Question 1

The creation of a market for pollution rights would:

Accepted Answer

A)  reduce air and water pollution to zero.
B)  stimulate the search for pollution-reducing technologies.
C)  induce an increase in the supply of pollution rights.
D)  be in conflict with the concept of user charges.E) B) and D)
F) B) and C)

Question 2

A market for pollution rights can be expected to:

Accepted Answer

A)  eliminate all pollution.
B)  produce a shortage of pollution.
C)  encourage potential polluters to increase emissions.
D)  provide potential polluters with a monetary incentive to reduce emissions.E) All of the above
F) B) and C)

Question 3

The optimal reduction of an externality occurs when:

Accepted Answer

A)  society's marginal cost of reducing that externality is greater than its marginal benefit.
B)  public agencies could make a great deal of money.
C)  society's marginal cost and marginal benefit of reducing that externality are equal.
D)  society's marginal benefit of reducing that externality is greater than its marginal cost.E) C) and D)
F) A) and B)

Question 4

Refer to the below supply and demand graph.Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective.If government decides to correct this externality with a subsidy to consumers, then the: 2 to D1. B) supply curve will shift from S1 to S2. C) demand curve will shift from D1 to D2. D) supply curve will shift from S2 to S1." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  demand curve will shift from D2 to D1.
B)  supply curve will shift from S1 to S2.
C)  demand curve will shift from D1 to D2.
D)  supply curve will shift from S2 to S1.E) A) and B)
F) C) and D)

Question 5

Refer to the below diagram of the market for product X.Curve St embodies all costs (including spillovers)  and Dt embodies all benefits (including spillovers)  associated with the production and consumption of X.Assuming the equilibrium output is Q1, we can conclude that the existence of spillover: t embodies all costs (including spillovers)  and Dt embodies all benefits (including spillovers)  associated with the production and consumption of X.Assuming the equilibrium output is Q1, we can conclude that the existence of spillover:   A) costs have resulted in an over-allocation of resources to X. B) benefits have resulted in an over-allocation of resources to X. C) costs have resulted in an under-allocation of resources to X. D) benefits have resulted in an under-allocation of resources to X." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  costs have resulted in an over-allocation of resources to X.
B)  benefits have resulted in an over-allocation of resources to X.
C)  costs have resulted in an under-allocation of resources to X.
D)  benefits have resulted in an under-allocation of resources to X.E) C) and D)
F) A) and B)

Question 6

A demand curve for a public good is determined by summing horizontally the individual demand curves for the public good.

Accepted Answer

A) True 
 B)False

Question 7

For which one of the following would we need to sum individual demand curves vertically to obtain the total demand curve?

Accepted Answer

A)  frozen yogurt
B)  bubble gum
C)  microwave popcorn
D)  courts of lawE) B) and C)
F) A) and B)

Question 8

The following table presents the demand schedule for product Z:  If the price of product Z increases to $15, what would be the consumer surplus?

Accepted Answer

A)  $3
B)  $8
C)  $5
D)  $15E) A) and C)
F) C) and D)

Question 9

The following information is for a public good.Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Suppose the government has already produced 4 units of this public good.The amount individual B is willing to voluntarily pay for the 4th unit is: a and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Suppose the government has already produced 4 units of this public good.The amount individual B is willing to voluntarily pay for the 4th unit is:   A) $14 B) $5 C) $2 D) $0" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $14
B)  $5
C)  $2
D)  $0E) B) and C)
F) A) and D)

Question 10

Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.

Accepted Answer

A) True 
 B)False

Question 11

The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.

Accepted Answer

A) True 
 B)False

Question 12

A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service.

Accepted Answer

A) True 
 B)False

Question 13

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

Accepted Answer

A)  price will be greater than MC.
B)  firms will shut down until costs are reduced.
C)  costs of production will, on average, be too high.
D)  too many resources will be allocated to production of the good.E) B) and C)
F) A) and B)

Question 14

Near an ocean beach, a high-rise building is being constructed that will block the scenic view of the ocean by the residents of a low-rise building.The Coase Theorem suggests that this type of dispute between the owners of high-rise and low-rise buildings would best be resolved by:

Accepted Answer

A)  the owners themselves.
B)  city government officials.
C)  a zoning ordinance restricting high-rise buildings.
D)  a government fine for the builder of the high-rise.E) A) and D)
F) C) and D)

Question 15

Consumer surplus refers to:

Accepted Answer

A)  The total amount consumer pays for the product
B)  The area under the demand curve
C)  The price consumer pays for the product
D)  The difference between the total amount consumers pays for the product and the value of the purchase to the consumersE) A) and B)
F) A) and C)

Question 16

Quasi-public goods are:

Accepted Answer

A)  government produced goods that can be produced so that exclusion is possible.
B)  government produced goods that can be produced so that exclusion is not possible.
C)  privately produced goods that can be produced so that exclusion is possible.
D)  privately produced goods that can be produced so that exclusion is not possible.E) None of the above
F) B) and C)

Question 17

The term "productive efficiency" refers to:

Accepted Answer

A)  the situation where producer surplus is greater than consumer surplus.
B)  the production of the product-mix most desired by consumers.
C)  the production of a good in the least costly way.
D)  the production of any good which producer desires to produce.E) All of the above
F) A) and D)

Question 18

Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5th unit of the public good if the marginal cost is:

Accepted Answer

A)  less than $150.
B)  less than $100.
C)  less than $60.
D)  less than $300.E) A) and B)
F) A) and C)

Question 19

Market for asparagus.At the market price of $2, area A represents:

Accepted Answer

A)  total consumer utility.
B)  total revenue to sellers.
C)  consumer surplus.
D)  economic profit.E) A) and D)
F) None of the above

Question 20

Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.Without government interference, this market will result in: 1 is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.Without government interference, this market will result in:   A) an optimal allocation of society's resources. B) an under-allocation of resources to this product. C) an over-allocation of resources to this product. D) a higher price than is consistent with an optimal allocation of resources." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  an optimal allocation of society's resources.
B)  an under-allocation of resources to this product.
C)  an over-allocation of resources to this product.
D)  a higher price than is consistent with an optimal allocation of resources.E) A) and D)
F) B) and C)

Exam 4: B: Market Failures: Public Goods and Externalities

The following table presents the demand schedule for product Z: If the price of product Z increases to $15, what would be the consumer surplus?

Correct Answer
verified

Correct Answer
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For which one of the following would we need to sum individual demand curves vertically to obtain the total demand curve?

Correct Answer
verified

The term "productive efficiency" refers to:

Correct Answer
verified

Near an ocean beach, a high-rise building is being constructed that will block the scenic view of the ocean by the residents of a low-rise building.The Coase Theorem suggests that this type of dispute between the owners of high-rise and low-rise buildings would best be resolved by:

Correct Answer
verified

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

Correct Answer
verified

The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.

Correct Answer
verified

A demand curve for a public good is determined by summing horizontally the individual demand curves for the public good.

Correct Answer
verified

Refer to the below supply and demand graph.Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective.If government decides to correct this externality with a subsidy to consumers, then the:

Correct Answer
verified

Market for asparagus.At the market price of $2, area A represents:

Correct Answer
verified

The optimal reduction of an externality occurs when:

Correct Answer
verified

Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.

Correct Answer
verified

The creation of a market for pollution rights would:

Correct Answer
verified

Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5^th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5^th unit of the public good if the marginal cost is:

Correct Answer
verified

A market for pollution rights can be expected to:

Correct Answer
verified

Quasi-public goods are:

Correct Answer
verified

Correct Answer
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Consumer surplus refers to:

Correct Answer
verified

Refer to the diagram in which S is the market supply curve and S₁ is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.Without government interference, this market will result in:

Correct Answer
verified

A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service.

Correct Answer
verified

Exam 4: B: Market Failures: Public Goods and Externalities

The following table presents the demand schedule for product Z: If the price of product Z increases to $15, what would be the consumer surplus?

Correct AnswerverifiedShow Answer

Refer to the below diagram of the market for product X.Curve St embodies all costs (including spillovers) and Dt embodies all benefits (including spillovers) associated with the production and consumption of X.Assuming the equilibrium output is Q1, we can conclude that the existence of spillover:

Correct AnswerverifiedShow Answer

For which one of the following would we need to sum individual demand curves vertically to obtain the total demand curve?

Correct AnswerverifiedShow Answer

The term "productive efficiency" refers to:

Correct AnswerverifiedShow Answer

Near an ocean beach, a high-rise building is being constructed that will block the scenic view of the ocean by the residents of a low-rise building.The Coase Theorem suggests that this type of dispute between the owners of high-rise and low-rise buildings would best be resolved by:

Correct AnswerverifiedShow Answer

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

Correct AnswerverifiedShow Answer

The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase Theorem.

Correct AnswerverifiedShow Answer

A demand curve for a public good is determined by summing horizontally the individual demand curves for the public good.

Correct AnswerverifiedShow Answer

Refer to the below supply and demand graph.Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective.If government decides to correct this externality with a subsidy to consumers, then the:

Correct AnswerverifiedShow Answer

Market for asparagus.At the market price of $2, area A represents:

Correct AnswerverifiedShow Answer

The optimal reduction of an externality occurs when:

Correct AnswerverifiedShow Answer

Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.

Correct AnswerverifiedShow Answer

The creation of a market for pollution rights would:

Correct AnswerverifiedShow Answer

Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5th unit of the public good if the marginal cost is:

Correct AnswerverifiedShow Answer

A market for pollution rights can be expected to:

Correct AnswerverifiedShow Answer

Quasi-public goods are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consumer surplus refers to:

Correct AnswerverifiedShow Answer

Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.Without government interference, this market will result in:

Correct AnswerverifiedShow Answer

A demand-side market failure occurs when demand curves do not reflect consumers' lack of willingness to pay for a good or service.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Ed, Mike, and Scott are the only three people in a community and Ed is willing to pay $20 for the 5^th unit of a public good; Mike, $15; Scott, $25.The government should produce the 5^th unit of the public good if the marginal cost is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Refer to the diagram in which S is the market supply curve and S₁ is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.Without government interference, this market will result in:

Correct Answer
verified

Correct Answer
verified