Question 1

Why does society sometimes impose taxes on negative externalities?

Accepted Answer

When an externality occurs, the social c...

Question 2

Suppose that a steel factory emits a certain amount of air pollution and that this pollution constitutes a negative externality.If this market is not required to internalise this externality:

Accepted Answer

A)  the supply curve would adequately reflect the marginal social cost of production
B)  consumers will be required to pay a higher price for steel than they would have if the externality were internalised
C)  the market equilibrium would not be the socially optimal quantity
D)  producers will produce less steel than they otherwise would have if the externality were internalisedE) A) and C)
F) A) and B)

Question 3

A positive consumption externality will cause a private market to produce:

Accepted Answer

A)  less than is socially desirable
B)  more than is socially desirable
C)  more than is market optimal
D)  less than is market optimalE) All of the above
F) A) and C)

Question 4

Pigovian taxes are unlike most other taxes because they:

Accepted Answer

A)  distort incentives
B)  move the allocation of resources away from the social optimum
C)  raise revenue for the government
D)  move the allocation of resources closer to the social optimumE) A) and B)
F) A) and C)

Question 5

If the social cost of producing robots is less than the private cost of producing robots, the private market produces too few robots.

Accepted Answer

A) True 
 B)False

Question 6

Why are tradeable pollution permits considered to be a more efficient way to reduce pollution than Government regulation?

Accepted Answer

With regulations, there is no incentive ...

Question 7

A ???______ is enacted to correct the effects of a negative externality:

Accepted Answer

A)  regulation
B)  deadweight loss
C)  corrective tax
D)  tradeable permitE) None of the above
F) B) and C)

Question 8

An externality will:

Accepted Answer

A)  usually be characterised as a form of market failure
B)  cause markets to allocate resources efficiently
C)  strengthen the role of the 'invisible hand' in the marketplace
D)  always require the producer to compensate societyE) A) and C)
F) A) and D)

Question 9

Which of the following statements about a market that is affected by a positive production externality is correct?

Accepted Answer

A)  the optimum level of output is less than the free market level of output and the optimum price is greater than the free market price
B)  the optimum level of output is greater than the free market level of output and the optimum price is less than the free market price
C)  the optimum level of output is greater than the free market level of output and the optimum price is greater than the free market price
D)  the optimum level of output is less than the free market level of output and the optimum price is less than the free market priceE) A) and B)
F) B) and C)

Question 10

When dealing with consumption externalities, the market equilibrium can be moved closer to the social equilibrium by:

Accepted Answer

A)  taxing negative externalities and subsidising positive externalities
B)  taxing both positive and negative externalities
C)  subsidising both positive and negative externalities
D)  none of the above because government has no corrective policy with regards to consumption externalitiesE) A) and B)
F) A) and C)

Question 11

When a tax is used to give buyers and sellers in a market the incentive to take into account the external effects of their actions, it is said to be 'internalising an externality'.

Accepted Answer

A) True 
 B)False

Question 12

Encouraging firms to increase production via a subsidy will tend to be socially optimal when:

Accepted Answer

A)  the firms are producing necessities
B)  there is excess supply in the market
C)  the firms output is associated with large technology spillovers
D)  the market equilibrium output level is greater than the social optimumE) All of the above
F) B) and D)

Question 13

Current media laws allow television companies to own a certain number of channels.However, the greatest part of their revenue comes from the advertisements that are shown when the most viewers are watching their shows.This has the unusual consequence of many stations broadcasting low-interest shows such as shopping on their other channels, so as to concentrate their audiences into one channel and thus reap the most advertising revenue.What is this an example of, and what could be done to rectify it?

Accepted Answer

This is an example of a negative externa...

Question 14

Assuming that Dick has the legal right to keep the dog, which of the following statements is true?

Accepted Answer

A)  Jane will have to pay Dick in order to create a private solution
B)  only if Dick's benefit exceeds Jane's cost will Jane have to pay Dick to solve the problem
C)  depending on Jane's cost, Dick may have to pay Jane to solve the externality problem
D)  none of the above statements is trueE) C) and D)
F) None of the above

Question 15

In Singapore, property taxes on an automobile can exceed the purchase price of a new automobile.Assuming that the tax is a fixed percentage of market value, which of the following does this tax represent?
(i)  a policy in which private incentives are used to reduced the traffic externality on congested roads in Singapore
(ii)  the government's direct control over the number of automobiles that are purchased
(iii)  a policy in which private incentives are used to reduce automobile pollution

Accepted Answer

A)  (i)  and (ii)  only
B)  (i)  and (iii)  only
C)  (ii)  and (iii)  only
D)  (i) , (ii)  and (iii) E) A) and D)
F) None of the above

Question 16

Brent and Jess live together.Every morning, Jess makes a smoothie before work and wakes Brent, angering him, since he usually likes to sleep in.How can Brent and Jess solve this problem?

Accepted Answer

A)  They will not be able to solve the problem unless it is clear whether Jess has the right to make smoothies or Brent has the right to sleep in
B)  Brent can offer to pay Jess adequately to stop making the smoothies
C)  They must hire a negotiator to solve the dispute
D)  Jess should make a smoothie for Brent tooE) A) and C)
F) A) and D)

Question 17

Evaluate the following statement: 'The problem of second-hand smoke in places of employment is different to the problem in public restaurants.People typically don't have very many employment options but they do have many alternatives for selecting a place to eat.As such, direct regulation of second-hand smoke in public restaurants is likely to be inefficient'.

Accepted Answer

If one believes that the restaurant mark...

Question 18

Markets are inefficient when positive production externalities are present because:

Accepted Answer

A)  private benefits of consumption exceed social benefits of consumption when the market is in equilibrium
B)  social costs of production exceed private costs of production when the market is in equilibrium
C)  social benefits of consumption exceed private benefits of consumption when the market is in equilibrium
D)  private costs of production exceed social costs of production when the market is in equilibriumE) B) and C)
F) A) and B)

Question 19

In the absence of public policies, markets will ensure that:

Accepted Answer

A)  demand will always reflect all positive externalities in consumption
B)  demand will always reflect all negative externalities in consumption
C)  supply will always reflect all negative and/or positive externalities in production
D)  none of the above holds trueE) B) and C)
F) A) and C)

Question 20

If sparks from trains sets adjacent farmland on fire, one way to internalise the externality is:

Accepted Answer

A)  for the rail company to increase the volume of rail traffic
B)  for the rail company to purchase the adjacent farmland
C)  for the government to buy the farmland
D)  for the rail company to lower their freight chargesE) All of the above
F) C) and D)

Exam 10: Externalities

Correct Answer
verified

Brent and Jess live together.Every morning, Jess makes a smoothie before work and wakes Brent, angering him, since he usually likes to sleep in.How can Brent and Jess solve this problem?

Correct Answer
verified

Assuming that Dick has the legal right to keep the dog, which of the following statements is true?

Correct Answer
verified

Pigovian taxes are unlike most other taxes because they:

Correct Answer
verified

Why are tradeable pollution permits considered to be a more efficient way to reduce pollution than Government regulation?

Correct Answer
verified
With regulations, there is no incentive ...
View Answer

If sparks from trains sets adjacent farmland on fire, one way to internalise the externality is:

Correct Answer
verified

Correct Answer
verified
If one believes that the restaurant mark...
View Answer

A ???______ is enacted to correct the effects of a negative externality:

Correct Answer
verified

An externality will:

Correct Answer
verified

Suppose that a steel factory emits a certain amount of air pollution and that this pollution constitutes a negative externality.If this market is not required to internalise this externality:

Correct Answer
verified

Correct Answer
verified
This is an example of a negative externa...
View Answer

Markets are inefficient when positive production externalities are present because:

Correct Answer
verified

When a tax is used to give buyers and sellers in a market the incentive to take into account the external effects of their actions, it is said to be 'internalising an externality'.

Correct Answer
verified

Encouraging firms to increase production via a subsidy will tend to be socially optimal when:

Correct Answer
verified

When dealing with consumption externalities, the market equilibrium can be moved closer to the social equilibrium by:

Correct Answer
verified

Which of the following statements about a market that is affected by a positive production externality is correct?

Correct Answer
verified

If the social cost of producing robots is less than the private cost of producing robots, the private market produces too few robots.

Correct Answer
verified

In the absence of public policies, markets will ensure that:

Correct Answer
verified

A positive consumption externality will cause a private market to produce:

Correct Answer
verified

Why does society sometimes impose taxes on negative externalities?

Correct Answer
verified
When an externality occurs, the social c...
View Answer

Exam 10: Externalities

Correct AnswerverifiedShow Answer

Brent and Jess live together.Every morning, Jess makes a smoothie before work and wakes Brent, angering him, since he usually likes to sleep in.How can Brent and Jess solve this problem?

Correct AnswerverifiedShow Answer

Assuming that Dick has the legal right to keep the dog, which of the following statements is true?

Correct AnswerverifiedShow Answer

Pigovian taxes are unlike most other taxes because they:

Correct AnswerverifiedShow Answer

Why are tradeable pollution permits considered to be a more efficient way to reduce pollution than Government regulation?

Correct AnswerverifiedWith regulations, there is no incentive ...View AnswerShow Answer

If sparks from trains sets adjacent farmland on fire, one way to internalise the externality is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf one believes that the restaurant mark...View AnswerShow Answer

A ???______ is enacted to correct the effects of a negative externality:

Correct AnswerverifiedShow Answer

An externality will:

Correct AnswerverifiedShow Answer

Suppose that a steel factory emits a certain amount of air pollution and that this pollution constitutes a negative externality.If this market is not required to internalise this externality:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThis is an example of a negative externa...View AnswerShow Answer

Markets are inefficient when positive production externalities are present because:

Correct AnswerverifiedShow Answer

When a tax is used to give buyers and sellers in a market the incentive to take into account the external effects of their actions, it is said to be 'internalising an externality'.

Correct AnswerverifiedShow Answer

Encouraging firms to increase production via a subsidy will tend to be socially optimal when:

Correct AnswerverifiedShow Answer

When dealing with consumption externalities, the market equilibrium can be moved closer to the social equilibrium by:

Correct AnswerverifiedShow Answer

Which of the following statements about a market that is affected by a positive production externality is correct?

Correct AnswerverifiedShow Answer

If the social cost of producing robots is less than the private cost of producing robots, the private market produces too few robots.

Correct AnswerverifiedShow Answer

In the absence of public policies, markets will ensure that:

Correct AnswerverifiedShow Answer

A positive consumption externality will cause a private market to produce:

Correct AnswerverifiedShow Answer

Why does society sometimes impose taxes on negative externalities?

Correct AnswerverifiedWhen an externality occurs, the social c...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
With regulations, there is no incentive ...
View Answer

Correct Answer
verified

Correct Answer
verified
If one believes that the restaurant mark...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
This is an example of a negative externa...
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When an externality occurs, the social c...
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