10.4 Integrative Questions
1) A noisy party that keeps neighbors awake is an example of a
A) negative production externality.
B) positive production externality.
C) negative consumption externality.
D) positive consumption externality.
E) Both answers B and C are correct.
2) An externality can be a cost or benefit arising from the production of a good that falls upon
A) consumers but not producers.
B) producers but not consumers.
C) both the consumer and the producer.
D) someone other than the consumer or producer.
E) no one, so it goes unpaid.
3) Externalities
A) are important in the areas of environment and education.
B) only have a negative impact on people.
C) deal with issues that are not our internal issues.
D) affect the people who are responsible for production.
E) are nonexistent in unregulated, competitive markets.
4) In a market with an external cost, government action
A) cannot decrease the amount of the deadweight loss from the external cost.
B) can sometimes help to achieve an efficient outcome.
C) cannot alter firms' cost curves.
D) Both answers A and C are correct.
E) Both answers B and C are correct.
5) A competitive, unregulated market would
A) produce too much pollution because pollution is an external cost.
B) produce too little education because education has an external benefit.
C) fail to achieve equilibrium if there are externalities present.
D) Both answers A and B are correct.
E) Both answers B and C are correct.
6) When property rights are assigned and transactions costs are low,
A) all costs and benefits are taken into account by the transacting parties so the transaction is efficient.
B) externalities will result in market failure.
C) the marginal social benefit curve shifts leftward and the marginal social cost curve does not shift.
D) the marginal social cost curve shifts rightward and the marginal social benefit curve does not shift.
E) the marginal social cost curve shifts rightward and the marginal social benefit curve also shifts rightward.
7) Which of the following is true?
i.In an unregulated market with an external benefit, consumers don't take it into account and consume less than the efficient quantity.
ii.Marginal social cost equals marginal private cost minus marginal external cost.
iii.An unregulated market produces more than the efficient quantity of a good with an external cost.
A) only i
B) only ii
C) only iii
D) i and ii
E) i and iii
8) When people decide whether or not to get a flu vaccination, they ignore the ________ and as a result ________.
A) marginal private benefit; too few vaccinations are given
B) external benefit; too few vaccinations are given
C) private cost; too many vaccinations are given
D) marginal external cost; vouchers must be provided
E) social cost; too many vaccinations are given
9) A carbon tax would ________ the cost of producing goods and services that create large carbon emissions, and would lead Americans to use ________ carbon-intensive goods and services, which could ________ climate change.
A) raise; more; slow
B) raise; fewer; speed up
C) lower; fewer; slow
D) raise; fewer; slow
E) raise; more; speed up
10) When there is a marginal external ________ producers take account only of marginal private cost and produce ________ than the efficient quantity.
A) cost; more
B) cost; less
C) benefit; more
D) benefit; less
E) increase; more
11) The Coase theorem says that if property rights exist and the costs of enforcing them are ________, then the market outcome is ________ and it doesn't matter who has the property rights.
A) low; inefficient
B) high; inefficient
C) low; efficient
D) high; efficient
E) stable; efficient
