Question 1

Policy responses that try to deal with market failure resulting from externalities are largely restricted to various forms of taxation.

Accepted Answer

A) True 
 B)False

Question 2

Japanese fishermen use gill nets to catch tuna with great efficiency.Many environmentalists have objected to this practice since many marine animals such as dolphins and sharks are killed by the nets and discarded by the fishermen.Which of the following statements is most correct?

Accepted Answer

A)  a private solution can be reached through negotiation between the fishermen and the environmentalists
B)  a private solution is not practical due to the number of individuals affected
C)  the market price of tuna is higher than the socially optimum price of tuna
D)  a private solution to this problem would not effect the price of tunaE) B) and C)
F) A) and B)

Question 3

Emission controls on automobiles provide an example of a:

Accepted Answer

A)  Pigovian tax on automobiles, based on how much they pollute
B)  command-and-control policy to increase social efficiency
C)  policy that reduces pollution by allocating resources through market mechanisms
D)  policy to reduce congestion on urban freewaysE) None of the above
F) B) and D)

Question 4

Which of the following best defines the situation where the city council fines people who park too long in one spot?

Accepted Answer

A)  social cost
B)  opportunity cost of technology
C)  internalisation of an externality
D)  regulationE) B) and C)
F) All of the above

Question 5

When Jake takes into account how his actions affect Jill, and changes these, an externality is solved.

Accepted Answer

A) True 
 B)False

Question 6

The sound of birds singing from a new bird sanctuary in inner Melbourne could be considered an externality.

Accepted Answer

A) True 
 B)False

Question 7

Private markets fail to reach a socially optimal level when negative consumption externalities are present because:

Accepted Answer

A)  social costs equal private costs at the private market solution
B)  private value exceeds social value at the private market solution
C)  private value exceeds social costs at the private market solution
D)  consumption externalities lead to production externalitiesE) All of the above
F) C) and D)

Question 8

Assume that your housemate is very messy.Suppose he gets a $200 benefit from being messy but imposes a $300 cost on you.The Coase theorem would suggest that an efficient solution would be:

Accepted Answer

A)  for you to tell him to stop his messy habits or force him to move out
B)  for you to pay your housemate at least $200 but less than $300 to clean up
C)  for him to continue to be messy and force you to make other living arrangements elsewhere
D)  for you to demand payment of at least $200 but no more than $300 to clean up after himE) All of the above
F) A) and C)

Question 9

Government can accurately measure the social value of an externality.

Accepted Answer

A) True 
 B)False

Question 10

Using a supply-demand diagram, demonstrate how a positive consumption externality leads to market inefficiency.

Accepted Answer

A positive consumption externa...

Question 11

An externality is when the impact of one person's actions on the wellbeing of a bystander is captured in the price of a good.

Accepted Answer

A) True 
 B)False

Question 12

When weighing the costs and benefits of pollution, the costs always exceed the benefits because the benefit equals zero.

Accepted Answer

A) True 
 B)False

Question 13

Government policies to encourage technology spillovers may go to industries with the most political clout rather than industries with the largest spillovers.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that a fish-food manufacturing company is located up the river from a fishing firm and often releases some of the food into the river.This means:

Accepted Answer

A)  the fish food manufacturing company is imposing a negative externality on the fishing firm
B)  the fish food manufacturing company is imposing a positive externality on the fishing firm
C)  under the Coase theorem the two companies should be able to negotiate away the externality
D)  unless the government imposes a tax on river pollution, the fishing firm will continue to be negatively impacted by the fish-food manufacturing companyE) All of the above
F) B) and C)

Question 15

Graph 10-2  This graph depicts the market for pork.Use this information to answer the following question(s) .
-In Graph 10-2, what price and quantity combination efficiently allocates resources in such a way that the total value to consumers who buy and use pork minus the total costs to the producers who make and sell pork is maximised?

Accepted Answer

A)  P₁, Q₁
B)  P₂, quantity of zero
C)  price of zero, Q₂
D)  P₀, Q₂E) A) and B)
F) B) and D)

Question 16

In essence, the Pigovian tax places a price on the right to pollute.

Accepted Answer

A) True 
 B)False

Question 17

Graph 10-3  This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees.
-Refer to Graph 10-3.The difference between the social cost curve and the supply curve reflects the:

Accepted Answer

A)  profit margin of each kiwifruit tray
B)  cost of spillover effects from the kiwifruit orchards (replacing bees, lost honey output) 
C)  value of kiwifruit to society as a whole
D)  amount by which the government should subsidise the kiwifruit orchardistsE) A) and D)
F) All of the above

Question 18

Negative externalities occur when one person's actions:

Accepted Answer

A)  cause another person to lose money in a stock-market transaction.
B)  cause his or her employer to lose business.
C)  adversely affect the wellbeing of a bystander (or bystanders)  who is (are)  not party to a market exchange.
D)  reveal his or her preference for foreign produced goods.E) A) and B)
F) C) and D)

Question 19

The height of the demand curve for aluminum for any given quantity, shows the:

Accepted Answer

A)  willingness to pay of the marginal supplier
B)  willingness to pay of the marginal buyer
C)  the gains from trade
D)  opportunity costE) A) and C)
F) A) and B)

Question 20

Internalising a positive production externality will cause the demand curve faced by an industry to:

Accepted Answer

A)  shift to the right
B)  shift to the left
C)  become more elastic
D)  remain unchangedE) B) and D)
F) B) and C)

Exam 10: Externalities

Emission controls on automobiles provide an example of a:

Correct Answer
verified

Correct Answer
verified

Suppose that a fish-food manufacturing company is located up the river from a fishing firm and often releases some of the food into the river.This means:

Correct Answer
verified

Negative externalities occur when one person's actions:

Correct Answer
verified

Using a supply-demand diagram, demonstrate how a positive consumption externality leads to market inefficiency.

Correct Answer
verified
A positive consumption externa...
View Answer

When weighing the costs and benefits of pollution, the costs always exceed the benefits because the benefit equals zero.

Correct Answer
verified

Private markets fail to reach a socially optimal level when negative consumption externalities are present because:

Correct Answer
verified

In essence, the Pigovian tax places a price on the right to pollute.

Correct Answer
verified

Government policies to encourage technology spillovers may go to industries with the most political clout rather than industries with the largest spillovers.

Correct Answer
verified

The height of the demand curve for aluminum for any given quantity, shows the:

Correct Answer
verified

Internalising a positive production externality will cause the demand curve faced by an industry to:

Correct Answer
verified

Assume that your housemate is very messy.Suppose he gets a $200 benefit from being messy but imposes a $300 cost on you.The Coase theorem would suggest that an efficient solution would be:

Correct Answer
verified

Graph 10-3 This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees. -Refer to Graph 10-3.The difference between the social cost curve and the supply curve reflects the:

Correct Answer
verified

When Jake takes into account how his actions affect Jill, and changes these, an externality is solved.

Correct Answer
verified

The sound of birds singing from a new bird sanctuary in inner Melbourne could be considered an externality.

Correct Answer
verified

Government can accurately measure the social value of an externality.

Correct Answer
verified

An externality is when the impact of one person's actions on the wellbeing of a bystander is captured in the price of a good.

Correct Answer
verified

Japanese fishermen use gill nets to catch tuna with great efficiency.Many environmentalists have objected to this practice since many marine animals such as dolphins and sharks are killed by the nets and discarded by the fishermen.Which of the following statements is most correct?

Correct Answer
verified

Policy responses that try to deal with market failure resulting from externalities are largely restricted to various forms of taxation.

Correct Answer
verified

Which of the following best defines the situation where the city council fines people who park too long in one spot?

Correct Answer
verified

Exam 10: Externalities

Emission controls on automobiles provide an example of a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that a fish-food manufacturing company is located up the river from a fishing firm and often releases some of the food into the river.This means:

Correct AnswerverifiedShow Answer

Negative externalities occur when one person's actions:

Correct AnswerverifiedShow Answer

Using a supply-demand diagram, demonstrate how a positive consumption externality leads to market inefficiency.

Correct AnswerverifiedA positive consumption externa...View AnswerShow Answer

When weighing the costs and benefits of pollution, the costs always exceed the benefits because the benefit equals zero.

Correct AnswerverifiedShow Answer

Private markets fail to reach a socially optimal level when negative consumption externalities are present because:

Correct AnswerverifiedShow Answer

In essence, the Pigovian tax places a price on the right to pollute.

Correct AnswerverifiedShow Answer

Government policies to encourage technology spillovers may go to industries with the most political clout rather than industries with the largest spillovers.

Correct AnswerverifiedShow Answer

The height of the demand curve for aluminum for any given quantity, shows the:

Correct AnswerverifiedShow Answer

Internalising a positive production externality will cause the demand curve faced by an industry to:

Correct AnswerverifiedShow Answer

Assume that your housemate is very messy.Suppose he gets a $200 benefit from being messy but imposes a $300 cost on you.The Coase theorem would suggest that an efficient solution would be:

Correct AnswerverifiedShow Answer

Graph 10-3 This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees. -Refer to Graph 10-3.The difference between the social cost curve and the supply curve reflects the:

Correct AnswerverifiedShow Answer

When Jake takes into account how his actions affect Jill, and changes these, an externality is solved.

Correct AnswerverifiedShow Answer

The sound of birds singing from a new bird sanctuary in inner Melbourne could be considered an externality.

Correct AnswerverifiedShow Answer

Government can accurately measure the social value of an externality.

Correct AnswerverifiedShow Answer

An externality is when the impact of one person's actions on the wellbeing of a bystander is captured in the price of a good.

Correct AnswerverifiedShow Answer

Japanese fishermen use gill nets to catch tuna with great efficiency.Many environmentalists have objected to this practice since many marine animals such as dolphins and sharks are killed by the nets and discarded by the fishermen.Which of the following statements is most correct?

Correct AnswerverifiedShow Answer

Policy responses that try to deal with market failure resulting from externalities are largely restricted to various forms of taxation.

Correct AnswerverifiedShow Answer

Which of the following best defines the situation where the city council fines people who park too long in one spot?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A positive consumption externa...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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