Microeconomics Chapter 5 exam- J Baker -Online- Owens

A negative externality exists if A) There are price controls in a market. B) There are quantity controls in a market. C) The marginal social cost of producing a good or service exceeds the private cost. D) The marginal private cost of producing a good or service exceeds the social cost.

A positive externality causes A) The marginal social benefit to be less than the marginal private cost of the last unit produced. B) The marginal social benefit to be equal to the marginal private cost of the last unit produced. C) The marginal social benefit to Exceed the marginal private cost of the last unit produced. D) The marginal private benefit to exceed the marginal social cost of the last unit produce

A product is considered to be rivalrous if A) Your consumption of the product reduces the quantity available for others to consume. B) It is jointly owned by all members of a community. C) You cannot keep those who did not pay for the item from enjoying its benefits. D) You can keep those who did not pay for the item from enjoying its benefits.

A tragedy of the commons occurs when a resource is A) Rival and non-excludable. B) Rival and excludable. C) Non-rival and excludable. D) Non-rival and non-excludable.

An externality is A) A cost paid for by the producer of a good or service. B) A benefit realized by the purchaser of a good or service. C) A benefit or cost experienced by someone who is not a producer or consumer of a good or service. D) Anything that is external or not relevant to the production of a good or service.

Anyone can purchase sulfur dioxide emissions allowances on the Chicago Mercantile Exchange. Several environmental groups have raised money to buy allowances (which they subsequently destroy). As part of their fund-raising, these groups have urged contributors to buy the allowances as gifts. As one newspaper story put it, \"For the environmentalist in your life, here's a gift that is sold by the ton, fits in an envelope and will last forever.\" Source for quote: Randall Edwards, \"Dear Santa: Please Bring Me Sulfur Dioxide for Christmas,\" Columbus Dispatch, December 19, 1999. What would be the impact on the price of the emission allowances in the market? A) The price rises. B) The price remains unchanged because the allowances purchased by the environmental groups are destroyed. C) The price falls to zero. D) The price falls but not to zero.

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows A) The effect of a positive externality in the production of a good. B) The effect of a negative externality in the production of a good. C) The effect of an external cost imposed on a producer. D) The effect of an external benefit such as a subsidy granted to consumers of a good.

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent? A) The market supply curve reflecting social cost B) The market supply curve reflecting implicit cost C) The market supply curve reflecting private cost D) The market supply curve reflecting external cost

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S2 represent? A) The market supply curve reflecting implicit cost B The market supply curve reflecting private cost C) The market supply curve reflecting social cost D) The market supply curve reflecting external cost

Figure 5-2 shows a market with a negative externality. Refer to Figure 5-2. The efficient output level is A) Qa. B) Qb - Qd. C) Qb. D) Qd.

If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered ? A) Social costs of the pollution. B) Marginal benefits. C) External costs. D) Transaction costs.

In economics, the term \"free rider\" refers to ? A) One who volunteers her services. B) A supervisor who delegates menial time-consuming activities to others. C) One who waits for others to produce a good and then enjoys its benefits without paying for it. D) A person who evades taxes.

The \"tragedy of the commons\" refers to the phenomenon where ? A) There is rivalry in consumption. B) Individuals are free riders. C) People do not internalize an externality. D) People overuse a common resource.

What are property rights? A) The right of the government to appropriate private assets for the good of society B) A legal document verifying ownership of intangible assets C) The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. D) The title to ownership of any physical asset

What does the phrase \"internalizing an external cost\" mean? A) Prohibiting economic activities that create externalities B) Limiting the extent to which domestic firms can outsource production C) Forcing producers to factor into their production costs the cost of the externalities created in the production of their output. D) Finding a way to address cross-border pollution

Which of the following displays rivalry and excludability in consumption? A) Quasi-public goods B) Public goods C) Private goods D) Common resources

Which of the following is a source of market failure? A) Unforeseen circumstances which leads to the bankruptcy of many firms B) An inequitable income distribution C) A lack of government intervention in a market D) Incomplete property rights or inability to enforce property rights