Question 1

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What is the efficient level of output in this market?

Accepted Answer

A)  60
B)  70
C)  80
D)  90
E)  100F) C) and D)
G) A) and B) C

Question 2

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market.Which statement is true?

Accepted Answer

A)  The efficient level of output is 4 units.
B)  The efficient level of output is 6 units.
C)  The efficient level of output is 8 units.
D)  The efficient level of output is 12 units.
E)  The efficient level of output is 0 units.F) All of the above
G) A) and C)

Question 3

The government issues tradable permits to tackle with the issue of sulphur dioxide emissions.Which statement is true?

Accepted Answer

A)  The initial allocation does not affect the final allocation and use of the permits.
B)  The initial distribution of permits impacts on their final use because it changes the relative opportunity cost of selling and buying permits for firms depending on their initial allocation.
C)  Firms that were not allocated any permits initially never end up using any permits.
D)  The firms allocated more permits in the initial allocation process typically use more permits than other firms.
E)  None of the above statements are true.F) B) and D)
G) None of the above

Question 4

The Coase theorem states that:

Accepted Answer

A)  The initial allocation of property rights affects the final outcome achieved in the market.
B)  Bargaining is difficult, given the high transaction costs typically involved.
C)  Provided property rights have been assigned and transactions costs are low, the efficient outcome will be achieved regardless as to the initial allocation of property rights.
D)  The initial allocation of property rights has no impact on the final outcome in market equilibrium, which is typically inefficient and results in a DWL.
E)  None of the above.F) C) and D)
G) None of the above

Question 5

A negative production externality results in:

Accepted Answer

A)  A DWL in the market equilibrium because there is too much output relative to the efficient level of production.
B)  A DWL in the market equilibrium because output is too low in the market equilibrium relative to the socially efficient level of output.
C)  No DWL loss in the market equilibrium as all costs and benefits are captured in the actions of market participants.
D)  All of the above.
E)  None of the above.F) C) and E)
G) C) and D) A

Question 6

A positive consumption externality results in:

Accepted Answer

A)  A market equilibrium quantity traded being more than the surplus-maximizing quantity, and consumers paying too high a price.
B)  A market equilibrium quantity traded being more than the surplus-maximizing quantity, and consumers paying too little for the product.
C)  The market output being below the surplus-maximizing level, and the market equilibrium price paid by consumers being too high.
D)  All of the above.
E)  None of the above.F) None of the above
G) C) and D)

Question 7

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market, the government can achieve the efficient level of output by:

Accepted Answer

A)  Implementing a per-unit tax of $4 on suppliers.
B)  Implementing a per-unit tax of $6 on suppliers.
C)  Implementing a per-unit tax of $8 on suppliers.
D)  Implementing a per-unit tax of $10 on suppliers.
E)  None of the above.F) A) and B)
G) A) and C)

Question 8

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What is the DWL that results in the market equilibrium?

Accepted Answer

A)  $200
B)  $600
C)  $400
D)  $500
E)  $0F) C) and D)
G) D) and E)

Question 9

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market.Which statement is true?

Accepted Answer

A)  The DWL in the market outcome is $4.
B)  The DWL in the market outcome is $16.
C)  The DWL in the market outcome is $12.
D)  The DWL in the market outcome is $8.
E)  The DWL in the market outcome is $6.F) C) and D)
G) B) and D) E

Question 10

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What government intervention will result in the efficient outcome?

Accepted Answer

A)  The government implement a tax of $60, levied on consumers.
B)  The government provide a consumption subsidy of $60 per unit, provided to consumers.
C)  The government subsidize producer by $60 per unit.
D)  Both b and CE) C) and D)
F) B) and C)

Exam 16: Externalities

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What is the efficient level of output in this market?

Correct Answer
verified
C

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market.Which statement is true?

Correct Answer
verified

The government issues tradable permits to tackle with the issue of sulphur dioxide emissions.Which statement is true?

Correct Answer
verified

The Coase theorem states that:

Correct Answer
verified

A negative production externality results in:

Correct Answer
verified
A

A positive consumption externality results in:

Correct Answer
verified

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market, the government can achieve the efficient level of output by:

Correct Answer
verified

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What is the DWL that results in the market equilibrium?

Correct Answer
verified

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market.Which statement is true?

Correct Answer
verified
E

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What government intervention will result in the efficient outcome?

Correct Answer
verified

Exam 16: Externalities

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What is the efficient level of output in this market?

Correct AnswerverifiedC

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market.Which statement is true?

Correct AnswerverifiedShow Answer

The government issues tradable permits to tackle with the issue of sulphur dioxide emissions.Which statement is true?

Correct AnswerverifiedShow Answer

The Coase theorem states that:

Correct AnswerverifiedShow Answer

A negative production externality results in:

Correct AnswerverifiedA

A positive consumption externality results in:

Correct AnswerverifiedShow Answer

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market, the government can achieve the efficient level of output by:

Correct AnswerverifiedShow Answer

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What is the DWL that results in the market equilibrium?

Correct AnswerverifiedShow Answer

Consider a competitive market with a MPB = 22 - q and a MPC = 10 +q.There is a negative production externality of e = q, where q is the level of output in the market.Which statement is true?

Correct AnswerverifiedE

Consider a competitive market in which the MPB = 180 - 2q and the MSC = q.In this market, however, there is a positive consumption externality of $60 per unit consumed.What government intervention will result in the efficient outcome?

Correct AnswerverifiedShow Answer

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C

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A

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E

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