Question : Figure 5-12 College education benefits society by producing a more employable : 1387503

 

Figure 5-12

 

 

College education benefits society by producing a more employable workforce, reducing crime and creating a better informed citizenry. Thus, the social benefits of college education exceed the private benefits for any level of college education. This is illustrated in Figure 5-12.

 

30) Refer to Figure 5-12.  One way to obtain the economically efficient amount of college education is for governments to subsidize college education. What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.)

A) P2 – P0

B) P2 – P1

C) P0 – P1

D) P1

 

31) State and local governments subsidize college students with grants and low-interest loans. The loans and subsidies are examples of

A) positive externalities.

B) Coase subsidies.

C) Pigovian subsidies.

D) emission allowances.

 

 

32) Which of the following is an example of a Pigovian tax?

A) payments by utilities to obtain tradable emissions allowances

B) a payroll tax

C) payments for licenses to pollute

D) a tax imposed on a utility that internalizes the cost of externalities caused by the utility

 

 

33) The efficient level of paper production will occur where the

A) marginal private benefit from consuming paper is equal to the marginal social cost of production.

B) marginal social benefit from consuming paper is equal to the marginal social cost of production.

C) economically efficient level of the output of paper is equal to the economically efficient level of inputs.

D) production of paper no longer produces negative externalities.

 

34) Which of the following describes a positive externality?

A) John Henry paints the outside of his house in order to increase its market value just before he puts the house up for sale.

B) People who do not attend college still benefit from others who receive a college education.

C) The government imposes a tax on cigarettes in order to discourage smoking among teenagers.

D) Mary volunteers to drive her neighbor’s children to soccer practice.

 

 

35) The U.S. government has frequently used a “command-and-control” approach in dealing with pollution. Which of the following describes this approach?

A) The government uses taxes in order to internalize the externalities caused by pollution.

B) The government uses subsidies to encourage firms to use new technology that reduces pollution.

C) The government imposes quantitative limits on the amount of pollution firms are allowed to generate.

D) The government distributes information to consumers and producers on how to reduce pollution.

 

 

36) Which of the following is an example of the U.S. government’s use of a “command and control” approach to reducing pollution?

A) In 1990, Congress approved measures designed to reduce sulfur dioxide emissions to 8.5 million tons annually by 2010.

B) The U.S. government imposed a tax on electric utilities to reduce damages from acid rain.

C) The government issued electric utilities tradable emissions allowances in order to reduce emissions of nitrogen oxide.

D) In the 1980s, the U.S. government required the installation of catalytic converters to reduce emissions from all new automobiles.

 

37) Economists generally favor the use of tradable emissions allowances to reduce pollution. However, the use of these allowances has been criticized by some environmentalists. Which of the following describes this criticism?

A) Some environmentalists believe the allowances give firms a license to pollute.

B) Some environmentalists believe that the price of allowances is often too high for consumers to afford.

C) Some environmentalists believe that Pigovian taxes are a more efficient way to reduce pollution.

D) Some environmentalists oppose allowances on legal grounds; they believe the use of allowances is unconstitutional.

 

Figure 5-13

 

 

Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.

 

38) Refer to Figure 5-13.  The efficient equilibrium quantity of gasoline is ________ million gallons per month.

A) 20

B) 32

C) 48

D) 56

 

 

39) Refer to Figure 5-13.  The market equilibrium quantity of gasoline is ________ million gallons per month.

A) 20

B) 32

C) 48

D) 56

 

40) Refer to Figure 5-13.  The efficient equilibrium price of gasoline is ________ per gallon.

A) $3.00

B) $3.75

C) $4.25

D) $5.00