Question 1

The Coase Theorem:

Accepted Answer

A)  applies only to circumstances in which externalities are extensive and bargaining costs are high.
B)  holds that the median voter will decide the outcome of elections.
C)  states that in some circumstances majority voting can yield inconsistent results.
D)  suggests that in some circumstances government intervention is not needed to resolve externality problems.E) B) and C)
F) A) and B)

Question 2

Which one of the following might shift the marginal benefit curve from MB1 to MB2? 1 to MB2?   A) major new studies strongly linking cancer to pollution B) improved technology for reducing pollution C) a change in consumer tastes from manufacturing goods to services D) a decrease in the price of recycled goods" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  major new studies strongly linking cancer to pollution
B)  improved technology for reducing pollution
C)  a change in consumer tastes from manufacturing goods to services
D)  a decrease in the price of recycled goodsE) All of the above
F) A) and D)

Question 3

Answer the next question on the basis of the following information is for public good.Pa and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6, then the collective quantity demanded will be: a and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6, then the collective quantity demanded will be:   A) 1 unit and the socially optimal quantity supplied will be 5 units. B) 2 units and the socially optimal quantity supplied will be 4 units. C) 3 units and the socially optimal quantity supplied will be 3 units. D) 4 units and the socially optimal quantity supplied will be 2 units." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  1 unit and the socially optimal quantity supplied will be 5 units.
B)  2 units and the socially optimal quantity supplied will be 4 units.
C)  3 units and the socially optimal quantity supplied will be 3 units.
D)  4 units and the socially optimal quantity supplied will be 2 units.E) None of the above
F) A) and C)

Question 4

Refer to the information below.Which of the following policies would be most appropriate for dealing with this problem? It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river.Operators of hydroelectric generating plants on the river find that they must clean up the river's water before it flows through their equipment.

Accepted Answer

A)  Levy a tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources.
B)  Levy a tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products.
C)  Levy a tax on the producers of electricity and use the tax revenues to clean up the river.
D)  Levy a tax on the producers of paper products and use the tax revenues to clean up the river.E) A) and C)
F) None of the above

Question 5

Answer the next question on the basis of the following information for public good.Pa and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.The collective willingness of this nation to pay for the fourth unit of the public good is: a and Pb represent the prices that citizens (a)  and (b) , the only two people in this nation, are willing to pay for additional units of a quantity (Qc)  of the public good.Qs represents the quantity of the public good supplied by government at each of the collective prices.The collective willingness of this nation to pay for the fourth unit of the public good is:   A) $7 B) $6 C) $5 D) $3" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $7
B)  $6
C)  $5
D)  $3E) C) and D)
F) B) and D)

Question 6

Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.

Accepted Answer

A) True 
 B)False

Question 7

The following information is for a public good.Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Refer to the data below.If the marginal cost of this good at the optimal quantity is $4, the optimal quantity must be: a and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Refer to the data below.If the marginal cost of this good at the optimal quantity is $4, the optimal quantity must be:   A) 1 unit. B) 2 units. C) 3 units. D) 4 units." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  1 unit.
B)  2 units.
C)  3 units.
D)  4 units.E) A) and D)
F) B) and C)

Question 8

Government must provide economically desirable public goods because:

Accepted Answer

A)  private production of these goods would entail unacceptably high levels of external costs.
B)  the availability of such goods yields no benefits to individual consumers.
C)  the benefits yielded by such goods cannot be withheld from those who refuse to pay for them.
D)  their provision is necessary if we are to reduce unemployment and inflation.E) A) and C)
F) None of the above

Question 9

A negative externality or external cost occurs when:

Accepted Answer

A)  firms fail to achieve allocative efficiency.
B)  firms fail to achieve productive efficiency.
C)  price exceeds marginal cost.
D)  the total cost of producing a good exceeds the costs borne by the producer.E) A) and C)
F) None of the above

Question 10

A market for pollution rights can be expected to:

Accepted Answer

A)  eliminate all pollution.
B)  produce a shortage of pollution.
C)  encourage potential polluters to increase emissions.
D)  provide potential polluters with a monetary incentive to reduce emissions.E) A) and D)
F) B) and C)

Question 11

When producing a good generates external or negative externalities, the private market for that good tends to produce too:

Accepted Answer

A)  much of the product at too low a price.
B)  much of the product at too high a price.
C)  little of the product at too low a price.
D)  little of the product at too high a priceE) A) and B)
F) All of the above

Question 12

Refer to the below diagrams in which figures (a)  and (b)  show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.The collective willingness to pay for the 1st unit of this public good is: st unit of this public good is:   A) $18 B) $14 C) $10 D) $6" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $18
B)  $14
C)  $10
D)  $6E) A) and C)
F) B) and C)

Question 13

The following data are for a series of increasingly extensive flood control projects: For Plan D marginal costs and marginal benefits are:

Accepted Answer

A)  $72,000 and $64,000 respectively.
B)  $28,000 and $12,000 respectively.
C)  $24,000 and $18,000 respectively.
D)  $16,000 and $28,000 respectively.E) B) and D)
F) A) and B)

Exam 4: Part B: Market Failures: Public Goods and Externalities

The following data are for a series of increasingly extensive flood control projects: For Plan D marginal costs and marginal benefits are:

Correct Answer
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Government must provide economically desirable public goods because:

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Which one of the following might shift the marginal benefit curve from MB₁ to MB₂?

Correct Answer
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A negative externality or external cost occurs when:

Correct Answer
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When producing a good generates external or negative externalities, the private market for that good tends to produce too:

Correct Answer
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A market for pollution rights can be expected to:

Correct Answer
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Refer to the below diagrams in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.The collective willingness to pay for the 1^st unit of this public good is:

Correct Answer
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The Coase Theorem:

Correct Answer
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Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.

Correct Answer
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Exam 4: Part B: Market Failures: Public Goods and Externalities

The following data are for a series of increasingly extensive flood control projects: For Plan D marginal costs and marginal benefits are:

Correct AnswerverifiedShow Answer

Government must provide economically desirable public goods because:

Correct AnswerverifiedShow Answer

Which one of the following might shift the marginal benefit curve from MB1 to MB2?

Correct AnswerverifiedShow Answer

A negative externality or external cost occurs when:

Correct AnswerverifiedShow Answer

When producing a good generates external or negative externalities, the private market for that good tends to produce too:

Correct AnswerverifiedShow Answer

A market for pollution rights can be expected to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the below diagrams in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.The collective willingness to pay for the 1st unit of this public good is:

Correct AnswerverifiedShow Answer

The Coase Theorem:

Correct AnswerverifiedShow Answer

Society's optimal amount of pollution moderation is where society's marginal benefit of moderation is zero.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Which one of the following might shift the marginal benefit curve from MB₁ to MB₂?

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Refer to the below diagrams in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.The collective willingness to pay for the 1^st unit of this public good is:

Correct Answer
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