question

Which of the following statements is correct about a market in which pollution is emitted?

answer

Both corrective taxes and pollution permits move the market toward the social optimum

question

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

answer

demand for the product is more elastic than the supply of the product

question

Why has the value of ivory threatened the extinction of the elephant, whereas the value of beef has enhanced the survival of the cow?

answer

Elephants are a common resource, whereas cows are privately owned

question

In recent years, the Canadian province of British Columbia has increased its carbon tax. Which of the following statements is correct?

answer

Along with the increase in the carbon tax, British Columbia has decreased income-tax rates on individuals and corporations

question

Which of the following goods is both excludable and rival in consumption?

answer

a wristwatch

question

Both private goods and club goods are

answer

excludable

question

The Coase theorem suggests that private solutions to an externality problem

answer

will usually allocate resources efficiently if private parties can bargain without cost

question

To fully understand how taxes affect economic well-being, we must

answer

compare the reduced welfare of buyers and sellers to the amount of revenue the government raises

question

Which of the following is not a reason why government agencies subsidize basic research?

answer

The government wants to attract the brightest researchers away from private research firms.

question

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

answer

$5

question

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

answer

an upward-sloping curve

question

The phenomenon of free riding is most closely associated with which type of good?

answer

public goods

question

Internalizing a positive externality will cause the demand curve to

answer

shift to the right

question

Examples of goods that are excludable include

answer

mobile phones and fire protection

question

Private markets fail to reach a socially optimal equilibrium when negative externalities are present because

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social costs exceed private costs at the private market solution

question

A seller's opportunity cost measures the

answer

value of everything she must give up to produce a good

question

Economists generally agree that the most important tax in the U.S. economy is the

answer

labor tax

question

A mobile phone is a

answer

private good

question

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

answer

the marginal buyer's willingness to pay for the 100th unit of the good is $25

question

A lighthouse is typically considered to be a public good because

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all passing ships are able to enjoy the benefits of the lighthouse without paying

question

If the labor supply curve is very elastic, a tax on labor

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has a large deadweight loss

question

Which of the following is not a common resource?

answer

national defense

question

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound

answer

any possible increase in consumer surplus would be smaller than the loss of producer surplus

question

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. Suppose that the federal government gives grants to these researchers equal to the their per-unit production externality. What is the relationship between the equilibrium quantity of university research and the socially optimal quantity of university research produced?

answer

They are equal

question

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

answer

supply of the product is more elastic than the demand for the product

question

Which of the following statements is correct?

answer

Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced

question

Economists Edward Glaeser and Matthew Kahn studied carbon emissions in different parts of the United States. On the basis of what they found, they concluded that environmentalists should be in favor of

answer

more and taller skyscrapers

question

All remedies for externalities share the goal of

answer

moving the allocation of resources toward the socially optimal equilibrium

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