Quiz 17: Externalities

An externality can be a A) cost or a benefit. B) benefit but not a cost. C) cost but not a benefit. D) marginal cost but not a total cost.

An externality occurs when A) the costs of producing a good are paid entirely by the producer. B) some of the costs of producing a good are paid by someone other than the producer. C) the marginal social cost of an activity increases as that activity is increased. D) Both answers A and C are correct.

An externality can be a cost or benefit arising from the production of a good that falls upon A) consumers but not producers. B) producers but not consumers. C) both the consumer and the producer. D) someone other than the consumer or producer.

The external benefit of a good A) equals its consumer surplus. B) equals its producer surplus. C) equals its total surplus. D) is a benefit from the good falling on people who are not the consumers of the good.

A cost that arises from the production of a good that is paid by someone who did not participate in the production is called A) a free rider. B) an externality. C) rent seeking. D) a public failure.

Which of the following does NOT contain an externality? A) I sell you an ice cream and you drip it all over the person sitting next to you. B) I sell you an ice cream and it gives you a headache. C) I sell you an ice cream and you share it with your friend. D) I give you an ice cream and you share it with a friend.

An example of an activity that generates an external cost is A) dumping soapsuds into a trout stream. B) national defense services. C) planting flowers along an interstate highway. D) eating an apple.

An example of an externality occurs when a chemical factory A) is producing ethanol and dumps waste in a river upstream from a popular fishing spot. B) produces fertilizers that do not help plants grow. C) produces fertilizers that kill plants rather than feed them. D) overworks its employees.

When people decorate the exteriors of their homes with colored lights, they create ________ for the motorists who pass by. A) an external benefit B) a competitive good C) a public good D) an excludable good

Which of the following episodes would most likely contain an externality? A) You cannot afford to buy groceries. B) You decide to grow your own vegetables in your backyard where no one else can see them. C) You decide to grow flowers in your front yard where everyone else can see them. D) You eat all the vegetables you grow yourself.

In which of the following markets are external benefits most likely to exist? A) in the market for gasoline B) in the market for ball pens C) in the market for flu shots D) in the market for cigarettes

Which of the following illustrates the concept of external benefit? A) Good weather increases the size of the wheat crop. B) A new pesticide increases the size of the wheat crop. C) A gardener enjoys his flowers. D) Neighbors enjoy a gardener's flowers.

Beautification of the national highways through the planting of shrubs and wildflowers will A) be profitable for a private landscaping company because they can charge passing drivers. B) benefit even people who do not help pay. C) provide a flow of services that are rival in consumption. D) provide a flow of services that involve excludable consumption.

Air pollution caused by lead A) has never been a pollution problem. B) is currently a major pollution problem. C) has mostly been eliminated as a pollution problem. D) is the number one source of pollution today.

A private cost is a cost of production that is A) borne by the producer of a good. B) measured in marginal terms. C) borne by someone other than the producer of a good. D) measured in total terms.

A private cost is a cost of production that is borne by the A) consumer of the good. B) producer of the good. C) government. D) consumer of the good and the government.

The cost of producing one more unit of a good or service that is paid by the producer A) has to be equal to the benefit that the consumer derives from that good. B) is equal to the cost borne by people other than the producer. C) is the marginal private cost. D) is the marginal external cost.

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service is the A) marginal external cost. B) marginal private cost. C) marginal social cost. D) None of the above answers is correct.

Suppose a firm produces pollution when it generates electricity. The cost of the pollution is called the A) marginal cost. B) marginal private cost. C) marginal external cost. D) marginal social cost.

Which of the following is an example of an external cost? A) taxes B) the price of a car wash C) pollution D) an electricity bill

If an external cost exists, then who bears the external cost in an unregulated competitive market transaction? A) nobody B) the federal government C) someone other than the producers D) the buyers of the product

The cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service is the A) marginal external cost. B) marginal private cost. C) marginal social cost. D) None of the above answers is correct.

The cost of producing a good or service that is paid by people other than the producers is A) the marginal cost. B) represented by the demand curve. C) represented by the supply curve. D) an external cost.

An external cost is a cost of producing a good or service that is A) not paid by the producers. B) paid by the producers. C) paid by the government. D) paid by the consumer and the government.

The marginal cost of production that is borne by the entire society is the A) marginal private cost. B) marginal social cost. C) marginal external cost. D) None of the above answers is correct.

The ________ is the cost of paid by the producer plus any cost paid by everyone else when another unit of a good or service is produced. A) marginal external cost. B) marginal private cost. C) marginal social cost. D) None of the above answers is correct.

The marginal social cost is A) equal to the marginal private cost plus the marginal external cost. B) equal to the marginal private cost minus the marginal external cost. C) the same as the marginal private cost. D) the same as the marginal external cost.

If the marginal private cost of producing one kilowatt of power in California equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt. A) five cents B) nine cents C) four cents D) fourteen cents

The difference between the marginal social cost and the marginal private cost equals the A) cost of producing an additional unit of a good. B) marginal external benefit. C) marginal external cost. D) marginal private benefit.

If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good A) is zero. B) equals the marginal social cost. C) equals the marginal social benefit. D) equals the marginal private benefit.

If a good has zero external costs, then A) marginal social cost equal marginal private cost. B) marginal social cost is greater than marginal private cost. C) marginal social cost is less than marginal private cost. D) we need more information to determine the relationship between private and social costs.

Marginal social cost is the A) difference between the marginal social benefit and the marginal private cost. B) sum of the marginal private benefit and the marginal private cost. C) difference between the marginal external cost and the marginal private cost. D) sum of the marginal external cost and the marginal private cost.

The marginal social cost of production is the A) marginal private cost plus the marginal external cost. B) same as the marginal cost of any externality. C) total cost of any externality. D) marginal private cost minus the marginal external cost.

Marginal social cost is equal to the A) sum of marginal private cost and marginal external cost. B) sum of marginal private cost and marginal private benefit. C) marginal cost incurred by the producer of the good. D) marginal cost imposed on others.

Marginal social cost is equal to A) marginal private cost plus the marginal external cost. B) the marginal external cost. C) the value of the tax that will make the market efficient. D) the marginal cost imposed on people other than the producer of the good.

Which of the following is TRUE? A) MSC = MC + Marginal external cost B) MC = Marginal external cost - MSC C) MC = Marginal external benefit + MSC D) MSC = Marginal external cost + marginal external benefit

The marginal social cost, MSC, of producing a good or service equals A) MC + MB. B) MB + marginal external cost. C) MB + marginal external benefit. D) MC + marginal external cost.

For a good with an external cost, the supply curve A) represents the various quantities people can buy. B) is the same as the marginal private cost curve. C) is the same as the marginal social cost curve. D) is the same as the marginal external cost curve.

If the marginal external cost of building a children's playground equals zero, then the A) marginal private cost equals the marginal social cost. B) marginal social cost equals zero. C) marginal private cost equals zero. D) None of the above answers is correct.

If a good has an external cost, then the marginal private cost curve A) lies below the marginal social cost curve. B) lies above the marginal social cost curve. C) is negative. D) is the same as the marginal external cost curve.

If the production of a good creates pollution, then the A) marginal social benefit curve lies above the marginal private benefit curve. B) marginal social cost curve lies above the marginal private cost curve. C) marginal social benefit curve lies below the marginal private benefit curve. D) marginal social cost curve lies below the marginal private cost curve.

Consider an industry that produces an output Q with marginal private cost (MC) and marginal social cost (MSC) as given in the table: Which of the following is TRUE? A) The production of each additional unit results in a larger marginal external cost. B) The production of each additional unit results in the same marginal external cost. C) The production of each additional unit results in a lower marginal external cost. D) There are no marginal external costs associated with the production of this good.

Consider an industry that produces an output Q with marginal private cost (MC) and marginal social cost (MSC) as given in the table: The marginal external cost associated with the production of unit 3 is A) 4. B) 6. C) 10. D) 16.

When production of a good results in an external cost, the unregulated competitive market equilibrium is inefficient because A) MSC = MC. B) MSC = MSB. C) MSC > MSB. D) MSC < MSB.

If production of a good creates an external cost, the amount of output where the marginal social benefit equals the marginal private cost is A) inefficient. B) inequitable. C) unattainable. D) efficient.

If a good has an external cost, the A) competitive market outcome is efficient. B) marginal private cost reflects the external cost. C) competitive market outcome is inefficient. D) marginal private benefit is equal to the marginal social cost.

Pollution occurs when lumber is produced. If the lumber market is unregulated, there would be A) overproduction of lumber compared to the efficient amount. B) underproduction of lumber compared to the efficient amount. C) sometimes overproduction and sometimes underproduction of lumber compared to the efficient amount. D) an external benefit to producing lumber.

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then A) a competitive, unregulated market produces less than the efficient quantity of Good A. B) a competitive, unregulated market produces the efficient quantity of Good A. C) a competitive, unregulated market produces more than the efficient quantity of Good A. D) the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.

When the production of a good has an external cost, the A) marginal social cost curve lies below the marginal private cost curve. B) marginal social benefit curve lies above the marginal private benefit curve. C) equilibrium quantity in an unregulated, competitive market has a marginal social cost greater than the marginal social benefit. D) equilibrium quantity in an unregulated, competitive market has a marginal social cost less than the marginal social benefit.

Generating electricity using coal creates air pollution. This industry, if left unregulated, will produce A) more than the efficient level of output. B) the efficient level of output. C) less than the efficient level of output. D) sometimes more and sometimes less than the efficient level of output.

Generating electricity using coal creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium because A) there is a deadweight loss. B) supply is not equal to demand. C) too little output is produced. D) the marginal social benefit is greater than the marginal social cost.

Generating electricity using coal creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium where A) marginal private cost equals marginal social benefit. B) marginal social cost equals marginal social benefit. C) marginal social cost equals marginal private cost. D) marginal social benefit is greater than marginal social cost.

In the absence of property rights, factories will dump waste into a waterway up to the point where ________ equals ________. A) marginal social cost; marginal social benefit B) marginal social cost; marginal private cost C) marginal private cost; marginal private benefit D) marginal private cost; marginal social cost

For a good whose production creates a pollution, when marginal social cost equals marginal social benefit, then I there is no pollution. II resources are utilized efficiently. A) I only B) II only C) neither I nor II D) both I and II

Resources are efficiently utilized when production is such that marginal social benefit A) is equal to marginal social cost. B) exceeds marginal social cost by as much as possible. C) is less than marginal social cost. D) None of the above because efficiency has to do with property rights and has nothing to do with marginal social benefit or marginal social cost.

The efficient quantity of output of a product with external costs of production is A) where the demand curve and the producer's supply curve intersect. B) where the marginal social cost curve and marginal social benefit curve intersect. C) as low as possible. D) zero.

Producing paper creates pollution. There is no externality in the consumption of paper. The efficient quantity of paper is when the A) marginal social benefit of paper is equal to zero. B) marginal social cost of the pollution from making paper is equal to zero. C) marginal social benefit of paper is equal to the marginal social cost of paper. D) marginal private cost of the pollution from making paper is equal to zero.

-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city. The market is efficient when the quantity of steel produced is ________ tons per week. A) 5 B) 10 C) 15 D) 25

-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city. If the marginal external cost is $10 per ton at every quantity of steel produced, the equilibrium quantity when the steel industry is unregulated is ________ tons per week. A) 5 B) 15 C) 20 D) 25

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external ________ of ________ per ton. A) benefit; $200 B) benefit; $100 C) cost; $200 D) cost; $100

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive and unregulated, how much steel will be produced? A) 0 tons B) 2 tons C) 4 tons D) 8 tons

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. What is the efficient quantity of steel? A) 0 tons B) 2 tons C) 4 tons D) 8 tons

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive and unregulated, the equilibrium quantity of steel is ________ tons and the efficient quantity of steel is ________ tons. A) 2; 2 B) 2; 4 C) 4; 2 D) None of the above answers is correct.

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency? A) The government could subsidize the production of steel. B) The government could tax the production of steel. C) The government could issue vouchers to steel consumers. D) None of the above answers is correct.

-A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. The marginal social cost, private marginal cost, and marginal social benefit from producing chemicals are in the figure above. If polluting is legal and no one owns the lake into which waste is dumped, then the amount of chemicals produced each week will be A) 0 tons. B) 4 tons. C) 8 tons. D) None of the above answers is correct.

-A chemical factory and a fishing club share a lake. The marginal social costs, private marginal costs, and marginal benefits from producing chemicals are in the figure above. The chemicals dumped into the lake have always harmed the fish, but now they begin to damage the fishing boats as well. As a result, the A) marginal social cost curve shifts leftward. B) marginal social cost curve shifts rightward. C) marginal benefit curve shifts leftward. D) marginal benefit curve shifts rightward.

-In the above figure, the efficient level of chemicals produced per week is A) 0 tons. B) 4 tons. C) between 5 and 7 tons. D) 8 tons.

A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. The marginal social cost, private marginal cost, and marginal benefit from producing chemicals are in the figure above. Initially the lake is owned by no one. Keeping in mind the Coase theorem, if transactions costs are low then if the chemical factory owns the lake ________ tons of chemicals will be produced and if the fishing club owns the lake, ________ tons of chemicals will be produced. A) 4; 4 B) 4; 8 C) 8; 4 D) 8; 8

Legally established titles to the ownership, use, and disposal of factors of production are referred to as A) property rights. B) Coase rights. C) pollution rights. D) emission rights.

Property rights A) apply to factors of production and to goods and services. B) are legally established titles of ownership that are enforceable in the courts. C) can be part of a solution to the problems of an externality. D) All of the above answers are correct.

The Coase Theorem is the proposition that private transactions are efficient if property rights exist, if only a ________ number of parties are involved, and if transactions costs are ________. A) large; low B) large; high C) small; low D) small; high

The Coase Theorem is the proposition that if the number of involved parties is low, if property rights ________ and transactions costs are ________, then private transactions are efficient. A) are nonexistent; low B) exist; high C) are nonexistent; high D) exist; low

The Coase Theorem points out that externality problems can be eliminated if the number of parties involved is small and if property rights A) are granted solely to consumers. B) are granted solely to producers. C) are eliminated. D) are granted to either consumers or producers and transactions costs are low.

The Coase theorem says that which of the following is necessary to lead to an efficient use of resources? A) presence of transaction costs B) existence of property rights C) government intervention D) All of the above answers are correct.

According to the Coase theorem, which of the following are necessary for the efficient levels of pollution to be achieved? I. Property rights are defined. II) Transactions costs are low. A) I only B) II only C) both I and II D) neither I nor II

Which condition(s) must exist for the Coase theorem to hold? I. Property rights must exist. II) Transactions costs must be measurable. III) A small number of parties must be involved. A) I and II only B) I and III only C) II and III only D) I, II and III

The Coase theorem is the proposition that if property rights exist, the number of parties is small, and transactions costs are low A) external costs result in deadweight losses. B) external benefits result in deadweight losses. C) private transactions are efficient. D) public transactions are efficient.

The Coase Theorem is the proposition that private economic transactions are efficient if the number of involved parties is small, if property rights ________, and transactions costs are ________. A) exist; high B) exist; low C) do not exist; high D) do not exist; low

According to the Coase theorem, part of what is needed for private transactions to be efficient is that property rights A) must be defined, but it does not matter who owns the property. B) must be defined, and it is crucial as to who owns the property. C) need not be defined as long as there are no transactions costs present. D) need to be defined by the government to avoid producers from exploiting high transactions costs.

A key contribution of Ronald Coase is that he pointed out that private transactions are efficient when the number of parties involved is small A) and when property rights are well defined and transactions costs are low. B) and when property rights do not exist. C) and that property rights are irrelevant to the existence of externalities. D) and when corporations are not greedy.

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established A) the government must intervene to eliminate any externalities in the market. B) private transactions are efficient. C) there will be no pollution. D) Both answers B and C are correct.

A large farming operation which uses a potent fertilizer is located up river from a trout farmer. If property rights of the river exist and transactions costs are low, the amount of pollution will be A) efficient only if the trout farmer owns the river. B) inefficient if the farming operation owns the river. C) efficient if either the farming operation or the trout farmer own the river. D) always inefficient.

The Coase theorem applies when property rights are given A) to the victim of pollution but not to the polluter. B) to the polluter but not to the victim. C) to either the polluter or the victim. D) neither to the polluter nor to the victim.

When property rights are assigned and transactions costs are low A) all costs and benefits are taken into account by the transacting parties so the transaction is efficient. B) externalities will lead to market failure. C) the marginal social benefit curve shifts leftward. D) the marginal social cost curve shifts rightward.

A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. Initially the lake is owned by no one. Keeping in mind the Coase theorem, suppose transactions costs are low and the chemical factory is given ownership of the lake. Compared to the situation with no property rights, the quantity of chemicals produced A) will decrease. B) will stay the same. C) will increase. D) changes, but the direction of the change is ambiguous.

A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. Initially the lake is owned by no one. Keeping in mind the Coase theorem, suppose transactions costs are low and the fishing club is given ownership of the lake. Compared to the situation with no property rights, the quantity of chemicals produced A) will decrease. B) will stay the same. C) will increase. D) changes, but the direction of the change is ambiguous.

A polluted river has 20 homes on it that rent for $1,000 each per month. Homes on a similar river that is not polluted rent for $2,000 each per month. The river is polluted because there are two factories on the river that dump polluted water in the river. Each factory could install a filter that would cost $5,000 each and would reduce the pollution in the water to a negligible level. The external cost in this problem is A) $20,000. B) $5,000. C) $10,000. D) $30,000.

A polluted river has 20 homes on it that rent for $1,000 each per month. Homes on a similar river that is not polluted rent for $2,000 each per month. The river is polluted because there are two factories on the river that dump polluted water in the river. Each factory could install a filter that would cost $5,000 each and would reduce the pollution in the water to a negligible level. In this case A) assigning property rights to the river to either party will result in an efficient outcome. B) neither party is willing to bargain with the other. C) if property rights to the river are assigned to the factory, then all the homes will be abandoned. D) if property rights to the river are assigned to the homeowners, then the factories will be closed.

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If no property rights exist on the waterway and if there is no regulation of pollution, then the factory produces ________ of chemicals a week. A) 1 ton B) as many tons as possible C) 3 tons D) 5 tons

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. The efficient quantity of chemicals to produce is ________ tons of chemicals a week. A) 1 ton B) as many tons as possible C) 3 tons D) 5 tons

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If the waterway is owned by a water ski club and the Coase theorem applies, then the factory will produce ________ tons of chemicals a week. A) 1 ton B) as many tons as possible C) 3 tons D) 5 tons

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If the waterway is owned by the factory and the Coase theorem applies, then the factory will produce ________ tons of chemicals a week. A) 1 ton B) as many tons as possible C) 3 tons D) 5 tons

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if the output is 180 tons per month, what is the marginal social cost of producing the pesticide? A) $60 B) $30 C) $40 D) $50

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, what is the efficient quantity of pesticide to produce? A) 300 tons per month B) 240 tons per month C) 180 tons per month D) 360 tons per month

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, what is the quantity of pesticide produced? A) 300 tons per month B) 240 tons per month C) 180 tons per month D) 360 tons per month

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, at the equilibrium quantity what is the marginal social cost of producing the pesticide? A) $80 B) $40 C) $60 D) $30

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, what is the equilibrium price of the pesticide? A) $80 per ton B) $40 per ton C) $60 per ton D) $30 per ton

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, the market does what? A) overproduces 120 tons of pesticide B) underproduces 120 tons of pesticide C) overproduces 60 tons of pesticide D) produces the efficient quantity of pesticide

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, what is the deadweight loss in the market? A) $2,400 per month B) $1,800 per month C) $3,600 per month D) zero

Keeping in mind the Coase theorem, in the figure above if the pesticide factories own the lake, how much pesticide is produced? A) 300 tons per month B) 240 tons per month C) 180 tons per month D) 360 tons per month

Keeping in mind the Coase theorem, in the figure above, if the pesticide factories own the lake, the market does what? A) overproduces 120 tons of pesticide B) underproduces 120 tons of pesticide C) overproduces 60 tons of pesticide D) produces the efficient quantity of pesticide

Keeping in mind the Coase theorem, in the figure above, if the residents of the town own the lake, the market does what? A) overproduces 120 tons of pesticide B) underproduces 120 tons of pesticide C) overproduces 60 tons of pesticide D) produces the efficient quantity of pesticide

Keeping in mind the Coase theorem, in the figure above, if the residents of the town own the lake, how much do they charge the factories to dump waste? A) $30 per ton of pesticide produced B) $40 per ton of pesticide produced C) $20 per ton of pesticide produced D) Nothing

In the figure above, if no one owns the lake the tax that achieves the efficient outcome is ________ per ton of pesticide produced. A) $30 B) $40 C) $20 D) $10

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT A) cap-and-trade. B) mandating clean technology. C) subsidies. D) taxes.

The three main methods that governments use to cope with an external cost of production include all of the following EXCEPT A) taxes. B) mandating clean technology. C) cap-and-trade D) price floors.

When external costs are present A) competitive, unregulated markets are efficient. B) transaction costs will be high. C) a tax might be able to create efficiency. D) property rights have already been established.

The government can use taxes to A) change production in a market with an external cost to the efficient amount. B) change production in a market with an external benefit to the efficient amount. C) increase production. D) decrease price.

Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will A) decrease supply of the good. B) increase supply of the good. C) decrease demand for the good. D) increase demand for the good.

Taxes can yield the efficient level of pollution if the tax is set equal to the A) marginal benefit of pollution. B) marginal external cost of the pollution. C) marginal social cost of the pollution. D) equilibrium price of the pollution.

When the production of a good creates an external cost, by setting the tax rate equal to the ________, firms can be made to behave in the same way as they would if they bore the cost of the externality directly. A) marginal external cost B) marginal social benefit C) marginal private benefit D) marginal social cost

When the production of a good creates an external cost, one method of achieving the efficient allocation is to impose a tax such that A) MC + tax = MSC. B) MC - tax = MSB. C) MB + tax = MSC. D) MB - tax = MSB.

When the production of a good creates an external cost, in order for taxes to be effective in achieving the efficient allocation of resources, the tax must be set equal to the A) marginal private cost. B) marginal external cost. C) marginal social cost. D) marginal benefit of polluting.

To eliminate the inefficiency resulting from an external cost of production, the government can impose a tax on producers that is equal to the A) MSB. B) MC. C) marginal external cost. D) MSC.

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that A) MSC = MC + T. B) MC = MSC + T. C) T = MC + MSC. D) MSC = MC - T.

Let MC be the marginal private cost per megawatt hour (Mwh) of producing electricity using coal. Let MSC be the marginal social cost per Mwh and T be the tax per Mwh. To achieve efficiency, the tax should be set so that A) MC = MSC + T. B) MSC = MC + T. C) MC + MSC = T. D) MC = T.

When external costs are present and the government imposes a tax equal to the marginal external cost, then A) efficiency can be achieved. B) transaction costs will be high. C) the marginal benefit of the external cost will fall. D) property rights must have already been established.

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then A) the amount of output moves farther away from the efficient amount. B) transaction costs will be high. C) the efficient amount of the good will be produced. D) property rights must have already been established.

A tax equal to the external marginal cost of an activity yields the efficient level of production because the tax A) achieves the competitive equilibrium. B) forces producers to face all costs of production including the external cost. C) ensures greater profits for the firm. D) eliminates all pollution.

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water. -Any such pollution is A) an external benefit. B) an external cost. C) a private cost. D) a private benefit.

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water. -If this pollution occurs, the marginal social cost equals the A) marginal external cost. B) private marginal cost. C) sum of the private marginal cost and the marginal external cost. D) private marginal cost minus the marginal external cost.

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water. -If this pollution occurs, the market equilibrium with no government intervention extracts ________ natural gas than the efficient quantity and ________ a deadweight loss. A) less; does not create B) more; does not create C) less; creates D) more; creates

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water. -If this pollution occurs, one way of reaching efficient production levels is by setting a Pigovian Tax. To achieve efficiency with this tax means that the tax must equal the A) marginal social cost. B) marginal private cost. C) marginal private benefit. D) marginal external cost.

Consider the production of some industrial good that creates air pollution. The table below gives the marginal social cost (MSC), the marginal cost (MC), and the marginal social benefit (MSB) for each level of output (Q). The inefficient market quantity is ________ and the efficient market quantity is ________. A) 4; 3 B) 6; 3 C) 3; 4 D) 4; 6

Consider the production of some industrial good that involves air pollution. The table below gives the marginal social cost (MSC), the marginal cost (MC), and the marginal social benefit (MSB) for each level of output (Q). To arrive at the efficient market equilibrium the government could impose a tax of A) $3. B) $4. C) $8. D) $9.

-The demand for bus service is perfectly elastic at a price of $1.00 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. The competitive quantity of bus rides per week is A) 100. B) 200. C) 300. D) 500.

-The demand for bus service is perfectly elastic at a price of $1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride. A) $0.75 B) $1.60 C) $1.25 D) $3.25

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the quantity produced if the market for paper is unregulated? A) 10 tons per week B) 60 tons per week C) 40 tons per week D) 30 tons per week

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the efficient amount of paper? A) 10 tons per week B) 60 tons per week C) 40 tons per week D) 30 tons per week

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What amount of tax per ton of paper is necessary to produce the efficient quantity of paper? A) $60 B) zero C) $40 D) $100

-The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. Now suppose a Pigovian tax is successfully implemented and the efficient quantity of paper is produced. What is the total tax revenue collected by the government per week? A) $120 B) $840 C) $1,200 D) $1,800

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the equilibrium output is ________ of paper. A) 1,600 tons B) 2,400 tons C) 3,200 tons D) 4,000 tons

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the equilibrium price is ________ per ton. A) $60 B) $70 C) $80 D) $90

-The tables above show the marginal costs and benefits from production and consumption of paper. From this information we can see that there are A) external costs of producing paper. B) external benefits of producing paper. C) no externalities in production of paper. D) external costs from consuming paper.

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal external cost is A) zero. B) $10. C) $20. D) $30.

-The tables above show the marginal costs and benefits from production of paper. The efficient level of output is ________ of paper. A) 1,600 tons B) 2,400 tons C) 3,200 tons D) 4,000 tons

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the A) allocation of resources is efficient. B) market equilibrium produces 800 tons more than the efficient amount. C) market equilibrium produces 1,600 tons more than the efficient amount. D) market equilibrium produces 800 tons less than the efficient amount.

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the efficient level of output A) is achieved. B) can be achieved by giving paper producers a subsidy. C) can be achieved by imposing a Pigovian tax on paper producers. D) cannot be achieved.

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the efficient amount of paper will be produced by setting a Pigovian tax of A) $5 per ton. B) $10 per ton. C) $20 per ton. D) $40 per ton.

-The tables above show the marginal costs and benefits from production of paper. If the efficient level of output is achieved by imposing a tax on paper producers, the government collects tax revenue equal to A) $64,000. B) $56,000. C) $72,000. D) $48,000.

-In the figure above showing the costs and benefits of paper production, there is an A) external cost associated with paper production. B) external benefit associated with paper production. C) external cost associated with paper consumption. D) external benefit associated with paper consumption.

-In the above figure, the competitive unregulated equilibrium is producing and consuming ________ tons of paper at a price of ________ per ton. A) 100; $150 B) 100; $100 C) 100; $50 D) 200; $100

If the government regulates the market in the above figure in a way to achieve efficiency, then ________ tons of paper will be produced and consumed. A) 0 B) 100 C) 200 D) None of the above answers is correct.

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that A) polluters are taxed on the amount of pollution they discharge. B) emission charges are established by the government. C) each polluter is assigned a pollution limit and is given tradable permits that allow this amount of pollution. D) only some producers pollute and the others go out of business.

Cap-and-trade policies make use of ________ to reduce different types of pollutants from the atmosphere. A) pigovian taxes B) the Coase Theorem C) emissions charges D) marketable permits

There are two industries that emit sulfur dioxide. The government decides to use a cap-and-trade policy by issuing permits for pollution. If Harry's industry has a higher marginal cost of reducing sulfur dioxide than does Joe's industry A) the cap-and-trade policy will not make the amount of pollution efficient. B) Joe's industry will sell permits to Harry's industry. C) Harry's industry will sell permits to Joe's industry. D) Harry's industry and Joe's industry will emit the same quantity of sulfur dioxide.

With marketable permits to pollute, efficiency can be obtained if A) the regulator knows the marginal cost schedule of every firm. B) firms with low marginal costs of eliminating pollution sell their permits. C) firms with low marginal costs of eliminating pollution buy up more permits. D) only one firm gets the permits to pollute.

Both firm A and firm B emit 300 tons of pollution. Suppose both firm A and firm B have permits that allow each to emit 100 tons of pollution. If it costs $5,000 for firm A to eliminate 100 tons of pollution and it costs firm B $6,000 to eliminate 100 tons of pollution, then A) firm B will sell its permits to firm A for a price above $6,000. B) firm A will sell its permits to firm B for a price below $6,000. C) firm A will sell its permits to firm B for a price above $6,000. D) firm B will sell its permits to firm A for a price below $6,000.

If the government creates a system of pollution permits, firms with low marginal costs of reducing pollution will A) buy permits from other firms. B) sell permits to other firms. C) hold on to the permits they have been issued and not attempt to buy more. D) not be issued permits.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. Based on the data in the table, production of fertilizer has A) external benefits. B) external costs. C) no externalities. D) constant returns to scale.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, the equilibrium output will be A) 2,000 tons. B) 3,000 tons. C) 4,000 tons. D) 5,000 tons.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium level of output A) resource allocation is efficient. B) resource allocation is inefficient. C) too few tons of fertilizer are produced. D) consumers must pay too high a price for fertilizer.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, the equilibrium price per ton will be A) $70. B) $80. C) $90. D) $100.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium output, the A) marginal private cost exceeds the marginal private benefit. B) marginal private cost is less than the marginal private benefit. C) marginal social cost equals the marginal private benefit. D) marginal social cost is greater than the marginal private benefit.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal external cost per ton is A) zero. B) $30. C) $80. D) $110.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. The efficient level of output is A) 2,000 tons. B) 3,000 tons. C) 4,000 tons. D) 5,000 tons.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, the efficient level of output could be achieved by setting a per ton tax of A) zero. B) $30. C) $80. D) $110.

-In the figure above, if the market is unregulated, the output will be A) zero. B) 50 units. C) 150 units. D) 250 units.

-In the figure above, if the market is unregulated A) more than the efficient amount of output will be produced. B) less than the efficient amount of output will be produced. C) the allocation of resources will be efficient because the efficient amount of output will be produced. D) the deadweight loss will be zero.

-In the figure above, if the market is unregulated, the price will be A) $250 per unit. B) $200 per unit. C) $150 per unit. D) $100 per unit.

-In the figure above, if the market is unregulated, then at the equilibrium output level, the marginal social cost of production A) is less than the marginal benefit to consumers. B) exceeds the marginal benefit to consumers. C) equals the marginal benefit to consumers. D) equals the marginal private cost of production.

-In the figure above, if the market is unregulated, at the equilibrium output the marginal external cost is A) zero. B) $250 per unit. C) $150 per unit. D) $100 per unit.

-In the figure above, in order to promote an efficient allocation of resources, the government could impose a tax equal to A) zero. B) $250 per unit. C) $150 per unit. D) $100 per unit.

-In the figure above, if an excise tax is imposed that generates an efficient allocation of resources, then the amount of output will be A) zero. B) 50 units. C) 150 units. D) 250 units.

-In the figure above, if a tax is imposed that generates an efficient allocation of resources, then consumers will pay a price of A) $250 per unit. B) $200 per unit. C) $150 per unit. D) $100 per unit.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The unregulated, competitive market for gasoline in Motorland A) produces the efficient quantity of gasoline. B) overproduces by 0.2 million gallons of gasoline a month. C) underproduces by 0.1 million gallons of gasoline a month. D) overproduces by 0.1 million gallons of gasoline a month.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The efficient quantity of gasoline to sell in Motorland is A) 1.7 million gallons per month. B) 1.8 million gallons per month. C) 1.6 million gallons per month. D) 1.9 million gallons per month.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. When the market for gasoline in Motorland is in equilibrium, the market price of gasoline is ________ the marginal social cost. A) $1.50 above B) $1.50 below C) equal to D) $1.20 above

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. When the market for gasoline in Motorland is in equilibrium, the deadweight loss is A) $37,500 per month. B) $150,000 per month. C) $75,000 per month. D) zero.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. Suppose Motorland's government imposes a tax of $1.50 per gallon of gasoline sold. With the tax, the market will A) underproduce by 0.2 million gallons of gasoline a month. B) underproduce by 0.1 million gallons of gasoline a month. C) overproduce by 0.1 million gallons of gasoline a month. D) produce the efficient quantity of gasoline.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. Suppose Motorland's government imposes a tax of $1.50 per gallon of gasoline sold. With the tax, when the market is in equilibrium, the deadweight loss is A) zero. B) $37,500 per month. C) $150,000 per month. D) $75,000 per month.

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. The marginal private cost when output equals 2 tons of paper per week equals A) $50 per ton. B) $100 per ton. C) $150 per ton. D) $200 per ton.

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. The marginal private cost borne by the firms plus the people who enjoy a clean lake when output equals 2 tons of paper per week equals A) $50 per ton. B) $100 per ton. C) $150 per ton. D) $200 per ton.

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. Without regulation, ________ tons of paper will be produced and the price will be ________ per ton. A) 3; $150 B) 4; $100 C) 4; $200 D) 3; $200

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. If paper production is 4 tons per week, the outcome is A) efficient because marginal benefit equals marginal private cost. B) efficient because private and external costs are accounted for. C) inefficient because only marginal external benefits are accounted for. D) inefficient because marginal social cost exceeds marginal social benefit.

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. According to the Coase Theorem, if the transactions costs are low and there are only a few people involved, the output will equal ________ tons of paper if ________ own the lake. A) 3; only the lakeside residents B) 3; either the firms or lakeside residents C) 4; the firms D) 4; either the firms or lakeside residents

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. If the market is unregulated, in equilibrium the external cost of visiting the state park is given by the distance between A) points H and G. B) points I and F. C) points F and G. D) points G and K.

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. The competitive equilibrium is at A) point G. B) point H. C) point I. D) point J.

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. An efficient allocation of resources occurs at A) point F. B) point G. C) point H. D) point I.

-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, the marginal cost of the externality is ________ per unit. A) $3 B) $4 C) $6 D) $7

-In the above figure, if the market is unregulated, the equilibrium quantity is A) 0 units. B) 70 units. C) 80 units. D) 100 units.

-In the above figure, the efficient quantity is A) 0 units. B) 70 units. C) 80 units. D) 100 units.

-In the above figure, in order to achieve efficiency, a tax of ________ per unit is needed. A) $3 B) $6 C) $0 D) $2

-The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created. If the market for transportation services is competitive and unregulated, the equilibrium quantity is ________ and the equilibrium price is ________. A) 120; $14 B) 120; $8 C) 80; $12 D) 80; $6

-The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created. The efficient quantity of transportation services is ________ and the corresponding price is ________. A) 120; $14 B) 120; $8 C) 80; $12 D) 80; $6

-The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created. Suppose that the government decides to introduce a pollution tax. What is the tax per vehicle mile that will achieve the efficient outcome? A) $2 B) $4 C) $6 D) $8

-Based on the data in the above table, the table shows a market for a good with A) an external cost. B) an external benefit. C) a mixed externality. D) no externalities.

-Left unregulated, the equilibrium amount produced in the market described in the table above is A) 550 units. B) 600 units. C) 650 units. D) 700 units.

-Based on the data in the table above, the efficient level of output equals A) 550 units. B) 600 units. C) 650 units. D) 700 units.

-Based on the data in the above table, to assure that the efficient amount is produced the government can A) subsidize the suppliers $8 per unit. B) subsidize the suppliers $2 per unit. C) tax suppliers $2 per unit. D) tax suppliers $8 per unit.

A copper ore refiner pollutes the water upstream from a brewery. These are the only two parties involved. The transactions costs of reaching an agreement between the refinery and the brewery are low. The amount of water pollution will be at the efficient level A) only when the property right to the stream is assigned to the ore refinery. B) only when the property right to the stream is assigned to the brewery. C) when the property right to the stream is assigned to either the refinery or to the brewery. D) when no one has clear property rights.

-The amount of the external marginal cost per ton illustrated in the above figure is A) $8.00 per ton. B) $12.00 per ton. C) $16.00 per ton. D) zero because no external cost is illustrated.

-Using the above figure, in the absence of any government intervention, the number of tons of paper produced will be A) 60 million tons. B) 80 million tons. C) 100 million tons. D) 120 million tons.

-Using the above figure, the efficient amount of paper produced is A) 60 million tons. B) 80 million tons. C) 100 million tons. D) 120 million tons.

-In the above figure, to achieve the efficient amount of paper production, the government could impose a tax of A) $2 per ton. B) $8 per ton. C) $26 per ton. D) zero, because the efficient amount is produced with no government intervention.

The tragedy of commons is the A) underuse of a common resource. B) absence of incentives for people to pay for what they consume. C) fact that common resources are nonrival. D) overuse of a common resource.

Which of the following applies to the tragedy of the commons? I. In the absence of government action, there is an absence of incentives to prevent the overuse of the common resource. II) When consumers take account of the marginal social benefit and marginal social cost, overuse of the resource occurs. III) Even with government action, it is impossible for an efficient level of output to be achieved. A) I only B) I and II C) II and III D) I, II and III

The tragedy of the commons is the absence of incentives to A) correctly measure the marginal social benefit from a common resource. B) prevent under use of the common resource. C) prevent overuse and depletion of a common resource. D) discover the common resource.

The tragedy of the commons is the absence of incentives to A) use commonly owned resources. B) prevent the overuse of commonly owned resources. C) use privately owned resources. D) have commonly owned resources.

In which of the following cases does the tragedy of the commons occur? I. Cattle grazing on private ranches. II) Catching lobsters off the coast of Florida. III) Raising salmon on salmon farms. IV) Using legal services provided by the courts. A) I only B) II only C) II and III only D) I and IV only

The Atlantic City Expressway is a highway that runs from outside Philadelphia to Atlantic City, New Jersey. It is notoriously congested during the summer weekends when many people are driving to the beach about the same time. The marginal private cost for a driver of driving on the Expressway includes I. the cost of gasoline. II) the cost of increasing congestion for everyone else. A) I only B) II only C) Both I and II D) Neither I nor II

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________. A) upward; upward B) upward; downward C) downward; upward D) downward; downward

For a common resource, the marginal social cost of the resource is ________ the marginal private cost. A) greater than B) equal to C) less than D) not comparable to

For a common resource, the equilibrium with no government intervention is such that ________ is less than ________. A) marginal private cost; marginal social benefit B) marginal social benefit; marginal social cost C) marginal private benefit; marginal social benefit D) total social benefit; total social cost

For a common resource, efficiency requires that the ________ equals the ________. A) marginal private benefit; marginal social cost B) marginal social benefit; marginal social cost C) marginal private benefit; marginal social benefit D) marginal social cost; marginal private cost

A common resource is used efficiently if A) the output is maximized. B) marginal social benefit equals marginal social cost. C) marginal private benefit equals marginal private cost. D) marginal social benefit is maximized.

To achieve the efficient amount of use of a common resource, the use should be such that ________ equals ________. A) marginal social cost; marginal private cost B) marginal social cost; marginal social benefit C) marginal social benefit; marginal private cost D) marginal private cost; marginal private benefit

The problem of the commons arises because ________ exceeds ________ when the resource is used. A) marginal social cost; marginal private cost B) marginal private benefit; marginal social benefit C) marginal private benefit; marginal private cost D) marginal private cost; marginal social cost

The Atlantic City Expressway is a highway that runs from outside Philadelphia to Atlantic City, New Jersey. It is notoriously congested during the summer weekends when many people are driving to the beach about the same time. Because drivers who decide to take this road ignore the impact of their driving on overall traffic congestion the result is ________ cars on the road than the efficient number of cars and a deadweight loss is ________. A) fewer; not created B) fewer; created C) more; not created D) more; created

One way to overcome the problem of the commons is to A) assign property rights so that someone owns the resource. B) take away property rights so that no one owns the resource. C) leave the market alone because the market will reach an equilibrium in which the efficient amount of the resource is used. D) None of the above answers is correct.

The catch of American lobster off the shores of New England is regulated using quotas. If the quota is set correctly, then at this quantity, the marginal social cost ________ the marginal social benefit. A) is less than B) is greater than C) is not comparable to D) equals

When a production quota is used to remedy the problem of the commons, then A) the production quota is set so that use of the resource is where marginal private benefit equals marginal private cost. B) the production quota is set so that use of the resource is where marginal social benefit equals marginal private cost. C) the market equilibrium, but not the efficient outcome, is achieved. D) all users of the resource have an incentive to cheat on the quota quantity.

If the government assigns private property rights to a common resource, then the A) resource is under-utilized. B) marginal private cost becomes equal to the marginal social cost. C) government needs to set a quota to achieve efficiency. D) None of the above answers is correct.

The market price of an individual transferable quota is equal to the A) marginal private benefit. B) marginal social benefit. C) marginal social benefit minus the marginal cost. D) marginal private benefit minus the marginal cost.

An individual transferable quota can be used to achieve the A) equilibrium for a public good. B) efficient use of a common resource. C) equilibrium for a private good. D) equilibrium for a common resource.

When producers are hard to monitor and marginal costs differ across producers, ________ are an effective method to achieve efficient use of a ________. A) individual transferable quotas; public good B) marginal private benefits; public good C) individual transferable quotas; common resource D) individual transferable quotas; excludable good

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The market equilibrium with no government intervention is A) 0 tons per week. B) 400 tons per week. C) 300 tons per week. D) None of the above answers is correct.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The efficient outcome is A) 0 tons per week. B) 300 tons per week. C) 400 tons per week. D) None of the above answers is correct.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to A) 0 tons per week. B) 300 tons per week. C) 400 tons per week. D) None of the above answers is correct.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The market equilibrium with no government intervention is A) 0 tons per week. B) 400 tons per week. C) 300 tons per week. D) None of the above answers is correct.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The market equilibrium with no government intervention is raising A) 0 goats. B) 40 goats. C) 50 goats. D) 55 goats.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The efficient outcome is raising A) 0 goats. B) 40 goats. C) 50 goats. D) 55 goats.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. A quota to prevent the overuse of the common pasture sets the number of goats to be raised equal to A) 0 goats. B) 40 goats. C) 50 goats. D) 55 goats.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. If property rights to the pasture are granted to a farmer so that the farmer owns the pasture, the farmer raises A) 0 goats. B) 40 goats. C) 50 goats. D) 55 goats.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. Suppose the government assigns individual transferable quotas (ITQ) set to achieve the efficient outcome. The market price of an ITQ is ________ per pound. A) $4.20 B) $2.00 C) $6.00 D) $4.00

For a common resource, efficiency requires that the ________ equals the ________. A) marginal private benefit; marginal private cost B) marginal social benefit; marginal social cost C) marginal private benefit; marginal social benefit D) marginal social cost; marginal private cost

If the government assigns private property rights to a common resource, then the A) resource is under-utilized. B) marginal private cost becomes equal to the marginal social cost. C) government needs to set a quota to achieve efficiency. D) None of the above answers is correct.

________ is the benefit that a consumer of a good or service receives. A) Marginal private benefit B) Marginal external benefit C) Marginal social benefit D) Both answers A and B are correct.

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the A) marginal private benefit. B) marginal external benefit. C) marginal social benefit. D) opportunity cost.

The benefit from an additional unit of a good or service that people other than the consumer of that good or service receives is the A) marginal private benefit. B) marginal external benefit. C) marginal social benefit. D) opportunity cost.

Suppose your neighbor has a beautiful garden. The benefit that she enjoys from her garden is called ________ and the benefit the rest of the neighborhood enjoys is called ________. A) marginal private benefit; marginal external benefit B) private cost; external cost C) marginal social benefit; marginal external benefit D) marginal external benefit; marginal social benefit

The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the A) marginal private benefit. B) marginal external benefit. C) marginal social benefit. D) opportunity cost.

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. When calculating the marginal social benefit of the vaccine, it is necessary to include A) only the marginal private benefit. B) only the marginal external benefit. C) both the marginal private benefit and the marginal external benefit. D) either the marginal private benefit or the marginal external benefit, whichever is larger.

Most economist would consider the marginal private benefit of education is A) less than the marginal social benefit. B) equal to the marginal social benefit. C) greater than the marginal social benefit. D) equal to the marginal social cost.

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good A) is zero. B) equals the marginal social benefit. C) equals the marginal social cost. D) equals the marginal private cost.

When individuals make decisions about how much schooling to obtain, they A) do not take account of the personal benefits that it creates. B) do not take account of the external benefits that it creates. C) overvalue the personal benefits that it creates. D) overvalue the external benefits that it creates.

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following? A) the price and marginal private benefit B) the economically efficient output C) the price and the marginal social benefit D) the size of the deadweight loss

When people determine the quantity of education they will undertake, they ________ the external benefits. As a result, if education were left to an unregulated market, people would undertake too ________ education. A) overvalue; much B) ignore; much C) ignore; little D) overvalue; little

When external benefits are present A) competitive markets are efficient. B) competitive markets are inefficient. C) a tax is required to eliminate the inefficiency. D) property rights have already been established.

In an unregulated, competitive market, less than the efficient quantity of education is produced and consumed because A) the decisions to produce and consume education are based on marginal private costs and marginal private benefits. B) the decisions to produce and consume education are based on marginal social costs and marginal social benefits. C) the decisions to produce and consume education are based on marginal private benefits and marginal social costs. D) marginal private costs are consistently greater than marginal private benefits.

Most governments subsidize basic education because A) there are external costs associated with well educated citizens. B) the marginal social benefit of education is greater than the marginal private benefit. C) of the existence of private schools. D) people do not value education enough.

Education in the United States is heavily subsidized by the government. This fact suggest that I. less than the efficient amount of education would be provided by an unregulated market. II) the marginal social benefit of education is greater than marginal social cost of education. A) I only B) II only C) both I and II D) neither I nor II

One reason that education has external benefits is that A) knowledge has diminishing marginal productivity. B) education creates job opportunities for teachers. C) education creates better citizens. D) property owners pay taxes to support the school system.

The concept of externalities means that subsidizing education can be justified on the grounds that as a student becomes better educated, the student will A) earn a higher income. B) enhance the lives of people around the student. C) make contributions to the student's alma mater. D) none of the above

When the marginal social benefit of Good A is greater than the marginal private benefit of Good A, then A) competitive, unregulated markets will produce a quantity of Good A that is less than the efficient quantity. B) competitive, unregulated markets will produce the quantity of Good A that is equal to the efficient quantity. C) competitive, unregulated markets will produce a quantity of Good A that is greater than the efficient quantity. D) the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.

When the consumption of a good creates an external benefit A) the marginal social cost curve lies below the marginal private cost curve. B) the marginal social benefit curve lies above the marginal private benefit curve. C) the quantity produced in an unregulated, competitive market is greater than the efficient quantity. D) an unregulated, competitive market will produce the efficient quantity of the good.

Consider a market in which there is an external benefit. The inefficient market equilibrium is such that A) too little output is produced. B) too much output is produced. C) price is too high. D) marginal social cost is greater than marginal social benefit.

Suppose a good has an external benefit and no external cost. When a competitive, unregulated market is at its equilibrium, then the A) marginal private benefit is less than the marginal social benefit. B) marginal private benefit is greater than the marginal social benefit. C) marginal private cost is less than the marginal social cost. D) marginal private cost is greater than the marginal social cost.

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. In a private market with no government intervention, the equilibrium will be A) overprovision of the HPV vaccine and a deadweight loss. B) overprovision of the HPV vaccine but no deadweight loss. C) underprovision of the HPV vaccine but no deadweight loss. D) underprovision of the HPV vaccine and a deadweight loss.

If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit A) the good should be taxed. B) permits should be required to purchase the good. C) the good could be subsidized. D) the government needs to take no action.

All of the following are devices that governments can use to achieve a more efficient allocation of resources in the presence of external benefits EXCEPT A) vouchers. B) private subsidies. C) marketable permits. D) public provision.

One way that government can increase the production of goods that have external benefits is to A) tax the activity. B) subsidize the activity. C) use marketable permits. D) Both answers B and C are correct.

Governments can use subsidies A) as a means of increasing government spending. B) when they want to increase taxes. C) to achieve an efficient outcome if there are external costs. D) to achieve an efficient outcome if there are external benefits.

A government subsidy for a good A) is similar to a tax insofar as it decreases the production of the good being subsidized. B) increases production of the subsidized goods. C) punishes those who consume or produce the subsidized good. D) has no effect on the quantity of the good produced.

Consider a market in which there is an external benefit. A private subsidy paid to producers can be used to arrive at the efficient market equilibrium because the subsidy will A) increase the quantity produced. B) decrease the supply of the good. C) increase the price demanders pay. D) decrease demand.

If a good has an external benefit, efficiency can be achieved by A) leaving the market unregulated. B) monopolizing the market. C) offering a private subsidy on the good equal to the external benefit. D) imposing a tax on the good equal to the external benefit.

If a local fishing club spends time each year cleaning up local streams by removing trash thrown by motorists, efficiency would be improved if A) motorists were fined and fishing club activities were taxed. B) the fishing club's activities were subsidized. C) the fishing club was taxed. D) motorists were subsidized.

Public universities, by charging tuition ________ the marginal cost of education, ________ the number of students. A) below; decrease B) below; increase C) above; decrease D) above; increase

When external benefits exist, which of the following can produce the efficient amount of output? I. vouchers II) private subsidies III) taxes IV) marketable permits A) I and II only B) I and III only C) II and IV only D) III and IV only

School vouchers can be used to arrive at the efficient market equilibrium because vouchers A) increase demand for schooling. B) increase supply of schooling. C) decrease the cost of schooling. D) decrease supply of schooling.

The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to A) marginal external cost. B) marginal external benefit. C) external cost. D) external benefit.

Vouchers create the efficient outcome only if production is such that the marginal social cost A) exceeds the marginal private benefit. B) equals the marginal external benefit. C) equals the marginal social benefit. D) is decreased so it equals the marginal private cost.

Food stamps provided by the U.S. Department of Agriculture are an example of A) a positive externality. B) a private subsidy. C) vouchers. D) an external benefit.

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good. A) marginal external benefit B) marginal social benefit C) marginal private benefit D) marginal social cost

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. To encourage the efficient number of people to be vaccinated the government could A) give producers a subsidy equal to the private marginal benefit. B) give consumers a voucher equal to the marginal external benefit. C) impose a tax equal to the marginal social benefit. D) impose a tax equal to the marginal external benefit.

-The table above provides information about the marginal private benefit of education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the market for education is competitive and unregulated, the equilibrium quantity of education will be ________ and the tuition will be ________. A) 20,000 student-years; $20,000 B) 40,000 student-years; $16,000 C) 60,000 student-years; $12,000 D) 80,000 student-years; $8,000

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. What is the efficient amount of education? A) 40,000 student-years B) 60,000 student-years C) 80,000 student-years D) 100,000 student-years

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government subsidizes education, how much should the subsidy be in order to attain the efficient level of enrollment? A) $4,000 B) $8,000 C) $12,000 D) $16,000

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition? A) $4,000 B) $8,000 C) $12,000 D) $16,000

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, how many students are enrolled in college? A) 12 million B) 20 million C) 16 million D) 24 million

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, what is the price of college education? A) $8,000 per year B) $12,000 per year C) $14,000 per year D) $16,000 per year

-The table above shows the marginal costs and marginal benefits of college education. If 8 million students are enrolled, the marginal external benefit is A) zero. B) $4,000. C) $5,000. D) $7,000.

-The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is A) zero. B) $4,000. C) $5,000. D) $7,000.

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal external benefit is A) zero. B) $5,000. C) $4,000. D) $8,000.

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal social benefit is A) zero. B) $14,000. C) $19,000. D) $16,000.

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal private benefit is A) zero. B) $14,000. C) $19,000. D) $16,000.

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal private cost is A) zero. B) $14,000. C) $19,000. D) $16,000.

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is A) 12 million. B) 20 million. C) 16 million. D) 24 million.

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, the amount of enrollment is A) efficient. B) inefficient because marginal social cost exceeds marginal social benefit. C) inefficient because marginal social benefit exceeds marginal social cost. D) inefficient because the quantity of education demanded exceeds the quantity of education supplied.

-The table above shows the marginal costs and marginal benefits of college education. The marginal private cost of college education at the efficient quantity of enrollment is A) $8,000 per year. B) $12,000 per year. C) $14,000 per year. D) $16,000 per year.

-The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is A) $20,000 per year. B) $16,000 per year. C) $12,000 per year. D) $14,000 per year.

-The table above shows the marginal costs and marginal benefits of college education. The marginal social benefit of college education at the efficient amount of enrollment is A) $20,000 per year. B) $16,000 per year. C) $12,000 per year. D) $14,000 per year.

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient level of college education, tuition is A) $10,000 per year. B) $12,000 per year. C) $14,000 per year. D) $16,000 per year.

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient amount of college education, the cost paid by the taxpayers is A) zero. B) $8,000 per student. C) $4,000 per student. D) $12,000 per student.

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium output will be A) 1,000 units. B) 2,000 units. C) 3,000 units. D) 4,000 units.

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium price will be A) $50 per unit. B) $60 per unit. C) $70 per unit. D) $110 per unit.

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level A) marginal private cost equals the marginal private benefit. B) marginal private cost is less than the marginal private benefit. C) marginal social cost equals the marginal private benefit. D) marginal social cost is greater than the marginal private benefit.

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level A) resource allocation is efficient. B) resource allocation is inefficient. C) too many units of output are produced. D) consumers pay too low a price.

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal external benefit per unit is A) zero. B) $20 per unit. C) $50 per unit. D) $70 per unit.

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal social benefit per unit is A) zero. B) $20 per unit. C) $50 per unit. D) $70 per unit.

-Based on the data in the above table, the product exhibits A) external benefits. B) external costs. C) no externalities. D) increasing returns.

-In the above table, the efficient level of output can be achieved through a per unit subsidy of A) zero. B) $20. C) $60. D) $120.

-In the above table, the efficient level of output can be achieved through a per unit A) subsidy of $20. B) tax of $20. C) subsidy of $60. D) tax of $60.

-In the above table, the efficient level of output is A) 2,000 units. B) 3,000 units. C) 4,000 units. D) 5,000 units.

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What is the equilibrium number of students at the college if the market is unregulated? A) 1,000 B) 3,000 C) 4,000 D) 5,000

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What is the efficient number of students at the college? A) 1,000 B) 3,000 C) 4,000 D) 5,000

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What is the tuition that will make the number of students equal to the efficient number? A) $400 B) $800 C) $2,800 D) $3,200

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What subsidy per student will the college require to take in the efficient number of students? A) $2,400 B) $400 C) $2,800 D) $3,400

-In the above figure, the unregulated, competitive market equilibrium is tuition of ________ and the equilibrium quantity is ________ students in college. A) $18,000; 30 million B) $12,000; 40 million C) $6,000; 50 million D) $18,000; 50 million

-In the above figure, what amount of subsidy per student would government have to provide to colleges if its desired objective was to achieve an efficient level of education, 50 million students per year? A) $6,000 per year B) $12,000 per year C) $18,000 per year D) $27,000 per year

-In the above figure, if the market is competitive and unregulated, output will be A) zero. B) 50 units per week. C) 150 units per week. D) 250 units per week.

-In the above figure, if the market is competitive and unregulated, the price will be A) $20 per unit. B) $15 per unit. C) $10 per unit. D) $5 per unit.

-In the above figure, if the market is competitive and unregulated, then at the equilibrium amount of output the marginal social benefit is A) less than the marginal cost to producers. B) greater than the marginal social cost. C) equal to the marginal cost to producers. D) equal to the marginal private benefit from consumption.

-In the above figure, if the market is competitive and unregulated A) more than the efficient amount of output will be produced. B) less than the efficient amount of output will be produced. C) the efficient amount of output will be produced. D) the distribution of income will be fair.

-In the above figure, in order to promote an efficient allocation of resources, the government could grant a subsidy equal to A) zero. B) $5 per unit. C) $10 per unit. D) $15 per unit.

-In the above figure, if a subsidy is granted that generates an efficient allocation of resources, then the output level will be A) zero. B) 50 units per week. C) 150 units per week. D) 250 units per week.

-In the above figure, if a subsidy is granted to producers that generates an efficient level of production, then the deadweight loss will be A) zero. B) $500 C) $1,000. D) $2,000.

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then consumers will pay a price of A) $20 per unit. B) $15 per unit. C) $10 per unit. D) $5 per unit.