Question 1

The first economist to systematically analyze market failure was

Accepted Answer

A)  Adam Smith.
B)  Ronald Coase.
C)  A.C.Pigou.
D)  J.E.Meade.E) C) and D)
F) B) and D)

Question 2

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

Accepted Answer

A) True 
 B)False

Question 3

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is ________ to achieve an ________ amount of pollution.

Accepted Answer

A)  necessary;equitable
B)  necessary;efficient
C)  not necessary;equitable
D)  not necessary;efficientE) None of the above
F) A) and B)

Question 4

The Wilfer Resort Hotel has a spectacular view of a pine forest along a river bank.Suppose a commercial logger has purchased the pine forest and is planning to clear-cut the forest in a way that has a negative impact on the resort.Can the two parties arrive at a Coasian solution and if so what might that solution be?

Accepted Answer

In this case,since there are only two pa...

Question 5

When there is an externality in a market

Accepted Answer

A)  the externality will move the market to an economically efficient equilibrium.
B)  the externality will cause the market price to be less than or greater than the equilibrium price.
C)  the government should use price controls to enable the market to reach equilibrium.
D)  government intervention may increase economic efficiency.E) All of the above
F) B) and C)

Question 6

It is difficult for a private market to provide the economically efficient quantity of a public good because

Accepted Answer

A)  by law governments cannot use cost-benefit analysis to determine this quantity.
B)  public goods produce positive and negative externalities.
C)  individual preferences are not revealed in the market for the good.
D)  it is too expensive to produce the necessary amount of the good.E) A) and B)
F) None of the above C

Question 7

If electric utilities continually reduce their emissions of sulfur dioxide

Accepted Answer

A)  the utilities will eventually be forced to go out of business.
B)  the marginal benefit of additional emissions will rise.
C)  the marginal cost of further emissions will rise.
D)  the total benefit of sulfur dioxide emissions will fall.E) None of the above
F) All of the above

Question 8

What are property rights?

Accepted Answer

A)  the title to ownership of any physical asset
B)  a legal document verifying ownership of intangible assets
C)  the rights individuals or firms have to the exclusive use of their property,including the right to buy or sell it
D)  the right of the government to appropriate private assets for the good of societyE) None of the above
F) C) and D)

Question 9

The free rider problem refers to a situation in which

Accepted Answer

A)  people consume a pure public good without payment,even though the good may not be produced if no one chooses to pay.
B)  the marginal cost of allowing additional consumers to consume a public good is zero.
C)  high income individuals subsidize the production of goods,such as education,that make society better off.
D)  markets fail to allocate resources efficiently when benefits outweigh costs.E) A) and D)
F) A) and C)

Question 10

Which of the following must be present to reach a private solution to an externality problem?

Accepted Answer

A)  A majority of the parties affected by the externality must agree to a solution.
B)  The transactions costs to negotiate a solution must be relatively low.
C)  The total number of people,creators of the problem and those affected,must be relatively large to justify negotiating a solution.
D)  The government must approve the solution for it to be a legal solution.E) C) and D)
F) B) and D)

Question 11

Which of the following is a source of market failure?

Accepted Answer

A)  unforeseen circumstances which leads to the bankruptcy of many firms
B)  a lack of government intervention in a market
C)  incomplete property rights or inability to enforce property rights
D)  an inequitable income distributionE) None of the above
F) B) and D)

Question 12

Determine if each of the products below displays any of the following characteristics:
(i)rivalry
(ii)nonrivalry
(iii)excludability
(iv)nonexcludability.
a.a freeway during peak commute hours
b.an online college course
c.infectious disease prevention
d.open source software such as Linux
e.a movie showing at Century Theatres

Accepted Answer

a.rivalry due to traffic congestion alth...

Question 13

Which of the following best illustrates the free rider problem?

Accepted Answer

A)  Since no one owns elephants and elephants are valued for their hide,meat,and ivory,elephants can be hunted to extinction.
B)  For every purchase of a $30 fare card,you are entitled to five free bus rides.
C)  If your neighbors professionally landscape their front yards,it is likely that the market value of your property will increase.
D)  All three homeowners in a quiet cul-de-sac have expressed the desirability of security lighting in the common parking area.One of the homeowners installs the lighting and asks you to contribute toward the cost.You choose not to contribute.E) A) and B)
F) C) and D)

Question 14

A public good is

Accepted Answer

A)  a good that is rivalrous and excludable.
B)  a good that is nonrivalrous and nonexcludable.
C)  a good that is nonrivalrous and excludable.
D)  a good that is rivalrous and nonexcludable.E) B) and C)
F) None of the above

Question 15

The basic cause of deadweight losses from the existence of common resources and externalities is

Accepted Answer

A)  a lack of clearly defined and enforceable property rights.
B)  the self-interested rationality of human beings.
C)  the use of a market system to deal with scarcity.
D)  the absence of government intervention.E) None of the above
F) A) and D)

Question 16

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good.

Accepted Answer

A) True 
 B)False  True

Question 17

Classifying a good as rival means

Accepted Answer

A)  that the good is produced in a competitive market.
B)  that there is a shortage of the good.
C)  that when one person consumes a unit of the good no one else can consume it.
D)  anyone who does not pay for the good cannot consume it.E) All of the above
F) C) and D) C

Question 18

The European Union established a cap-and-trade system which was designed to

Accepted Answer

A)  eliminate air pollution and greenhouse gases by the year 2020.
B)  reduce carbon dioxide emissions.
C)  provide fast growing developing countries with the technology to reduce their carbon emissions.
D)  remove all taxes from polluting industries.E) B) and C)
F) A) and D)

Question 19

Figure 5-7 
-Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve.
B)  the demand for pollution reduction curve.
C)  the negative externality curve.
D)  the value of pollution reduction curve.E) B) and C)
F) A) and D)

Question 20

Which of the following is an example of a product that is nonexcludable and rival?

Accepted Answer

A)  free concert (with limited seating) in a park
B)  national defense
C)  automobiles
D)  flu vaccinationsE) A) and C)
F) All of the above

Exam 5: Externalities, environmental Policy, and Public Goods

The first economist to systematically analyze market failure was

Correct Answer
verified

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

Correct Answer
verified

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is to achieve an amount of pollution.

Correct Answer
verified

Correct Answer
verified
In this case,since there are only two pa...
View Answer

When there is an externality in a market

Correct Answer
verified

It is difficult for a private market to provide the economically efficient quantity of a public good because

Correct Answer
verified
C

If electric utilities continually reduce their emissions of sulfur dioxide

Correct Answer
verified

What are property rights?

Correct Answer
verified

The free rider problem refers to a situation in which

Correct Answer
verified

Which of the following must be present to reach a private solution to an externality problem?

Correct Answer
verified

Which of the following is a source of market failure?

Correct Answer
verified

Correct Answer
verified
a.rivalry due to traffic congestion alth...
View Answer

Which of the following best illustrates the free rider problem?

Correct Answer
verified

A public good is

Correct Answer
verified

The basic cause of deadweight losses from the existence of common resources and externalities is

Correct Answer
verified

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good.

Correct Answer
verified
True

Classifying a good as rival means

Correct Answer
verified
C

The European Union established a cap-and-trade system which was designed to

Correct Answer
verified

Figure 5-7 -Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Correct Answer
verified

Which of the following is an example of a product that is nonexcludable and rival?

Correct Answer
verified

Exam 5: Externalities, environmental Policy, and Public Goods

The first economist to systematically analyze market failure was

Correct AnswerverifiedShow Answer

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

Correct AnswerverifiedShow Answer

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is ________ to achieve an ________ amount of pollution.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn this case,since there are only two pa...View AnswerShow Answer

When there is an externality in a market

Correct AnswerverifiedShow Answer

It is difficult for a private market to provide the economically efficient quantity of a public good because

Correct AnswerverifiedC

If electric utilities continually reduce their emissions of sulfur dioxide

Correct AnswerverifiedShow Answer

What are property rights?

Correct AnswerverifiedShow Answer

The free rider problem refers to a situation in which

Correct AnswerverifiedShow Answer

Which of the following must be present to reach a private solution to an externality problem?

Correct AnswerverifiedShow Answer

Which of the following is a source of market failure?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.rivalry due to traffic congestion alth...View AnswerShow Answer

Which of the following best illustrates the free rider problem?

Correct AnswerverifiedShow Answer

A public good is

Correct AnswerverifiedShow Answer

The basic cause of deadweight losses from the existence of common resources and externalities is

Correct AnswerverifiedShow Answer

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good.

Correct AnswerverifiedTrue

Classifying a good as rival means

Correct AnswerverifiedC

The European Union established a cap-and-trade system which was designed to

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Correct AnswerverifiedShow Answer

Which of the following is an example of a product that is nonexcludable and rival?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem,government action is to achieve an amount of pollution.

Correct Answer
verified

Correct Answer
verified
In this case,since there are only two pa...
View Answer

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.rivalry due to traffic congestion alth...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified