Question : 38) In the past the federal government often employed what : 1387486

38) In the past the federal government often employed what is called a “command and control” approach to the reduction of pollution emissions. Many economists are critical of this approach because

A) it does not lead to significant reductions in pollution.

B) they believe a market-based approach will reduce pollution more efficiently.

C) the “command and control” approach is designed to help firms at the expense of consumers.

D) the “command and control” approach leads to negative externalities.

39) A positive externality results when

A) economists are sure that a good or service provides benefits to consumers.

B) someone pays for a good or service even though she is not directly affected by the production or consumption of it.

C) people who live in one country benefit from the production of a good or service that occurs in another country.

D) people who are not directly involved in producing or paying for a good or service benefit from it.

40) Which of the following describes how a negative externality affects a competitive market?

A) The externality causes a difference between the private cost of production and the social cost.

B) The externality causes a difference between the private cost of production and the private benefit from consumption.

C) The externality causes consumer surplus to exceed producer surplus.

D) The externality causes a difference between the private cost of production and the equilibrium price.

41) A free market fails when

A) there is government intervention.

B) there is an external effect in either production, consumption, or both.

C) firms that produce goods which create positive externalities go bankrupt.

D) firms that produce goods which create negative externalities earn high profits.

42) Which of the following could be evidence of a market failure?

A) Resources in an economy are not fully utilized.

B) The market price of a product is above the average cost of production.

C) There are only a handful of firms competing against each other in an industry.

D) Market prices do not reflect true production costs.

43) Alternative approaches for reducing carbon dioxide emissions are

A) carbon taxes and carbon scrubbing.

B) carbon trading and carbon subsidies.

C) carbon taxes and carbon trading.

D) burning low carbon coal and deforestation.

44) Which of the following describes how a positive externality affects a competitive market?

A) The externality causes a difference between the private benefit from consumption and the social benefit.

B) The externality causes a difference between the private benefit from production and the social cost of production.

C) The externality causes quantity demanded to exceed quantity supplied.

D) The externality causes a difference between the social cost of production and the social cost of consumption.

45) “A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus.” This statement

A) is true only if there are positive externalities in production in the market.

B) is true only if there are no negative externalities in the market.

C) is true only if there are no positive or negative externalities in the market.

D) is true in theory, but economic efficiency cannot be achieved in a real market.

46) If there are no externalities, a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because

A) too little of the good will be produced.

B) too much of the good will be produced.

C) a deadweight loss will occur that is equal to the area under the demand curve for the good.

D) economic surplus is maximized.

47) When there is a negative externality, the private cost of production ________ the social cost of production.

A) is greater than

B) is equal to

C) eliminates

D) is less than