Question 1

Which of the following characteristics best defines a club good?

Accepted Answer

A)  rival and excludable
B)  rival and nonexcludable
C)  nonrival and nonexcludable
D)  nonrival and excludable
E)  a good that is never produced by the governmentF) C) and E)
G) B) and E)

Question 2

The amount you pay for insurance on your car is an example of a(n) :

Accepted Answer

A)  internal cost.
B)  social cost.
C)  external cost.
D)  third-party cost.
E)  public-good cost.F) None of the above
G) B) and E)

Question 3

A carbon tax would be an efficient method of addressing the problem of global warming because:

Accepted Answer

A)  carbon taxes are an external cost.
B)  it forces firms to internalize the external cost of emissions.
C)  it eliminates the positive externalities associated with global warming.
D)  firms are likely to prefer the carbon tax over the cap-and-trade policy.
E)  it is less likely than the cap-and-trade policy to result in rising prices.F) A) and C)
G) A) and B)

Question 4

A good that is nonrival and nonexcludable is defined as a:

Accepted Answer

A)  private good.
B)  public good.
C)  common-resource good.
D)  club good.
E)  government good.F) A) and B)
G) B) and E)

Question 5

Congestion charges effectively decrease the number of cars on the road.This is an example of:

Accepted Answer

A)  the law of supply.
B)  the public-good problem.
C)  the free-rider problem.
D)  the common-resource problem.
E)  internalizing the externality.F) A) and B)
G) C) and D)

Question 6

The costs of a market activity paid for by an individual engaged in the market activity are:

Accepted Answer

A)  external costs.
B)  internal costs.
C)  free-rider costs.
D)  social costs.
E)  common costs.F) B) and D)
G) D) and E)

Question 7

Which of the following is a cost of internalizing a negative externality?

Accepted Answer

A)  Less output is produced.
B)  The deadweight loss is larger.
C)  The level of pollution rises.
D)  Taxes must increase to cover the external cost.
E)  The government must pay firms to encourage them to change production techniques.F) A) and D)
G) None of the above

Question 8

A positive externality exists whenever:

Accepted Answer

A)  there are no internal costs.
B)  production of a good creates an external cost.
C)  production of a good creates an external benefit.
D)  production of a good has no social cost.
E)  production of a good has no social benefit.F) A) and B)
G) A) and C)

Question 9

Which of the following characteristics best defines a common-resource good?

Accepted Answer

A)  rival and excludable
B)  rival and nonexcludable
C)  nonrival and nonexcludable
D)  nonrival and excludable
E)  a good that is never produced by the governmentF) A) and E)
G) A) and C)

Question 10

Consider the accompanying figure to answer the questions that follow.
 
-External benefits arise from the actions of:

Accepted Answer

A)  firms.
B)  consumers.
C)  firms and consumers.
D)  the government.
E)  firms,consumers,and the government.F) A) and B)
G) A) and C)

Question 11

Your neighbor is an avid gardener who changes his flower displays four times per year and who was given the "best yard on the block" award last year.While you personally enjoy these changing flower displays,some of your neighbors have said they do not like some of the flowers your neighbor chooses to plant.For you,this is an example of:

Accepted Answer

A)  a positive externality.
B)  the tragedy of the commons.
C)  an internal cost.
D)  internalizing the external cost.
E)  a negative externality.F) A) and D)
G) A) and C)

Question 12

Congestion charges cause the price of driving to __________.Therefore,the number of cars on the road will __________.

Accepted Answer

A)  rise; rise
B)  rise; fall
C)  fall; fall
D)  fall; rise
E)  remain unchanged; remain unchangedF) All of the above
G) B) and C)

Question 13

Common resources are:

Accepted Answer

A)  overused.
B)  underused.
C)  optimally used.
D)  always owned by the government.
E)  never owned by anyone.F) A) and E)
G) A) and C)

Question 14

The government imposes a tax on the sale of a good whose production is creating a negative externality.The value of the tax is $4 per unit sold.In the new equilibrium,you would expect:

Accepted Answer

A)  the same amount to be sold and the price to be $4 higher.
B)  the same amount to be sold and the price to increase by less than $4.
C)  less to be sold and the price to increase by $4.
D)  less to be sold and the price to increase by less than $4.
E)  less to be sold and the price to increase by more than $4.F) B) and D)
G) A) and E)

Question 15

The third-party problem:

Accepted Answer

A)  occurs when a market activity leads to a negative externality.
B)  occurs when a market activity leads to a positive externality.
C)  occurs when a market activity leads to a negative or a positive externality.
D)  is the same as the free-rider problem.
E)  is associated with the production of private goods but not public goods.F) B) and C)
G) All of the above

Question 16

Explain why the actual social benefit of a public good is hard to measure.

Accepted Answer

Public goods are not sold in markets,so ...

Question 17

The pollution emitted by your car is an example of a(n) :

Accepted Answer

A)  internal cost.
B)  social cost.
C)  external cost.
D)  production cost.
E)  public-good cost.F) None of the above
G) B) and D)

Question 18

A government decision to impose a tax on the sale of plastic disposable water bottles is an example of:

Accepted Answer

A)  a positive externality.
B)  internalizing the externality.
C)  the third-party problem.
D)  an external cost.
E)  the Coase theorem.F) A) and B)
G) C) and D)

Question 19

Identify and briefly explain the four incentives that arise when there are well-defined property rights for a homeowner.

Accepted Answer

The four incentives are the incentives t...

Question 20

Which goods are sold in markets?

Accepted Answer

A)  private goods
B)  private goods and club goods
C)  private goods,club goods,and common-resource goods
D)  all types of goods
E)  public goodsF) A) and C)
G) B) and D)

Exam 7: Market Inefficiencies: Externalities and Public Goods

Correct Answer
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Consider the accompanying figure to answer the questions that follow. -External benefits arise from the actions of:

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The government imposes a tax on the sale of a good whose production is creating a negative externality.The value of the tax is $4 per unit sold.In the new equilibrium,you would expect:

Correct Answer
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Which of the following is a cost of internalizing a negative externality?

Correct Answer
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The costs of a market activity paid for by an individual engaged in the market activity are:

Correct Answer
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A government decision to impose a tax on the sale of plastic disposable water bottles is an example of:

Correct Answer
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Congestion charges cause the price of driving to .Therefore,the number of cars on the road will .

Correct Answer
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Common resources are:

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Which of the following characteristics best defines a common-resource good?

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Identify and briefly explain the four incentives that arise when there are well-defined property rights for a homeowner.

Correct Answer
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The four incentives are the incentives t...
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The third-party problem:

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Which of the following characteristics best defines a club good?

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The amount you pay for insurance on your car is an example of a(n) :

Correct Answer
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The pollution emitted by your car is an example of a(n) :

Correct Answer
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A carbon tax would be an efficient method of addressing the problem of global warming because:

Correct Answer
verified

Congestion charges effectively decrease the number of cars on the road.This is an example of:

Correct Answer
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Explain why the actual social benefit of a public good is hard to measure.

Correct Answer
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Public goods are not sold in markets,so ...
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A good that is nonrival and nonexcludable is defined as a:

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A positive externality exists whenever:

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Which goods are sold in markets?

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Exam 7: Market Inefficiencies: Externalities and Public Goods

Correct AnswerverifiedShow Answer

Consider the accompanying figure to answer the questions that follow. -External benefits arise from the actions of:

Correct AnswerverifiedShow Answer

The government imposes a tax on the sale of a good whose production is creating a negative externality.The value of the tax is $4 per unit sold.In the new equilibrium,you would expect:

Correct AnswerverifiedShow Answer

Which of the following is a cost of internalizing a negative externality?

Correct AnswerverifiedShow Answer

The costs of a market activity paid for by an individual engaged in the market activity are:

Correct AnswerverifiedShow Answer

A government decision to impose a tax on the sale of plastic disposable water bottles is an example of:

Correct AnswerverifiedShow Answer

Congestion charges cause the price of driving to __________.Therefore,the number of cars on the road will __________.

Correct AnswerverifiedShow Answer

Common resources are:

Correct AnswerverifiedShow Answer

Which of the following characteristics best defines a common-resource good?

Correct AnswerverifiedShow Answer

Identify and briefly explain the four incentives that arise when there are well-defined property rights for a homeowner.

Correct AnswerverifiedThe four incentives are the incentives t...View AnswerShow Answer

The third-party problem:

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Which of the following characteristics best defines a club good?

Correct AnswerverifiedShow Answer

The amount you pay for insurance on your car is an example of a(n) :

Correct AnswerverifiedShow Answer

The pollution emitted by your car is an example of a(n) :

Correct AnswerverifiedShow Answer

A carbon tax would be an efficient method of addressing the problem of global warming because:

Correct AnswerverifiedShow Answer

Congestion charges effectively decrease the number of cars on the road.This is an example of:

Correct AnswerverifiedShow Answer

Explain why the actual social benefit of a public good is hard to measure.

Correct AnswerverifiedPublic goods are not sold in markets,so ...View AnswerShow Answer

A good that is nonrival and nonexcludable is defined as a:

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A positive externality exists whenever:

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Which goods are sold in markets?

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Congestion charges cause the price of driving to .Therefore,the number of cars on the road will .

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Correct Answer
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Correct Answer
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Correct Answer
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The four incentives are the incentives t...
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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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Public goods are not sold in markets,so ...
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Correct Answer
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Correct Answer
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