Question 1

Patents do not

Accepted Answer

A)   provide firms an incentive to research.
B)   assign property rights to inventors.
C)   protect the rights of inventors for their lifetimes.
D)   internalize externalities.E) A) and B)
F) All of the above

Question 2

A positive externality occurs when

Accepted Answer

A)   Jack receives a benefit from John's consumption of a certain good.
B)   Jack receives personal benefits from his own consumption of a certain good.
C)   Jack's benefit exceeds John's benefit when they each consume the same good.
D)   Jack's receives a loss from John's consumption of a certain good.E) A) and D)
F) A) and B)

Question 3

Table 10-3
The following table shows the marginal costs for each of four firms (A,B,C,and D) to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $54,and for Firm A to eliminate a second unit of pollution it would cost an additional $67.
 
-Refer to Table 10-3.If the government charged a fee of $69 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Accepted Answer

A)   7
B)   8
C)   9
D)   10E) C) and D)
F) A) and C)

Question 4

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) A) and C)
F) A) and B)

Question 5

Figure 10-8 
-Refer to Figure 10-8.What is the equilibrium price in this market?

Accepted Answer

A)   $8
B)   Between $8 and $10
C)   $10
D)   More than $10E) A) and B)
F) All of the above

Question 6

Figure 10-4 3." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.This market

Accepted Answer

A)   has no need for government intervention.
B)   would benefit from a tax on the product.
C)   would benefit from a subsidy for the product.
D)   would maximize total well-being at Q3.E) C) and D)
F) A) and B)

Question 7

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) A) and D)
F) A) and B)

Question 8

The goal of industrial policy should be that

Accepted Answer

A)   industries yielding the largest positive externalities should receive the biggest subsidies.
B)   any industry that produces negative externalities should be heavily taxed.
C)   any production process that produces negative externalities should be shut down.
D)   all industries that produce positive externalities should be equally subsidized.E) A) and B)
F) A) and C)

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) C) and D)

Question 10

Figure 10-9   
-Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Accepted Answer

A)   Panel (a) .
B)   Panel (b) .
C)   Panel (c) .
D)   Both (b) and (c) are correct.E) B) and D)
F) B) and C)

Question 11

Since restored historic buildings convey a positive externality,local governments may choose to

Accepted Answer

A)   regulate the demolition of them.
B)   provide tax breaks to owners who restore them.
C)   increase property taxes in historic areas.
D)   Both a and b are correct.E) A) and C)
F) B) and C)

Question 12

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) C) and D)
F) A) and B)

Question 13

Which of the following suggests that private markets can be effective in dealing with externalities?

Accepted Answer

A)   the "invisible hand"
B)   the law of diminishing social returns
C)   the Coase theorem
D)   technology policyE) None of the above
F) All of the above

Question 14

According to the Coase theorem,if private parties can bargain without cost,then the private market will solve the problem of externalities.

Accepted Answer

A) True 
 B)False

Question 15

A corrective tax

Accepted Answer

A)   causes each factory to reduce pollution by the same amount.
B)   assigns a legal pollution limit for firms.
C)   places a price on the right to pollute.
D)   costs society more than pollution regulations.E) A) and B)
F) B) and C)

Question 16

When externalities exist,buyers and sellers

Accepted Answer

A)   neglect the external effects of their actions,but the market equilibrium is still efficient.
B)   do not neglect the external effects of their actions,and the market equilibrium is efficient.
C)   neglect the external effects of their actions,and the market equilibrium is not efficient.
D)   do not neglect the external effects of their actions,and the market equilibrium is not efficient.E) A) and C)
F) B) and D)

Question 17

Figure 10-9   
-Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Accepted Answer

A)   Q2.
B)   Q3.
C)   Q4.
D)   Q5.E) All of the above
F) A) and B)

Question 18

To enhance the well-being of society,a social planner will encourage firms to increase production when

Accepted Answer

A)   the firms are producing basic goods.
B)   there is a shortage in the market.
C)   technology spillovers are associated with production.
D)   negative externalities "spill over" into production.E) All of the above
F) C) and D)

Question 19

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 20

Figure 10-7 1. B)  Q2. C)  Q3. D)  Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-7.Which quantity represents the social optimum for this market?

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.E) A) and B)
F) A) and C)

Exam 10: Externalities

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Correct Answer
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The goal of industrial policy should be that

Correct Answer
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Which of the following suggests that private markets can be effective in dealing with externalities?

Correct Answer
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Figure 10-8 -Refer to Figure 10-8.What is the equilibrium price in this market?

Correct Answer
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To enhance the well-being of society,a social planner will encourage firms to increase production when

Correct Answer
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A positive externality occurs when

Correct Answer
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According to the Coase theorem,if private parties can bargain without cost,then the private market will solve the problem of externalities.

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

Correct Answer
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Figure 10-7 -Refer to Figure 10-7.Which quantity represents the social optimum for this market?

Correct Answer
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Since restored historic buildings convey a positive externality,local governments may choose to

Correct Answer
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When externalities exist,buyers and sellers

Correct Answer
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Patents do not

Correct Answer
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Figure 10-4 -Refer to Figure 10-4.This market

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
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Figure 10-9 -Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Correct Answer
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Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

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

Correct Answer
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A corrective tax

Correct Answer
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Which of the following is not correct?

Correct Answer
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Exam 10: Externalities

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Correct AnswerverifiedShow Answer

The goal of industrial policy should be that

Correct AnswerverifiedShow Answer

Which of the following suggests that private markets can be effective in dealing with externalities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 10-8 -Refer to Figure 10-8.What is the equilibrium price in this market?

Correct AnswerverifiedShow Answer

To enhance the well-being of society,a social planner will encourage firms to increase production when

Correct AnswerverifiedShow Answer

A positive externality occurs when

Correct AnswerverifiedShow Answer

According to the Coase theorem,if private parties can bargain without cost,then the private market will solve the problem of externalities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 10-7 -Refer to Figure 10-7.Which quantity represents the social optimum for this market?

Correct AnswerverifiedShow Answer

Since restored historic buildings convey a positive externality,local governments may choose to

Correct AnswerverifiedShow Answer

When externalities exist,buyers and sellers

Correct AnswerverifiedShow Answer

Patents do not

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.This market

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 10-9 -Refer to Figure 10-9.The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the market for smokestack scrubbers is shown in

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A corrective tax

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

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