Which of the following statements is correct about a market in which pollution i
ID: 1220482 • Letter: W
Question
Which of the following statements is correct about a market in which pollution is emitted?
Corrective taxes fail to internalize the externality of pollution, but corrective taxes internalize that externality.
Neither corrective taxes nor pollution permits internalize the externality of pollution.
Both corrective taxes and pollution permits internalize the externality of pollution.
Corrective taxes internalize the externality of pollution, but pollution permits do not internalize that externality.
5 points
QUESTION 2
Refer to Figure 10-19. How many units of the good are produced in a market equilibrium?
58
73
94
fewer than 58
5 points
QUESTION 3
Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is
50
2,000
1,000
100
5 points
QUESTION 4
Suppose that elementary education creates a positive externality. If the government does not subsidize education, then
the equilibrium quantity of education will be equal to the socially optimal quantity of education.
the equilibrium quantity of education will be greater than the socially optimal quantity of education.
the equilibrium quantity of education will be less than the socially optimal quantity of education.
There is not enough information to answer the question.
5 points
QUESTION 5
In recent years, the Canadian province of British Columbia has increased its carbon tax. Which of the following statements is correct?
Despite the increase in the carbon tax, emissions of greenhouse gases in British Columbia have continued to increase at a rapid rate.
Along with the increase in the carbon tax, British Columbia has decreased income-tax rates on individuals and corporations.
Few, if any, economists favor carbon taxes such as the one that British Columbia has imposed.
All of the above are correct.
5 points
QUESTION 6
Which of the following is an example of a positive externality?
Sue not catching the flu because she got a flu vaccine
Mary catching the flu from Sue because Sue did not get a flu vaccine
Mary not catching the flu from Sue because Sue got a flu vaccine
Sue catching the flu because she did not get a flu vaccine
5 points
QUESTION 7
Refer to Figure 10-7. To internalize the externality in this market, the government should
provide a subsidy for this product.
forbid production.
produce the product itself.
impose a tax on this product.
5 points
QUESTION 8
Table 11-2
Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family’s willingness to pay for each streetlight.
Number of
Streetlights
The Greene Family
The Brown Family
The Black Family
1
$340
$480
$420
2
260
380
400
3
160
260
340
4
40
130
240
5
0
50
100
6
0
0
20
Refer to Table 11-2. Suppose the cost to install each streetlight is $900. How many streetlights should the town install to maximize total surplus from the streetlights?
1 streetlight
4 streetlights
2 streetlights
3 streetlights
5 points
QUESTION 9
The national defense of the United States is not rival because
once the nation is defended, it is possible to prevent any single person from enjoying the benefit of this defense.
once the nation is defended, it is impossible to prevent any single person from enjoying the benefit of this defense.
my enjoyment of the national defense does diminish your enjoyment of the national defense of the United States.
my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States.
5 points
QUESTION 10
A cable television broadcast of a movie is
excludable and not rival in consumption.
not excludable and rival in consumption.
excludable and rival in consumption.
not excludable and not rival in consumption.
5 points
QUESTION 11
Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident’s willingness to pay for each acre of the park.
Acres
Sophia
Amber
Cedric
1
$10
$24
$6
2
8
18
5
3
6
14
4
4
3
8
3
5
1
6
2
6
0
4
1
7
0
2
0
Refer to Table 11-1. Suppose the cost to build the park is $9 per acre. How large should the park be to maximize total surplus from the park in Springfield?
3 acres
4 acres
5 acres
2 acres
5 points
QUESTION 12
What do American drivers on congested roads and Soviet shoppers waiting in line to purchase clothing have in common?
American drivers and Soviet shoppers have nothing in common.
Both the American drivers and the Soviet shoppers could avoid waiting if the prices were lowered.
Both the American drivers and the Soviet shoppers can purchase as much as they want at the market price.
Both the American drivers and the Soviet shoppers are consuming products at prices that do not represent the full costs of the products.
5 points
QUESTION 13
Table 11-4
There are four homes along Belmont Circle, which surrounds a small plot of land. The land currently has no trees, and the 4 homeowners -- Adams, Benitez, Chen, and Davis -- are considering the idea of contributing to a pool of money that will be used to plant up to 4 trees. The table represents their willingness to pay, that is, the maximum amount that each homeowner is willing to contribute toward each tree.
Adams
Benitez
Chen
Davis
$100
$115
$120
$90
50
110
110
50
20
100
80
30
10
50
40
0
Refer to Table 11-4. Suppose the cost to plant each tree is $90. How many trees should be planted to maximize the total surplus of the four homeowners?
2
1
4
3
5 points
QUESTION 14
Congressman Smith and Congresswoman Johnson both consider themselves advocates for the national parks and are introducing different bills designed to benefit the parks. Congressman Smith’s bill calls for an increase in the entrance fees. Congresswoman Johnson’s bill calls for a decrease in the entrance fees. Which of the bills would be more effective at ensuring the quality of the national parks?
Both bills would be equally effective.
Neither bill would be effective.
Congressman Smith’s bill because it will reduce the overuse of the parks
Congresswoman Johnson’s bill because more visitors means more citizens will value and care for the parks
5 points
QUESTION 15
Table 15-6
A monopolist faces the following demand curve:
Quantity
Price
1
$15
2
$12
3
$9
4
$6
5
$3
Refer to Table 15-6. What is the marginal revenue from the sale of the 4th unit?
-$3
$9
$24
$3
5 points
QUESTION 16
Refer to Figure 15-15. To maximize its profit, a monopolist would choose which of the following outcomes?
Q = 60 and P = 30
Q = 45 and P = 45
Q = 30 and P = 30
Q = 30 and P = 60
5 points
QUESTION 17
For a monopolist, when the output effect is greater than the price effect, marginal revenue is
negative.
maximized.
zero.
positive.
5 points
QUESTION 18
Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.
Price
Output
ATC
$5
0
--
$4
4
$1.00
$3
8
$0.75
$2
12
$0.75
$1
16
$0.81
$0
20
$0.90
Refer to Table 15-12. In order to maximize profits, the firm should produce
8 units of output.
12 units of output.
4 units of output.
16 units of output.
5 points
QUESTION 19
Refer to Figure 15-3. Which panel could represent the demand curve facing the soybean industry?
Panel A
Panel B
Panel C
Panel D
5 points
QUESTION 20
A monopoly market is characterized by
a Nash equilibrium.
barriers to entry.
many buyers and sellers.
“natural” products.
5 points
a.Corrective taxes fail to internalize the externality of pollution, but corrective taxes internalize that externality.
b.Neither corrective taxes nor pollution permits internalize the externality of pollution.
c.Both corrective taxes and pollution permits internalize the externality of pollution.
d.Corrective taxes internalize the externality of pollution, but pollution permits do not internalize that externality.
Explanation / Answer
Q1 is answered below.
A market in which pollution is emitted is suffering from negative externality. As a step to correct these market externalities, government has come up with different measures from time to time. These include taxes (taxing the polluters) and pollution permits (setting a pollution limit and allowing trading of permits to pollute among firms)
Both of these steps try to internalize the harm done by externality by making the polluter pay for the harm done.
Thus, correct option is: (c) Both corrective taxes and pollution permits internalize the externality of pollution.
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