Question 1

If a product has an external benefit,how does its marginal private benefit compare to its marginal social benefit?

Accepted Answer

A)   Marginal private benefit is less than marginal social benefit.
B)   Marginal private benefit is greater than marginal social benefit.
C)   At low quantities, marginal private benefit is less than marginal social benefit but at high quantities, marginal private benefit is greater than marginal social benefit.
D)   At low quantities, marginal private benefit is greater than marginal social benefit but at high quantities, marginal private benefit is less than marginal social benefit.
E)   Marginal private benefit cannot be compared to marginal social benefit.F) B) and D)
G) B) and E)

Question 2

A firm dumps dioxin in a river,thereby severely polluting the river.The cost of the water pollution is
i.zero for the firm.
ii.an external cost.
iii.part of the marginal social cost

Accepted Answer

A)   i only
B)   ii only
C)   iii only
D)   ii and iii
E)   i, ii, and iiiF) B) and E)
G) B) and C)

Question 3

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents,then the marginal external cost equals ________ per kilowatt.

Accepted Answer

A)   ten cents
B)   nineteen cents
C)   four cents
D)   zero cents
E)   fourteen centsF) A) and B)
G) B) and C)

Question 4

The figure above shows the demand for college education (D) , the marginal social benefit of college education (MSB) , and the marginal cost of the private schools (MC) .
-Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

A)   exceeds; above the efficient quantity
B)   exceeds; below the efficient quantity
C)   is below; above the efficient quantity
D)   is below; below the efficient quantity
E)   equals; efficientF) C) and D)
G) None of the above

Question 5

Education has an external benefit.So to achieve the efficient level of education,an education voucher must equal the difference between the

Accepted Answer

A)   marginal (private)  cost and the marginal social benefit.
B)   marginal (private)  benefit and the marginal social benefit.
C)   marginal social benefit and the marginal (private)  cost.
D)   dollar price and marginal (private)  cost.
E)   marginal (private)  cost and the marginal social cost.F) C) and D)
G) All of the above

Question 6

Public provision

Accepted Answer

A)   is the production of a good by the government by giving funds to private producers.
B)   lowers the marginal cost of producing the good.
C)   means the good is produced by a public authority that receives the most of its revenue from the government.
D)   Both answers A and B are correct.
E)   Both answers B and C are correct.F) A) and B)
G) B) and D)

Question 7

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The difference between the marginal cost curve and the marginal social cost curve equals

Accepted Answer

A)   marginal private cost.
B)   private cost.
C)   external cost.
D)   marginal external cost.
E)   Coasian cost.F) A) and B)
G) A) and C)

Question 8

-The figure shows the market for college education.In order for the efficient amount of education to occur,the government could provide a voucher of ________ per student.

Accepted Answer

A)   $4,000
B)   $8,000
C)   $12,000
D)   $20,000
E)   $16,000F) A) and B)
G) C) and E)

Question 9

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Accepted Answer

A)   The size of marginal external benefit must be accurately determined.
B)   The government must produce the product.
C)   Private production and private consumption must both be directly subsidized.
D)   The quantity demanded must be decreased to the efficient amount.
E)   Private production without the subsidy must be prohibited.F) A) and C)
G) B) and D)

Question 10

Discuss the difference between a private cost and a social cost.

Accepted Answer

A private cost is the cost of producing ...

Question 11

The proposition that if property rights exist and are enforced,then private transactions are efficient is referred to as the

Accepted Answer

A)   Coase theorem.
B)   property rights theorem.
C)   pollution rights theorem.
D)   emission rights theorem.
E)   private-market efficiency theorem.F) A) and E)
G) A) and D)

Question 12

List and briefly define the three methods government can use to cope with an external cost,such as pollution.

Accepted Answer

The three methods are pollution limits,p...

Question 13

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

Accepted Answer

While many people might like to see a mi...

Question 14

If all education in the United States were provided by private,tuition-charging schools,

Accepted Answer

A)   too much education would be consumed.
B)   too little education would be consumed.
C)   the efficient level of education would be provided.
D)   the government would provide both students and schools with vouchers.
E)   education would no longer have an external benefit.F) A) and D)
G) A) and C)

Question 15

One reason why property rights help achieve an efficient level of pollution is because property rights

Accepted Answer

A)   force the marginal private cost to equal the marginal social cost.
B)   force the marginal social cost to zero.
C)   force the marginal external cost to a lower level than marginal private cost.
D)   eliminate marginal private costs.
E)   change the marginal external cost so that they are equal to the marginal social benefit.F) A) and E)
G) B) and E)

Question 16

-The figure above shows an education market in which the government is providing households with vouchers.Excluding the voucher,what do the students pay the schools?

Accepted Answer

A)   $4,000
B)   $8,000
C)   $12,000
D)   $16,000
E)   $0F) B) and E)
G) C) and E)

Question 17

Marginal private cost

Accepted Answer

A)   is always zero if there is an external cost.
B)   equals the marginal social cost only if the marginal external cost is positive.
C)   is the cost of producing an additional unit of a good or service that is paid by the producer of that good or service.
D)   the cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service.
E)   the cost of producing an additional unit of a good or service that is paid by the entire society.F) A) and C)
G) B) and D)

Question 18

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

Accepted Answer

A)   0¢
B)   7.5¢
C)   10¢
D)   15¢
E)   2.5¢F) A) and E)
G) All of the above

Question 19

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10,what is the marginal social cost?

Accepted Answer

A)   $0.20
B)   $3.00
C)   $0.03
D)   $0.40
E)   None of the above answers is correct.F) B) and E)
G) A) and B)

Question 20

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost borne by producers when 100 billion kilowatt hours are produced is

Accepted Answer

A)   5¢ per kilowatt.
B)   10¢ per kilowatt.
C)   15¢ per kilowatt.
D)   20¢ per kilowatt.
E)   0¢ per kilowatt.F) B) and D)
G) A) and B)

Exam 10: Externalities

Discuss the difference between a private cost and a social cost.

Correct Answer
verified
A private cost is the cost of producing ...
View Answer

If a product has an external benefit,how does its marginal private benefit compare to its marginal social benefit?

Correct Answer
verified

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10,what is the marginal social cost?

Correct Answer
verified

A firm dumps dioxin in a river,thereby severely polluting the river.The cost of the water pollution is i.zero for the firm. ii.an external cost. iii.part of the marginal social cost

Correct Answer
verified

List and briefly define the three methods government can use to cope with an external cost,such as pollution.

Correct Answer
verified
The three methods are pollution limits,p...
View Answer

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents,then the marginal external cost equals ________ per kilowatt.

Correct Answer
verified

-The figure above shows an education market in which the government is providing households with vouchers.Excluding the voucher,what do the students pay the schools?

Correct Answer
verified

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost borne by producers when 100 billion kilowatt hours are produced is

Correct Answer
verified

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Correct Answer
verified

Public provision

Correct Answer
verified

Education has an external benefit.So to achieve the efficient level of education,an education voucher must equal the difference between the

Correct Answer
verified

Correct Answer
verified

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The difference between the marginal cost curve and the marginal social cost curve equals

Correct Answer
verified

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

Correct Answer
verified
While many people might like to see a mi...
View Answer

One reason why property rights help achieve an efficient level of pollution is because property rights

Correct Answer
verified

-The figure shows the market for college education.In order for the efficient amount of education to occur,the government could provide a voucher of ________ per student.

Correct Answer
verified

The proposition that if property rights exist and are enforced,then private transactions are efficient is referred to as the

Correct Answer
verified

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

Correct Answer
verified

If all education in the United States were provided by private,tuition-charging schools,

Correct Answer
verified

Marginal private cost

Correct Answer
verified

Exam 10: Externalities

Discuss the difference between a private cost and a social cost.

Correct AnswerverifiedA private cost is the cost of producing ...View AnswerShow Answer

If a product has an external benefit,how does its marginal private benefit compare to its marginal social benefit?

Correct AnswerverifiedShow Answer

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10,what is the marginal social cost?

Correct AnswerverifiedShow Answer

A firm dumps dioxin in a river,thereby severely polluting the river.The cost of the water pollution is i.zero for the firm. ii.an external cost. iii.part of the marginal social cost

Correct AnswerverifiedShow Answer

List and briefly define the three methods government can use to cope with an external cost,such as pollution.

Correct AnswerverifiedThe three methods are pollution limits,p...View AnswerShow Answer

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents,then the marginal external cost equals ________ per kilowatt.

Correct AnswerverifiedShow Answer

-The figure above shows an education market in which the government is providing households with vouchers.Excluding the voucher,what do the students pay the schools?

Correct AnswerverifiedShow Answer

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The marginal cost borne by producers when 100 billion kilowatt hours are produced is

Correct AnswerverifiedShow Answer

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced,what must be done?

Correct AnswerverifiedShow Answer

Public provision

Correct AnswerverifiedShow Answer

Education has an external benefit.So to achieve the efficient level of education,an education voucher must equal the difference between the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve.The difference between the marginal cost curve and the marginal social cost curve equals

Correct AnswerverifiedShow Answer

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

Correct AnswerverifiedWhile many people might like to see a mi...View AnswerShow Answer

One reason why property rights help achieve an efficient level of pollution is because property rights

Correct AnswerverifiedShow Answer

-The figure shows the market for college education.In order for the efficient amount of education to occur,the government could provide a voucher of ________ per student.

Correct AnswerverifiedShow Answer

The proposition that if property rights exist and are enforced,then private transactions are efficient is referred to as the

Correct AnswerverifiedShow Answer

-The figure above shows the marginal social cost curve of generating electricity,the marginal private cost curve,and the demand curve.If the government imposes a pollution tax to achieve the efficient level of production,the tax equals ________ per kilowatt hour.

Correct AnswerverifiedShow Answer

If all education in the United States were provided by private,tuition-charging schools,

Correct AnswerverifiedShow Answer

Marginal private cost

Correct AnswerverifiedShow Answer

Correct Answer
verified
A private cost is the cost of producing ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The three methods are pollution limits,p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
While many people might like to see a mi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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