Question 1

Left to their own,private markets tend to

Accepted Answer

A)   underallocate resources to public goods.
B)   allocate the economically efficient amount of resources to public goods.
C)   overallocate resources to public goods.
D)   use up all the public goods.E) A) and D)
F) None of the above

Question 2

Perfectly competitive markets will tend to underallocate resources to nonexclusive public goods because

Accepted Answer

A)   these goods are produced under conditions of increasing returns to scale.
B)   no single individual can appropriate the total benefits provided by the purchase of such goods.
C)   these goods are best produced under conditions of monopoly.
D)   no private producer can provide the capital necessary to produce such goods.E) C) and D)
F) B) and D)

Question 3

Suppose residents of Toadhop live on the Quabache River,a river prone to flooding.Suppose there are 1000 (type A) people who value flood control more than the 1000 (type B) people.  where Q measures the quality of flood control.If the price of a unit of flood control is $100,000 and the citizens of Toadhop did not work together the amount of flood control purchased would be

Accepted Answer

A)   0
B)   10
C)   25
D)   70E) A) and B)
F) None of the above

Question 4

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose QD = 1000 - 100P and QS = -100 + 100P.The price consumers would have to pay for the market to achieve the socially optimal level of production is

Accepted Answer

A)   5
B)   5.5
C)   6
D)   6.5E) B) and C)
F) A) and D)

Question 5

In the case of a negative externality,the social marginal cost will

Accepted Answer

A)   exceed the private marginal cost.
B)   be equal to private marginal cost.
C)   fall short of private marginal cost.
D)   bear no significant relation to private marginal cost.E) A) and B)
F) C) and D)

Question 6

If preferences are one-dimensional and preferences are single peaked,majority rule will result in selection of the project most favored by

Accepted Answer

A)   no one.
B)   the median voter.
C)   the average voter.
D)   everyone.E) All of the above
F) A) and B)

Question 7

Each of the following provides incentives to reduce a negative externality except:

Accepted Answer

A)   a merger with affected firms.
B)   subsidizing consumption of the good being produced.
C)   bargaining among firms.
D)   taxation of the externality.E) C) and D)
F) A) and C)

Question 8

Suppose residents of Toadhop live on the Quabache River,a river prone to flooding.Suppose there are 1000 (type A) people who value flood control more than the 1000 (type B) people.  where Q measures the quality of flood control.If the price of a unit of flood control is $100,000 and the citizens of Toadhop gather for a town hall meeting to find the socially optimal level of flood control,and they are successful,how much will each type B individual contribute in total?

Accepted Answer

A)   1875
B)   1500
C)   875
D)   625E) B) and D)
F) A) and D)

Question 9

Each of the following is by definition an attribute of a public good except

Accepted Answer

A)   nonrivalry.
B)   increasing returns to scale.
C)   nonexclusivity.
D)   none of these.E) All of the above
F) B) and C)

Question 10

Externalities between two firms can be "internalized" if:
I.The two firms merge.
II.Bargaining costs are zero.
III.The externalities affect each firm equally.
IV.Marginal costs for both firms are constant.
Which statement(s) correctly complete(s) the sentence?

Accepted Answer

A)   Only II.
B)   All except III.
C)   I and II, but not III and IV.
D)   I and IV, but not II and III.E) B) and C)
F) A) and D)

Question 11

A higher interest rate (r) will favor those projects in cost-benefit analysis which

Accepted Answer

A)   have costs and benefits occurring in the more distant future.
B)   have costs and benefits occurring in the more immediate future.
C)   have benefits occurring in the more immediate future and costs occurring in the more distant future.
D)   have benefits occurring in the more distant future and costs occurring in the more immediate future.E) B) and D)
F) None of the above

Question 12

Special interest groups often

Accepted Answer

A)   represent broad questions of public interest.
B)   pursue rent seeking behavior.
C)   do not use lobbying techniques.
D)   have no effect on the political process.E) A) and C)
F) A) and D)

Question 13

In the case of a positive externality,social marginal cost will

Accepted Answer

A)   exceed private marginal cost.
B)   be equal to private marginal cost.
C)   fall short of private marginal cost.
D)   have no specific relation to private marginal cost.E) A) and B)
F) C) and D)

Question 14

If bargaining is costless,the assignment of property rights for an externality

Accepted Answer

A)   has no impact on the possibility of an efficient outcome and no distributional impact.
B)   has no impact on the possibility of an efficient outcome but does have a distributional impact.
C)   does have an impact on the possibility of an efficient outcome but has no distributional impact.
D)   does have an impact on the possibility of an efficient outcome and does have a distributional impact.E) A) and B)
F) A) and C)

Question 15

Suppose residents of Toadhop live on the Quabache River,a river prone to flooding.Suppose there are 1000 (type A) people who value flood control more than the 1000 (type B) people.  where Q measures the quality of flood control.If the price of a unit of flood control is $100,000 and the citizens of Toadhop gather for a town hall meeting to find the socially optimal level of flood control,and they are successful,they will pick Q equal to

Accepted Answer

A)   0
B)   10
C)   25
D)   70E) B) and C)
F) A) and D)

Question 16

Bargaining costs are generally high in cases involving environmental externalities because

Accepted Answer

A)   there are strong incentives to be a free rider.
B)   many individuals may be affected by the externalities.
C)   it is difficult to measure the costs of the externalities.
D)   all of the above.E) B) and C)
F) None of the above

Exam 16: Externalities and Public Goods

Each of the following provides incentives to reduce a negative externality except:

Correct Answer
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Correct Answer
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Bargaining costs are generally high in cases involving environmental externalities because

Correct Answer
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Each of the following is by definition an attribute of a public good except

Correct Answer
verified

Correct Answer
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In the case of a negative externality,the social marginal cost will

Correct Answer
verified

A higher interest rate (r) will favor those projects in cost-benefit analysis which

Correct Answer
verified

If preferences are one-dimensional and preferences are single peaked,majority rule will result in selection of the project most favored by

Correct Answer
verified

Left to their own,private markets tend to

Correct Answer
verified

Correct Answer
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Correct Answer
verified

In the case of a positive externality,social marginal cost will

Correct Answer
verified

Special interest groups often

Correct Answer
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Perfectly competitive markets will tend to underallocate resources to nonexclusive public goods because

Correct Answer
verified

Externalities between two firms can be "internalized" if: I.The two firms merge. II.Bargaining costs are zero. III.The externalities affect each firm equally. IV.Marginal costs for both firms are constant. Which statement(s) correctly complete(s) the sentence?

Correct Answer
verified

If bargaining is costless,the assignment of property rights for an externality

Correct Answer
verified

Exam 16: Externalities and Public Goods

Each of the following provides incentives to reduce a negative externality except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bargaining costs are generally high in cases involving environmental externalities because

Correct AnswerverifiedShow Answer

Each of the following is by definition an attribute of a public good except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the case of a negative externality,the social marginal cost will

Correct AnswerverifiedShow Answer

A higher interest rate (r) will favor those projects in cost-benefit analysis which

Correct AnswerverifiedShow Answer

If preferences are one-dimensional and preferences are single peaked,majority rule will result in selection of the project most favored by

Correct AnswerverifiedShow Answer

Left to their own,private markets tend to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the case of a positive externality,social marginal cost will

Correct AnswerverifiedShow Answer

Special interest groups often

Correct AnswerverifiedShow Answer

Perfectly competitive markets will tend to underallocate resources to nonexclusive public goods because

Correct AnswerverifiedShow Answer

Externalities between two firms can be "internalized" if: I.The two firms merge. II.Bargaining costs are zero. III.The externalities affect each firm equally. IV.Marginal costs for both firms are constant. Which statement(s) correctly complete(s) the sentence?

Correct AnswerverifiedShow Answer

If bargaining is costless,the assignment of property rights for an externality

Correct AnswerverifiedShow Answer

Correct Answer
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