good is greater than the private benefit. In this case, the external benefit of a flu shot is $12, which is not reflected in the price. As a result, the equilibrium quantity will be lower than the socially optimal quantity because the market does not take into account the full benefit to society.

Question 9

In the case of a technology spillover, internalizing a positive externality will cause the supply curve of an industry to
A)shift to the right.
B)shift to the left.
C)become more elastic.
D)remain unchanged.

Accepted Answer

Internalizing a positive externality means that the positive effects of a technology spillover are factored into the cost of production, which decreases the cost of production for firms. This leads to an increase in supply, and therefore, the supply curve shifts to the right.

Question 10

Technology spillover is one type of
A)negative externality.
B)positive externality.
C)subsidy.
D)producer surplus.

Accepted Answer

Technology spillover is a positive externality because the benefits of the technology spill over onto society as a whole and not just the original firm or individual that developed it. It is a type of positive externality because it leads to benefits for others in society without any cost to them.

Question 11

If education produces positive externalities, we would expect
A)the government to tax education.
B)the government to subsidize education.
C)people to realize the benefits, which would increase the demand for education.
D)colleges to relax admission requirements.

Accepted Answer

If education produces positive externalities, such as an increase in productivity and a decrease in crime rates, then the private demand for education may not reflect the full social benefits. In this case, the government can intervene and subsidize education in order to increase its consumption and maximize its positive externalities.

Question 12

Government intervention that aims to promote technology-enhancing industries is called
A)assisted technology.
B)intervention policy.
C)industrial technology assistance.
D)industrial policy.

Accepted Answer

The term used to describe government intervention aimed at promoting technology-enhancing industries is industrial policy.

Question 13

Because there are positive externalities from higher education,
A)private markets will under-supply college classes.
B)private markets will over-supply college classes.
C)the government should impose a tax on college students.
D)government intervention cannot improve the market for college classes.

Accepted Answer

Positive externalities mean that the benefits of education spill over to society as a whole, not just the individual who received the education. Private markets will focus only on the private benefits to individuals, and they will not take into account the positive externalities. Therefore, private markets will under-supply college classes, since they do not account for the benefits to society as a whole.

Question 14

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?
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.

Accepted Answer

Positive externalities create a situation where the social benefits of a good or service are greater than the private benefits. In the case of cookie production, the producers only consider their own costs and benefits (private benefits) and not the additional benefits that their cookies provide to society (external benefits). Since the producers do not take into account the positive externality of $2 per dozen, their equilibrium quantity is lower than the social optimal one. Thus, the socially optimal quantity of cookies to be produced is larger than the equilibrium quantity. Therefore, the correct answer is C because the equilibrium quantity is less than the socially optimal quantity.

Question 15

Technology spillover occurs when
A)a firm passes the high costs of technical research on to society through higher prices.
B)a firm's research yields technical knowledge that is used by society as a whole.
C)the government subsidizes firms engaged in high-tech research.
D)copyright laws prohibit firms from profiting from the research of others.

Accepted Answer

Technology spillover happens when a firm's research leads to technical knowledge that is utilized by society as a whole. This might happen through the publication of scientific research, the movement of trained employees between firms or universities, or the dissemination of technological breakthroughs through trade.

Question 16

Which of the following statements is not correct?
A)A patent is a way for the government to encourage the production of a good with technology spillovers.
B)A tax is a way for the government to reduce the production of a good with a negative externality.
C)A tax that accurately reflects social costs produces the socially optimal outcome.
D)Government policies cannot improve upon private market outcomes.

Accepted Answer

This statement is not correct as government policies such as taxes, subsidies, regulations, and public goods provision can help correct market failures and improve upon private market outcomes.

Question 17

Research into new technologies
A)provides positive externalities because it creates knowledge others can use.
B)results in negative externalities because government funding for research causes less government spending in other areas.
C)is protected by patent laws, which eliminates the need for government intervention.
D)should only be funded by the corporations that will receive the profits from the research.

Accepted Answer

Research into new technologies provides knowledge that can be shared with others, leading to positive externalities such as improved standards of living and economic growth.

Question 18

Suppose that elementary education creates a positive externality. If the government does not subsidize education, then
A)the equilibrium quantity of education will be equal to the socially optimal quantity of education.
B)the equilibrium quantity of education will be greater than the socially optimal quantity of education.
C)the equilibrium quantity of education will be less than the socially optimal quantity of education.
D)There is not enough information to answer the question.

Accepted Answer

When there is a positive externality, the social benefit of the activity exceeds the private benefit. In this case, when education is not subsidized, the private benefit of education is reflected in the demand for education. However, the social benefit also includes the positive externality, which is not accounted for in the market. As a result, the equilibrium quantity of education will be less than the socially optimal quantity, leading to an underallocation of resources towards education.

Question 19

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

Accepted Answer

The answer of Which of the following is true of...

Question 20

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?
A)At the current output level, the marginal social benefit exceeds the marginal private benefit.
B)The current output level is inefficiently low.
C)A per-shot subsidy could turn an inefficient situation into an efficient one.
D)All of the above are correct.

Accepted Answer

The answer of Flu shots provide a positive externality. Suppose...

Quiz 10: Externalities

When technology spillover occurs,

Which of the following is an example of a positive externality?

Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

If education produces positive externalities and the government does not intervene in the market, we would expect

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should

Suppose that flu shots create a positive externality equal to $12 per shot. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

In the case of a technology spillover, internalizing a positive externality will cause the supply curve of an industry to

Technology spillover is one type of

If education produces positive externalities, we would expect

Government intervention that aims to promote technology-enhancing industries is called

Because there are positive externalities from higher education,

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?

Technology spillover occurs when

Which of the following statements is not correct?

Research into new technologies

Suppose that elementary education creates a positive externality. If the government does not subsidize education, then

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

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?