41) Many remedies to resolving externalities involve \"internalizing the externa

Question

41) Many remedies to resolving externalities involve "internalizing the externality." Which BEST approximates that goal? A) buying yourself flowers to counteract the bad smell from a neighboring pig farm giving candy to disruptive children C) punching people who smell nice D) placing a large dome over a polluting factory 42) A legal maximum price at which a good can be sold is a price: A) floor B) stabilization. C) support. D) ceiling. 43) Rent controls are: A) quality freezes on rental housing. B) price ceilings on rental housing C) quantity freezes on rental housing. D) price floors on rental housing. 44) Unlike price floors, subsidies: A) do not create surpluses. B) cause surpluses. C) discourage firms from producing. D) create shortages. 45) Which of the following statements is TRUE? A tax and subsidy are similar in that: I. they both create a deadweight loss. II. the burden of the tax and benefit of the subsidy depend on relative elasticities of demand and supply III. they both change the equilibrium level of output. A) I and III only B) I only C) I, II, and III D) I and II only 46) The social cost of driving an SUV is equal to: A) both the cost of the vehicle's pollution and its operation (gas, etc.). B) the cost of producing the vehicle. C) both the cost of producing and driving the vehicle. D) only the cost of the pollution emitted by the vehicle. 47) An external benefit in a market will cause the market to produce: A) more than is socially desirable. B) the socially optimal equilibrium amount C) less than is socially desirable. D) more than the same market would produce in the presence of a negative extemali Page 9

Explanation / Answer

41, D - Placing a large dome over a polluting factory.

42, D - Ceiling, a legal maximum limit on the price at which a good can be sold, the price is not allowed to rise above this level.

43, B - Rent control is basically the price controls on the renting of residential housing.

44, A - Do not create surpluses. (fact)

45, C - All the three options are correct.

46, A - both the cost of vehicle's pollution and its operation.

47, C - less than is socially desirable.

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