Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Corrective taxes differ from most taxes in that corrective taxes

Accepted Answer

A)  reduce economic efficiency.
B)  do not raise revenue for the government.
C)  do not cause deadweight losses.
D)  always result in a high burden on sellers of goods to which the corrective tax applies.E) B) and D)
F) A) and D) C

Question 3

A corrective tax

Accepted Answer

A)  allocates pollution to those factories that face the highest cost of reducing it.
B)  is a form of regulation.
C)  works well for all types of externalities.
D)  is inferior to regulatory policy according to most economists.E) C) and D)
F) A) and B)

Question 4

​Figure 10-20. ​ 
-Refer to Figure 10-20. The graph depicts the market for fertilizer. What is the socially optimal price of fertilizer?

Accepted Answer

A)  $​100
B)  $200
C)  $250
D)  ​$300E) A) and B)
F) A) and C)

Question 5

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Accepted Answer

A)  They are equal.
B)  The after-tax equilibrium quantity is greater than the socially optimal quantity.
C)  The after-tax equilibrium quantity is less than the socially optimal quantity.
D)  There is not enough information to answer the question.E) A) and B)
F) B) and C)

Question 6

The concept of external cost is associated with a negative externality, but not with a positive externality.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is correct?

Accepted Answer

A)  Gasoline taxes are an example of an EPA regulation.
B)  Gasoline taxes are higher in many European countries than in the United States.
C)  Gasoline taxes contribute to global warming.
D)  Gasoline taxes are an example of a command-and-control policy.E) B) and D)
F) B) and C)

Question 8

Most economists prefer regulation to taxation because regulation corrects market inefficiencies at a lower cost than taxation does.

Accepted Answer

A) True 
 B)False

Question 9

With a corrective tax, the supply curve for pollution is

Accepted Answer

A)  vertical.
B)  horizontal.
C)  upward-sloping.
D)  downward-sloping.E) B) and C)
F) A) and D)

Question 10

In some parts of the United States, sugar beets are grown and harvested. The process of producing usable sugar from the beets generates foul-smelling smoke. A government policy that limits the emission of smoke by sugar-beet-processing firms is an example of

Accepted Answer

A)  a market-based policy.
B)  a command-and-control policy.
C)  tradable pollution permits.
D)  transaction costs.E) A) and D)
F) None of the above B

Question 11

The supply curve for a product reflects the

Accepted Answer

A)  willingness to pay of the marginal buyer.
B)  quantity buyers will ultimately purchase of the product.
C)  cost to sellers of producing the product.
D)  seller's profit from producing the product.E) B) and C)
F) All of the above

Question 12

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following:
• a private cost of $3.10;
• a social cost of $3.55;
• a value to consumers of $3.70.
-Refer to Scenario 10-1. From the given information, it is apparent that

Accepted Answer

A)  the production of gasoline involves a negative externality, so the market will produce a smaller quantity of gasoline than is socially desirable.
B)  the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable.
C)  the production of gasoline involves a positive externality, so the market will produce a smaller quantity of gasoline than is socially desirable.
D)  the production of gasoline involves a positive externality, so the market will produce a larger quantity of gasoline than is socially desirable.E) A) and D)
F) B) and C)

Question 13

The Golden Rule is an example of a private solution for

Accepted Answer

A)  subsidizing higher education.
B)  internalizing externalities.
C)  increasing production.
D)  reducing scarcity.E) A) and C)
F) B) and D)

Question 14

If a sawmill creates too much noise for local residents,

Accepted Answer

A)  noise restrictions will force residents to move out of the area.
B)  a sense of social responsibility will cause owners of the mill to reduce noise levels.
C)  the government can raise economic well-being through noise-control regulations.
D)  the government should avoid intervening because the market will allocate resources efficiently.E) C) and D)
F) A) and C)

Question 15

Figure 10-18. The graph represents a corrective tax to reduce pollution. On the axes, Q denotes the quantity of pollution and P represents the price of pollution. 
-Refer to Figure 10-18. The line labeled "Corrective tax" could accurately be re-labeled as

Accepted Answer

A)  "Demand for clean air."
B)  "Demand for pollution rights."
C)  "Price of pollution."
D)  "Rate of subsidy."E) B) and D)
F) A) and B)

Question 16

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 17

Figure 10-9   
-Refer to Figure 10-9. Which graph represents a market with no externality?

Accepted Answer

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

Question 18

Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently.

Accepted Answer

A) True 
 B)False

Question 19

Figure 10-17 
-Refer to Figure 10-17. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Accepted Answer

A)  An amount equal to P' minus P.
B)  An amount equal to P'.
C)  An amount equal to P.
D)  An amount equal to the external cost.E) A) and D)
F) All of the above

Question 20

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3 1, Q1 B) P2, Q0 C) P2, Q1 D) The optimum quantity is zero concerts as long as residents in surrounding neighborhoods are adversely affected by noise and congestion." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized?

Accepted Answer

A)  P1, Q1
B)  P2, Q0
C)  P2, Q1
D)  The optimum quantity is zero concerts as long as residents in surrounding neighborhoods are adversely affected by noise and congestion.E) B) and D)
F) B) and C) B

Exam 10: Externalities

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

Correct Answer
verified

Corrective taxes differ from most taxes in that corrective taxes

Correct Answer
verified
C

A corrective tax

Correct Answer
verified

Figure 10-20. -Refer to Figure 10-20. The graph depicts the market for fertilizer. What is the socially optimal price of fertilizer?

Correct Answer
verified

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Correct Answer
verified

The concept of external cost is associated with a negative externality, but not with a positive externality.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Most economists prefer regulation to taxation because regulation corrects market inefficiencies at a lower cost than taxation does.

Correct Answer
verified

With a corrective tax, the supply curve for pollution is

Correct Answer
verified

In some parts of the United States, sugar beets are grown and harvested. The process of producing usable sugar from the beets generates foul-smelling smoke. A government policy that limits the emission of smoke by sugar-beet-processing firms is an example of

Correct Answer
verified
B

The supply curve for a product reflects the

Correct Answer
verified

Correct Answer
verified

The Golden Rule is an example of a private solution for

Correct Answer
verified

If a sawmill creates too much noise for local residents,

Correct Answer
verified

Figure 10-18. The graph represents a corrective tax to reduce pollution. On the axes, Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18. The line labeled "Corrective tax" could accurately be re-labeled as

Correct Answer
verified

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with no externality?

Correct Answer
verified

Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently.

Correct Answer
verified

Figure 10-17 -Refer to Figure 10-17. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct Answer
verified

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized?

Correct Answer
verified
B

Exam 10: Externalities

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

Correct AnswerverifiedShow Answer

Corrective taxes differ from most taxes in that corrective taxes

Correct AnswerverifiedC

A corrective tax

Correct AnswerverifiedShow Answer

​Figure 10-20. ​ -Refer to Figure 10-20. The graph depicts the market for fertilizer. What is the socially optimal price of fertilizer?

Correct AnswerverifiedShow Answer

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Correct AnswerverifiedShow Answer

The concept of external cost is associated with a negative externality, but not with a positive externality.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Most economists prefer regulation to taxation because regulation corrects market inefficiencies at a lower cost than taxation does.

Correct AnswerverifiedShow Answer

With a corrective tax, the supply curve for pollution is

Correct AnswerverifiedShow Answer

In some parts of the United States, sugar beets are grown and harvested. The process of producing usable sugar from the beets generates foul-smelling smoke. A government policy that limits the emission of smoke by sugar-beet-processing firms is an example of

Correct AnswerverifiedB

The supply curve for a product reflects the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Golden Rule is an example of a private solution for

Correct AnswerverifiedShow Answer

If a sawmill creates too much noise for local residents,

Correct AnswerverifiedShow Answer

Figure 10-18. The graph represents a corrective tax to reduce pollution. On the axes, Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18. The line labeled "Corrective tax" could accurately be re-labeled as

Correct AnswerverifiedShow Answer

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with no externality?

Correct AnswerverifiedShow Answer

Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently.

Correct AnswerverifiedShow Answer

Figure 10-17 -Refer to Figure 10-17. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Correct AnswerverifiedShow Answer

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized?

Correct AnswerverifiedB

Correct Answer
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C

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Figure 10-20. -Refer to Figure 10-20. The graph depicts the market for fertilizer. What is the socially optimal price of fertilizer?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B