ECO111_Part_6 – Flashcards
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QN=251 (17378) Which of the following policies is the government most inclined to use when faced with a positive externality? a. taxation b. permits c. subsidies d. usage fees
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C
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QN=252 (17374) Positive externalities a. result in a larger than efficient equilibrium quantity. b. result in smaller than efficient equilibrium quantity. c. result in an efficient equilibrium quantity. d. can be internalized with a corrective tax.
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B
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QN=253 (17389) Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? a. Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke. b. Mary pays Cathy $16 so that Mary can smoke. c. Mary pays Cathy $14 so that Mary can smoke. d. Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke.
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B
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QN=254 (17360) The height of the demand curve shows a. how much each buyer in the market is willing to pay. b. the willingness to pay of the marginal buyer. c. the maximum price all buyers will pay for a product. d. the lowest price buyers will pay for a product.
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B
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QN=255 (17369) All remedies for externalities share the goal of a. moving the allocation of resources toward the market equilibrium. b. moving the allocation of resources toward the socially optimal equilibrium. c. increasing the allocation of resources. d. decreasing the allocation of resources.
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B
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QN=256 (17381) If a paper manufacturer does not bear the entire cost of the dioxin it emits, it will a. emit a lower level of dioxin than is socially efficient. b. emit a higher level of dioxin than is socially efficient. c. emit an acceptable level of dioxin. d. not emit any dioxin in an attempt to avoid paying the entire cost.
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B
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QN=257 (17356) This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized? 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.
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B
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QN=258 (17358) The "invisible hand" leads a market to maximize a. producer profit from that market. b. total benefit to society from that market. c. both equity and efficiency in that market. d. output of goods or services in that market.
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B
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QN=259 (17359) The demand curve for a product reflects the a. value of the product to consumers. b. cost of the product to consumers. c. quantity consumers are able to purchase. d. price the product will sell for in the market.
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A
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QN=260 (17376) Which of the following statements is not correct? a. Government policies may improve the market's allocation of resources when negative externalities are present. b. Government policies may improve the market's allocation of resources when positive externalities are present. c. A positive externality is an example of a market failure. d. Without government intervention, the market will tend to undersupply products that produce negative externalities.
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B
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QN=261 (17362) Refer to Figure 10-4. At Q3 a. the marginal consumer values this product less than the social cost of producing it. b. every consumer values this product less than the social cost of producing it. c. the cost to society is equal to the value to society. d. the marginal consumer values this product more than the private cost.
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A
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QN=262 (17370) Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If the government offers subsidies for MBAs, then which of the following statements is correct? a. The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs. b. The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAs. c. The equilibrium quantity of MBAs will be less than the socially optimal quantity of MBAs. d. There is not enough information to answer the question.
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B
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QN=263 (17388) The Coase theorem states that a. taxes are an efficient way for governments to remedy negative externalities. b. subsidies are an efficient way for governments to remedy positive externalities. c. industrial policies encourage technology spillovers. d. in the absence of transaction costs, private parties can solve the problem of externalities on their own.
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D
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QN=264 (17350) In the case of a technology spillover, the government can encourage firms to internalize a positive externality by a. taxing production, which would decrease supply. b. taxing production, which would increase supply. c. subsidizing production, which would decrease supply. d. subsidizing production, which would increase supply.
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D
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QN=265 (17373) Refer to Figure 10-5. Which of the following statements is correct? a. The marginal benefit of the positive externality is measured by P3 - P1. b. The marginal cost of the negative externality is measured by P3 - P2. c. The marginal cost of the negative externality is measured by P3 - P1. d. The marginal cost of the negative externality is measured by P3 - P0.
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C
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QN=266 (17377) Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality, a. the supply curve would adequately reflect the marginal social cost of production. b. consumers will be required to pay a higher price for steel than they would have if the externality were internalized. c. the market equilibrium quantity will not be the socially optimal quantity. d. producers will produce less steel than they otherwise would if the externality were internalized.
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C
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QN=267 (17365) Refer to Figure 10-6. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome? 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.
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D
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QN=268 (17361) When the social cost curve is above a product's supply curve we know that a. government has intervened in the market. b. a negative externality exists in the market. c. a positive externality exists in the market. d. the market reached equilibrium on its own.
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B
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QN=269 (17347) An externality is a. the costs that parties incur in the process of agreeing and following through on a bargain. b. the uncompensated impact of one person's actions on the well-being of a bystander. c. the proposition that private parties can bargain without cost over the allocation of resources. d. a market equilibrium tax.
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B
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QN=270 (17379) The best remedy for market failure is often a. a market-based solution. b. shutdown of the market. c. no government intervention. d. externalizing the externalities.
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A
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QN=271 (17375) Which of the following is NOT a way of internalizing technology spillovers? a. subsidies b. patent protection c. industrial policy d. taxes
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D
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QN=272 (17363) A positive externality a. is a benefit to the producer of the good. b. is a benefit to the consumer of the good. c. is a benefit to someone other than the producer and consumer of the good. d. results in an optimal level of output.
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C
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QN=273 (17383) This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Refer to Figure 10-3. The social cost curve is above the supply curve because a. it takes into account the external costs imposed on society by the concert. b. it takes into account the effect of local noise restrictions on concerts in parks surrounded by residential neighborhoods. c. concert tickets are likely to cost more than the concert actually costs the organizers. d. residents in the surrounding neighborhoods get to listen to the concert for free.
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A
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QN=274 (17353) Externalities tend to cause markets to be a. inefficient. b. unequal. c. unnecessary. d. overwhelmed.
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A
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QN=275 (17371) All externalities a. cause markets to fail to allocate resources efficiently. b. cause equilibrium prices to be too high. c. benefit producers at the expense of consumers. d. cause equilibrium prices to be too low.
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A
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QN=276 (17380) Which of the following is a way to address an externality problem? a. (i) command and control solution b. (ii) corrective tax c. (iii) corrective subsidy d. all of (i), (ii), and (iii).
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D
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QN=277 (17385) Refer to Figure 10-7. To internalize the externality in this market, the government should a. impose a tax on this product. b. provide a subsidy for this product. c. forbid production. d. produce the product itself.
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B
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QN=278 (17408) An ice cream cone is a. excludable and rival in consumption. b. excludable and not rival in consumption. c. not excludable and rival in consumption. d. not excludable and not rival in consumption.
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A
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QN=279 (17399) Goods that are nonexcludable and nonrival are a. public goods. b. private goods. c. natural monopolies. d. common resources.
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A
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QN=280 (17422) Without government intervention, public goods tend to be a. overproduced and common resources tend to be overconsumed. b. overproduced and common resources tend to be underconsumed. c. underproduced and common resources tend to be overconsumed. d. underproduced and common resources tend to be underconsumed.
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C
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QN=281 (17405) What causes the Tragedy of the Commons? (i) Social and private incentives differ. (ii) Common resources are not rival in consumption and are not excludable. (iii) Common resources are not excludable but are rival in consumption. a. (i) only b. (ii) only c. (i) and (ii) only d. (i) and (iii) only
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D
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QN=282 (17407) A good is excludable if a. one person's use of the good diminishes another person's enjoyment of it. b. the government can regulate its availability. c. it is not a normal good. d. people can be prevented from using it.
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D
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QN=283 (17394) Because public goods are a. excludable, people have an incentive to be free riders. b. excludable, people do not have an incentive to be free riders. c. not excludable, people have an incentive to be free riders. d. not excludable, people do not have an incentive to be free riders.
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C
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QN=284 (17423) A lighthouse is typically considered to be a public good because a. the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse. b. there is rarely another lighthouse nearby to provide competition. c. a nearby port authority cannot avoid paying fees to the lighthouse owner. d. all passing ships are able to enjoy the benefits of the lighthouse without paying.
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D
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QN=285 (17424) The Tragedy of the Commons occurs because a. a common resource is rival in consumption. b. a common resource is underutilized. c. crimes are committed in public places. d. common resources are subject to exclusionary rules.
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A
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QN=286 (17426) Because elephants roam freely in many countries in Africa, each individual African elephant poacher has a. (i) a strong incentive to kill as many elephants as he can find. b. (ii) a strong incentive to protect the elephants. c. (iii) the ability to save the elephants. d. None of (i), (ii), and (iii) is correct.
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A
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QN=287 (17419) When property rights are not well established, a. private goods become public goods. b. markets fail to allocate resources efficiently. c. the distribution of private goods is unfair. d. government resources are used inefficiently.
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B
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QN=288 (17410) Which of the following is an example of the free-rider problem? a. Both Fred and Wilma receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. b. Elmer receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Dorothy, is not eligible for the free lunch. c. Max owns Fido, a large dog who barks whenever anyone walks near his house. Sally lives next to Max, and Fido's barking can be heard whenever anyone walks near her house, too. Thus, Sally receives free protection from burglars because of Fido's barking. d. David purchases a burger at a fast food restaurant and gets a second burger free because the restaurant is having a buy one, get one free sale.
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C
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QN=289 (17400) Common resources are both a. rival and nonexcludable. b. rival and excludable. c. nonrival and excludable. d. nonrival and nonexcludable.
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A
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QN=290 (17413) Which of the following is not a public good? a. national defense b. patented technological knowledge c. general knowledge d. the elimination of poverty
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B
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QN=291 (17406) Most goods in the economy are a. natural monopolies. b. common resources. c. public goods. d. private goods.
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D
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QN=292 (17396) A stairwell in a certain office building is always congested at 12:00 p.m. and 2:00 p.m. The congestion is so bad that people have been complaining to the building's owner. Which of the following methods would be the most efficient way of reducing congestion? a. Assign each person in the building a time when they are allowed to use the stairwell. b. Encourage people to voluntarily keep off the stairwell during peak times. c. Charge everyone who uses the stairwell when it is congested the same fee which is high enough to discourage some people from using the stairwell during peak times. People who value the use of the stairs the most will be the ones who use the stairwell at peak times. d. Hold a lottery to determine who wins the right to use the stairwell at peak times.
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C
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QN=293 (17403) Which of the following quotations illustrates the Tragedy of the Commons? a. "A bird in the hand is worth two in the bush." b. "The only difference between the rich and other people is that the rich have more money." c. "What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others." d. "Anyone who is not a socialist before he is 30 has no heart; anyone who is still a socialist after he is 30 has no head."
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C
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QN=294 (17402) Goods that are not excludable include both a. private goods and public goods. b. natural monopolies and common resources. c. common resources and public goods. d. private goods and natural monopolies.
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C
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QN=295 (17397) If one person's use of a good diminishes another person's enjoyment of it, the good is a. rival. b. excludable. c. normal. d. exhaustible.
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A
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QN=296 (17392) When property rights are not well established, a. private goods become public goods. b. markets fail to allocate resources efficiently. c. the distribution of private goods is unfair. d. government resources are used inefficiently.
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B
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QN=297 (17414) The free-rider problem a. forces the supply of a public good to exceed its demand. b. results in common resources becoming natural monopolies. c. explains why many local governments supply public goods. d. results in public goods becoming private goods.
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C
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QN=298 (17391) A view of a spectacular sunset along a private beach is an example of a a. private good. b. public good. c. nonrival but excludable good. d. rival but nonexcludable good.
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C
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QN=299 (17416) Advocates of antipoverty programs believe that fighting poverty a. can make everyone better off. b. is most successfully accomplished by charities. c. is most efficiently accomplished by the market. d. reduces the well-being of tax payers.
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A
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QN=300 (17409) An overcrowded beach is an example of a. a positive externality. b. a Tragedy of the Commons. c. an environmentally inefficient allocation of resources. d. an economically unfair allocation of resources.
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B
