Question 1

A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence.The accompanying table identifies the annual profit received by each party per year in the event there is,or there is not,a fence.If there is no fence,one can be installed and maintained at an annual cost of $25,000.  If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop,then the

Accepted Answer

A)   rancher will choose to close his ranch.
B)   farmer will not allow the rancher to stay in business.
C)   rancher will pay to build the fence.
D)   rancher will choose to compensate the farmer for damages.
E)   rancher will be indifferent toward neither building the fence nor compensating the farmer for damages.F) A) and B)
G) A) and C)

Question 2

Refer to the accompanying figure.The market for dry-cleaning services is currently in equilibrium at point A,and the government decides to tax the stores that offer dry-cleaning services in order to improve the air quality.The new equilibrium will be at point

Accepted Answer

A)   B.
B)   C.
C)   E.
D)   F.
E)   G.F) A) and D)
G) None of the above

Question 3

Consider the accompanying figure to answer the following questions. 
-When a positive externality exists,which point best identifies the social optimum?

Accepted Answer

A)   A
B)   B
C)   C
D)   D
E)   either A or DF) B) and E)
G) A) and E)

Question 4

Which good is excludable?

Accepted Answer

A)   apples on a tree in a public park
B)   a fireworks display
C)   swimming in the ocean
D)   a walk in a public park
E)   education at a community collegeF) A) and E)
G) B) and E)

Question 5

The amount an individual pays for gasoline for his or her car is an example of a(n) ________ cost.

Accepted Answer

A)   internal
B)   social
C)   external
D)   third-party
E)   public-goodF) A) and E)
G) D) and E)

Question 6

A cap-and-trade policy is most often used to solve problems associated with

Accepted Answer

A)   making free-riders pay for the goods they are consuming.
B)   the production of public goods.
C)   the production of goods that generate a negative externality.
D)   the production of goods that generate a positive externality.
E)   the production of club goods.F) B) and D)
G) B) and C)

Question 7

Which of the following is true?

Accepted Answer

A)   social benefits = internal benefits = external benefits
B)   social benefits =internal benefits = external benefits
C)   internal benefits = social benefits = external benefits
D)   external benefits = social benefits = internal benefits
E)   internal benefits = social benefits = external benefits.F) C) and D)
G) A) and C)

Question 8

The market works efficiently in the absence of externalities if the good is

Accepted Answer

A)   rival and excludable.
B)   nonrival and nonexcludable.
C)   rival and nonexcludable.
D)   nonrival and excludable.
E)   rival and either excludable or nonexcludable.F) B) and C)
G) A) and C)

Question 9

Which of the following characteristics best defines a common-resource good?

Accepted Answer

A)   rival and excludable
B)   rival and nonexcludable
C)   nonrival and nonexcludable
D)   nonrival and excludable
E)   a good that is never produced by the governmentF) A) and E)
G) B) and E)

Question 10

Which of the following is a cost of internalizing a negative externality?

Accepted Answer

A)   Less output is produced.
B)   The deadweight loss is larger.
C)   The level of pollution rises.
D)   Taxes must increase to cover the external cost.
E)   The government must pay firms to encourage them to change production techniques.F) A) and D)
G) C) and D)

Question 11

When pollution (a negative externality) is created by firms,which of the following is NOT a valid way for the government to restore the social optimum?

Accepted Answer

A)   require firms to install pollution-abatement equipment
B)   require firms to change production techniques to reduce emissions
C)   levy a tax on the production of the good
D)   require firms to pay for the environmental damage they create
E)   offer a subsidy to firms to reduce their production costsF) A) and D)
G) C) and E)

Question 12

What does it mean for a good to be excludable?

Accepted Answer

A)   The good must be paid for before it is used.
B)   The good can only be enjoyed by one person at a time.
C)   The good is subject to the free-rider problem.
D)   The good comes with a natural incentive to protect it.
E)   The good does not fall within the scope of the Coase theorem.F) B) and D)
G) A) and D)

Question 13

Which goods are sold in markets?

Accepted Answer

A)   private goods
B)   private goods and club goods
C)   private goods,club goods,and common-resource goods
D)   all types of goods
E)   public goodsF) B) and C)
G) A) and E)

Question 14

The government imposes a tax on each plastic bag sold such that the producer of the plastic bags must pay the tax to the government.In the market for plastic bags,the

Accepted Answer

A)   supply curve shifts to the left.
B)   supply curve shifts to the right.
C)   demand curve shifts to the left.
D)   demand curve shifts to the right.
E)   the supply curve and the demand curve shift to the left.F) A) and C)
G) C) and D)

Question 15

Refer to the accompanying table, where Q represents the quantity produced, internal cost and social cost are given for various quantities, and P represents the price consumers are willing to pay for various quantities, to answer the following questions. 
-The external cost is equal to ________ per unit.

Accepted Answer

A)   $60
B)   $70
C)   $20
D)   $50
E)   $30F) None of the above
G) A) and D)

Question 16

If emissions of this pollutant are not regulated,then the total emissions from the two firms equal _______ units.

Accepted Answer

A)   12
B)   6
C)   0
D)   10
E)   9F) D) and E)
G) All of the above

Question 17

Which of the following characteristics best defines a club good?

Accepted Answer

A)   rival and excludable
B)   rival and nonexcludable
C)   nonrival and nonexcludable
D)   nonrival and excludable
E)   a good that is never produced by the governmentF) A) and C)
G) A) and D)

Question 18

Copyright laws exist to

Accepted Answer

A)   eliminate negative externalities.
B)   eliminate public goods.
C)   limit free-riding.
D)   solve the tragedy of the commons.
E)   protect consumers.F) B) and C)
G) A) and E)

Question 19

The pollution emitted by a car is an example of a(n) ________ cost.

Accepted Answer

A)   internal
B)   social
C)   external
D)   production
E)   public-goodF) C) and E)
G) A) and D)

Question 20

The music you buy on the Internet is

Accepted Answer

A)   a club good.
B)   a private good.
C)   a common-resource good.
D)   a public good.
E)   rival and excludable.F) A) and E)
G) B) and E)

Exam 7: Market Inefficiencies: Externalities and Public Goods

Which of the following characteristics best defines a common-resource good?

Correct Answer
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Consider the accompanying figure to answer the following questions. -When a positive externality exists,which point best identifies the social optimum?

Correct Answer
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Which of the following is true?

Correct Answer
verified

The pollution emitted by a car is an example of a(n) ________ cost.

Correct Answer
verified

Which goods are sold in markets?

Correct Answer
verified

Which of the following characteristics best defines a club good?

Correct Answer
verified

The amount an individual pays for gasoline for his or her car is an example of a(n) ________ cost.

Correct Answer
verified

The government imposes a tax on each plastic bag sold such that the producer of the plastic bags must pay the tax to the government.In the market for plastic bags,the

Correct Answer
verified

Correct Answer
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The market works efficiently in the absence of externalities if the good is

Correct Answer
verified

A cap-and-trade policy is most often used to solve problems associated with

Correct Answer
verified

The music you buy on the Internet is

Correct Answer
verified

Which of the following is a cost of internalizing a negative externality?

Correct Answer
verified

When pollution (a negative externality) is created by firms,which of the following is NOT a valid way for the government to restore the social optimum?

Correct Answer
verified

Which good is excludable?

Correct Answer
verified

Refer to the accompanying figure.The market for dry-cleaning services is currently in equilibrium at point A,and the government decides to tax the stores that offer dry-cleaning services in order to improve the air quality.The new equilibrium will be at point

Correct Answer
verified

Copyright laws exist to

Correct Answer
verified

If emissions of this pollutant are not regulated,then the total emissions from the two firms equal _______ units.

Correct Answer
verified

Correct Answer
verified

What does it mean for a good to be excludable?

Correct Answer
verified

Exam 7: Market Inefficiencies: Externalities and Public Goods

Which of the following characteristics best defines a common-resource good?

Correct AnswerverifiedShow Answer

Consider the accompanying figure to answer the following questions. -When a positive externality exists,which point best identifies the social optimum?

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

The pollution emitted by a car is an example of a(n) ________ cost.

Correct AnswerverifiedShow Answer

Which goods are sold in markets?

Correct AnswerverifiedShow Answer

Which of the following characteristics best defines a club good?

Correct AnswerverifiedShow Answer

The amount an individual pays for gasoline for his or her car is an example of a(n) ________ cost.

Correct AnswerverifiedShow Answer

The government imposes a tax on each plastic bag sold such that the producer of the plastic bags must pay the tax to the government.In the market for plastic bags,the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The market works efficiently in the absence of externalities if the good is

Correct AnswerverifiedShow Answer

A cap-and-trade policy is most often used to solve problems associated with

Correct AnswerverifiedShow Answer

The music you buy on the Internet is

Correct AnswerverifiedShow Answer

Which of the following is a cost of internalizing a negative externality?

Correct AnswerverifiedShow Answer

When pollution (a negative externality) is created by firms,which of the following is NOT a valid way for the government to restore the social optimum?

Correct AnswerverifiedShow Answer

Which good is excludable?

Correct AnswerverifiedShow Answer

Refer to the accompanying figure.The market for dry-cleaning services is currently in equilibrium at point A,and the government decides to tax the stores that offer dry-cleaning services in order to improve the air quality.The new equilibrium will be at point

Correct AnswerverifiedShow Answer

Copyright laws exist to

Correct AnswerverifiedShow Answer

If emissions of this pollutant are not regulated,then the total emissions from the two firms equal _______ units.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What does it mean for a good to be excludable?

Correct AnswerverifiedShow Answer

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