Question 1

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 2

Figure 10-9   
-Refer to Figure 10-9, Panel (c) . The market equilibrium price is

Accepted Answer

A)  P4a.
B)  P4b.
C)  P5.
D)  P4a - P4b.E) A) and B)
F) All of the above

Question 3

Altering incentives so that people take account of the external effects of their actions

Accepted Answer

A)  is called internalizing the externality.
B)  can be done by imposing a corrective tax.
C)  is the role of government in markets with externalities.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 4

What are the three externalities that are associated with driving cars and trucks?

Accepted Answer

The negative externa...

Question 5

Figure 10-9   
-Refer to Figure 10-9. Which graph represents a market with no externality?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  None of the above is correct.E) B) and D)
F) A) and B)

Question 6

An externality arises when a person engages in an activity that influences the well-being of

Accepted Answer

A)  buyers in the market for that activity and yet neither pays nor receives any compensation for that effect.
B)  sellers in the market for that activity and yet neither pays nor receives any compensation for that effect.
C)  bystanders in the market for that activity and yet neither pays nor receives any compensation for that effect.
D)  Both (a)  and (b)  are correct.E) B) and C)
F) None of the above

Question 7

Figure 10-11 th unit of output is $24. B) The social value of the 240th unit of output is $42. C) The external benefit of the 240th unit of output is $18. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-11. Which of the following statements is correct?

Accepted Answer

A)  The private value of the 240th unit of output is $24.
B)  The social value of the 240th unit of output is $42.
C)  The external benefit of the 240th unit of output is $18.
D)  All of the above are correct.E) B) and C)
F) B) and D)

Question 8

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following:
• a private cost of $3.10;
• a social cost of $3.55;
• a value to consumers of $3.70.
-Refer to Scenario 10-1. Suppose the equilibrium quantity of gasoline is 1,150 gallons; that is, QMARKET = 1,150. Then the equilibrium price of a gallon could be

Accepted Answer

A)  $2.80.
B)  $3.00.
C)  $3.30.
D)  $3.80.E) A) and B)
F) A) and D)

Question 9

Which of the following is the most effective way to internalize a technology spillover?

Accepted Answer

A)  taxes
B)  patents
C)  government regulations
D)  free marketsE) A) and D)
F) B) and D)

Question 10

Which of the following policies is the government most inclined to use when faced with a positive externality?

Accepted Answer

A)  taxation
B)  permits
C)  subsidies
D)  usage feesE) A) and C)
F) C) and D)

Question 11

When negative externalities are present in a market

Accepted Answer

A)  private costs will be greater than social costs.
B)  social costs will be greater than private costs.
C)  only government regulation will solve the problem.
D)  the market will not be able to reach any equilibrium.E) None of the above
F) A) and B)

Question 12

Which of the following is not correct?

Accepted Answer

A)  Markets allocate scarce resources with the forces of supply and demand.
B)  The equilibrium of supply and demand is typically an efficient allocation of resources.
C)  Governments can sometimes improve market outcomes.
D)  Externalities cannot be positive.E) B) and C)
F) None of the above

Question 13

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels?

Accepted Answer

A)  ​impose a tax on rain barrels that is equal to the per-unit externality
B)  ​offer a subsidy on rain barrels that is equal to the per-unit externality
C)  ​encourage homeowners to bargain with rain barrel producers
D)  nothing​E) None of the above
F) A) and D)

Question 14

A technology spillover is a type of negative externality.

Accepted Answer

A) True 
 B)False

Question 15

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Accepted Answer

A) True 
 B)False

Question 16

When a market experiences a positive externality,

Accepted Answer

A)  the demand curve does not reflect the value to society of the good.
B)  too much of the good is being produced.
C)  the government can internalize the externality by imposing a tax on the product.
D)  the private value is greater than the social value.E) B) and C)
F) C) and D)

Question 17

A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x,

Accepted Answer

A)  social value = private value = private cost 
B)  social cost > private value = social value > private cost.
C)  social cost = private cost = private value 
D)  social value = private cost = social cost > private value.E) A) and B)
F) None of the above

Question 18

Figure 10-8 
-Refer to Figure 10-8. What is the socially-optimal quantity of output in this market?

Accepted Answer

A)  8 units
B)  Between 8 and 10 units
C)  10 units
D)  More than 10 unitsE) B) and C)
F) A) and D)

Question 19

Figure 10-4 1. B) Q2. C) Q3. D) Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be

Accepted Answer

A)  Q1.
B)  Q2.
C)  Q3.
D)  Q4.E) A) and D)
F) All of the above

Question 20

Figure 10-15 
-Refer to Figure 10-15. Which graph illustrates a corrective tax?

Accepted Answer

A)  the left graph
B)  the right graph
C)  both graphs
D)  neither graphE) A) and B)
F) C) and D)

Exam 10: Externalities

Correct Answer
verified

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Correct Answer
verified

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a corrective tax?

Correct Answer
verified

An externality arises when a person engages in an activity that influences the well-being of

Correct Answer
verified

What are the three externalities that are associated with driving cars and trucks?

Correct Answer
verified
The negative externa...
View Answer

Figure 10-8 -Refer to Figure 10-8. What is the socially-optimal quantity of output in this market?

Correct Answer
verified

Altering incentives so that people take account of the external effects of their actions

Correct Answer
verified

A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x,

Correct Answer
verified

Which of the following is the most effective way to internalize a technology spillover?

Correct Answer
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Figure 10-11 -Refer to Figure 10-11. Which of the following statements is correct?

Correct Answer
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Which of the following is not correct?

Correct Answer
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When negative externalities are present in a market

Correct Answer
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Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with no externality?

Correct Answer
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When a market experiences a positive externality,

Correct Answer
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Which of the following policies is the government most inclined to use when faced with a positive externality?

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be

Correct Answer
verified

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Correct Answer
verified

Correct Answer
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Figure 10-9 -Refer to Figure 10-9, Panel (c) . The market equilibrium price is

Correct Answer
verified

A technology spillover is a type of negative externality.

Correct Answer
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Exam 10: Externalities

Correct AnswerverifiedShow Answer

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Correct AnswerverifiedShow Answer

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a corrective tax?

Correct AnswerverifiedShow Answer

An externality arises when a person engages in an activity that influences the well-being of

Correct AnswerverifiedShow Answer

What are the three externalities that are associated with driving cars and trucks?

Correct AnswerverifiedThe negative externa...View AnswerShow Answer

Figure 10-8 -Refer to Figure 10-8. What is the socially-optimal quantity of output in this market?

Correct AnswerverifiedShow Answer

Altering incentives so that people take account of the external effects of their actions

Correct AnswerverifiedShow Answer

A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x,

Correct AnswerverifiedShow Answer

Which of the following is the most effective way to internalize a technology spillover?

Correct AnswerverifiedShow Answer

Figure 10-11 -Refer to Figure 10-11. Which of the following statements is correct?

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Which of the following is not correct?

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When negative externalities are present in a market

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Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with no externality?

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When a market experiences a positive externality,

Correct AnswerverifiedShow Answer

Which of the following policies is the government most inclined to use when faced with a positive externality?

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be

Correct AnswerverifiedShow Answer

The patent system gives firms greater incentive to engage in research and other activities that advance technology.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9, Panel (c) . The market equilibrium price is

Correct AnswerverifiedShow Answer

A technology spillover is a type of negative externality.

Correct AnswerverifiedShow Answer

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The negative externa...
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