31.Supposethatalcoholconsumptioncreatesanegativeexternality.Whatcanthegovernmentdotoequatetheequilibriumquantityofalcoholandthesociallyoptimalquantityofalcohol?
a.imposeataxonalcoholthatisequaltotheper-unitexternality
b.offerasubsidyonalcoholthatisequaltotheper-unitexternality
c.imposearegulationlimitingtheamountofalcoholthateachconsumercanpurchase
d.nothing
32.Supposethatsmokingcreatesanegativeexternality.Ifthegovernmentimposesaper-cigarettetaxequaltotheper-cigaretteexternality,then
a.theafter-taxequilibriumquantityofcigarettessmokedwillbelessthanthesociallyoptimalquantityofcigarettessmoked.
b.theafter-taxequilibriumquantityofcigarettessmokedwillbegreaterthanthesociallyoptimalquantityofcigarettessmoked.
c.theafter-taxequilibriumquantityofcigarettessmokedwillequalthesociallyoptimalquantityofcigarettessmoked.
d.Thereisnotenoughinformationtoanswerthequestion.
33.Supposethatelectricityproducerscreateanegativeexternalityequalto$5perunit.Furthersupposethatthegovernmentimposesa$5per-unittaxontheproducers.Whatistherelationshipbetweentheafter-taxequilibriumquantityandthesociallyoptimalquantityofelectricitytobeproduced?
a.Theyareequal.
b.Theafter-taxequilibriumquantityisgreaterthanthesociallyoptimalquantity.
c.Theafter-taxequilibriumquantityislessthanthesociallyoptimalquantity.
d.Thereisnotenoughinformationtoanswerthequestion.
34.Correctivetaxesthatareimposedupontheproducerofanastysmellcanbesuccessfulinreducingthatsmellbecausethetaxmakestheproducer
a.externalizethepositiveexternality.
b.externalizethenegativeexternality.
c.internalizethepositiveexternality.
d.internalizethenegativeexternality.
35.Supposethatelectricityproducerscreateanegativeexternalityequalto$5perunit.Furthersupposethatthegovernmentgivesa$5per-unitsubsidytoproducers.Whatistherelationshipbetweentheequilibriumquantityandthesociallyoptimalquantityofelectricitytobeproduced?
a.Theyareequal.
b.Theequilibriumquantityisgreaterthanthesociallyoptimalquantity.
c.Theequilibriumquantityislessthanthesociallyoptimalquantity.
d.Thereisnotenoughinformationtoanswerthequestion.
36.Supposethatelectricityproducerscreateanegativeexternalityequalto$6perunit.Furthersupposethatthegovernmentimposesa$8per-unittaxontheproducers.Whatistherelationshipbetweentheafter-taxequilibriumquantityandthesociallyoptimalquantityofelectricitytobeproduced?
a.Theyareequal.
b.Theafter-taxequilibriumquantityisgreaterthanthesociallyoptimalquantity.
c.Theafter-taxequilibriumquantityislessthanthesociallyoptimalquantity.
d.Thereisnotenoughinformationtoanswerthequestion.
37.Supposethatelementaryeducationcreatesapositiveexternality.Ifthegovernmentsubsidizeseducationbyanamountequaltotheper-unitexternalityitcreates,then
a.theequilibriumquantityofeducationwillequalthesociallyoptimalquantityofeducation.
b.theequilibriumquantityofeducationwillbegreaterthanthesociallyoptimalquantityofeducation.
c.theequilibriumquantityofeducationwillbelessthanthesociallyoptimalquantityofeducation.
d.Thereisnotenoughinformationtoanswerthequestion.
38.Universityresearcherscreateapositiveexternalitybecausewhattheydiscoverintheirresearchlabscaneasilybelearnedbyotherswhohaven’tcontributedtotheresearchcosts.Whatcouldthefederalgovernmentdotoequatetheequilibriumquantityofuniversityresearchandthesociallyoptimalquantityofuniversityresearchproduced?
a.taxuniversityresearchers
b.offergrantstouniversityresearchers
c.eliminatesubsidizedstudentloans
d.nothing
39.Universityresearcherscreateapositiveexternalitybecausewhattheydiscoverintheirresearchlabscaneasilybelearnedbyotherswhohaven’tcontributedtotheresearchcosts.Supposethatthefederalgovernmentgivesgrantstotheseresearchersequaltothetheirper-unitproductionexternality.Whatistherelationshipbetweentheequilibriumquantityofuniversityresearchandthesociallyoptimalquantityofuniversityresearchproduced?
a.Theequilibriumquantityisgreaterthanthesociallyoptimalquantity.
b.Theyareequal.
c.Theequilibriumquantityislessthanthesociallyoptimalquantity.
d.Thereisnotenoughinformationtoanswerthequestion.
40.Supposeplantingfloweringshrubscreatesapositiveexternalityequalto$7pershrub.Furthersupposethatthelocalgovernmentoffersa$7per-shrubsubsidytoplanters.Thenumberofshrubsthatareplantedisthen
a.lessthanthesociallyoptimalquantity.
b.greaterthanthesociallyoptimalquantity.
c.equaltothesociallyoptimalquantity.
d.Thereisnotenoughinformationtoanswerthequestion.
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