经济学原理对应练习0

  Chapter10/E*ternalities

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Chapter10

E*ternalities

MultipleChoice

1. Inamarketeconomy,governmentintervention

a. willalwaysimprovemarketoutes.

b. reducesefficiencyinthepresenceofe*ternalities.

c. mayimprovemarketoutesinthepresenceofe*ternalities.

d. isnecessarytocontrolindividualgreed.

ANS:C PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Applicative

2. Intheabsenceofe*ternalities,the"invisiblehand"leadsamarkettoma*imize

a. producerprofitfromthatmarket.

b. totalbenefittosocietyfromthatmarket.

c. bothequityandefficiencyinthatmarket.

d. outputofgoodsorservicesinthatmarket.

ANS:B PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Applicative

3. Oneadvantagemarketeconomieshaveoverothertypesofeconomiesisthatmarketeconomies

a. provideanequaldistributionofgoodsandservicestoconsumers.

b. establishgovernmenteconomiccontrol.

c. solvetheproblemofscarcity.

d. aremoreefficient.

ANS:D PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Applicative

4. Thetermmarketfailurerefersto

a. amarketthatfailstoallocateresourcesefficiently.

b. anunsuccessfuladvertisingcampaignwhichreducesdemand.

c. ruthlesspetitionamongfirms.

d. afirmthatisforcedoutofbusinessbecauseoflosses.

ANS:A PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Definitional

5. Marketfailurecanbecausedby

a. toomuchpetition.

b. e*ternalities.

c. lowconsumerdemand.

d. scarcity.

ANS:B PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Interpretive

6. Ane*ternalityistheimpactof

a. society'sdecisionsonthewell-beingofsociety.

b. aperson'sactionsonthatperson'swell-being.

c. oneperson'sactionsonthewell-beingofabystander.

d. society'sdecisionsonthepoorestpersoninthesociety.

ANS:C PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Definitional

7. Theimpactofoneperson'sactionsonthewell-beingofabystanderiscalled

a. aneconomicdilemma.

b. deadweightloss.

c. amulti-partyproblem.

d. ane*ternality.

ANS:D PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Applicative

8. Ane*ternality

a. isatypeofmarketfailure.

b. causesmarketstoallocateresourcesefficiently.

c. strengthenstheroleofthe“invisiblehand〞inthemarketplace.

d. affectsproducersbutnotconsumers.

ANS:A PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Interpretive

9. Dogownersdonotbearthefullcostofthenoisetheirbarkingdogscreateandoftentaketoofewprecautionstopreventtheirdogsfrombarking.Localgovernmentsaddressthisproblemby

a. makingitillegalto"disturbthepeace."

b. havingawell-fundedanimalcontroldepartment.

c. subsidizinglocalanimalshelters.

d. encouragingpeopletoadoptcats.

ANS:A PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Applicative

10. Ane*ternalityis

a. thecoststhatpartiesincurintheprocessofagreeingandfollowingthroughonabargain.

b. theunpensatedimpactofoneperson'sactionsonthewell-beingofabystander.

c. thepropositionthatprivatepartiescanbargainwithoutcostovertheallocationofresources.

d. amarketequilibriumta*.

ANS:B PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Definitional

11. Ane*ternalityisane*ampleof

a. acorrectiveta*.

b. atradablepollutionpermit.

c. amarketfailure.

d. Bothaandbarecorrect.

ANS:C PTS:1 DIF:1 REF:10-0

TOP:E*ternalities MSC:Applicative

12. Ane*ternalitye*istswhenever

a. theeconomycanbenefitfromgovernmentintervention.

b. marketsarenotabletoreachequilibrium.

c. afirmsellsitsproductinaforeignmarket.

d. apersonengagesinanactivitythatinfluencesthewell-beingofabystanderandyetneitherpaysnorreceivespaymentforthateffect.

ANS:D PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Definitional

13. Whene*ternalitiesarepresentinamarket,thewell-beingofmarketparticipants

a. andmarketbystandersarebothdirectlyaffected.

b. andmarketbystandersarebothindirectlyaffected.

c. isdirectlyaffected,andmarketbystandersareindirectlyaffected.

d. isindirectlyaffected,andmarketbystandersaredirectlyaffected.

ANS:C PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Analytical

14. Whichofthefollowingstatementsaboutawell-maintainedyardbestconveysthegeneralnatureofthee*ternality?

a. Awell-maintainedyardconveysapositivee*ternalitybecauseitincreasesthehome'smarketvalue.

b. Awell-maintainedyardconveysanegativee*ternalitybecauseitincreasesthepropertyta*liabilityoftheowner.

c. Awell-maintainedyardconveysapositivee*ternalitybecauseitincreasesthevalueofadjacentpropertiesintheneighborhood.

d. Awell-maintainedyardcannotprovideanytypeofe*ternality.

ANS:C PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

15. Sincerestoredhistoricbuildingsconveyapositivee*ternality,localgovernmentsmaychooseto

a. regulationthedemolitionofthem.

b. provideta*breakstoownerswhorestorethem.

c. increasepropertyta*esinhistoricareas.

d. Bothaandbarecorrect.

ANS:D PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

16. E*ternalities

a. causemarketstofailtoallocateresourcesefficiently.

b. causeequilibriumpricestobetoohigh.

c. benefitproducersatthee*penseofconsumers.

d. causeequilibriumpricestobetoolow.

ANS:A PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

17. Whene*ternalitiese*ist,buyersandsellers

a. neglectthee*ternaleffectsoftheiractions,butthemarketequilibriumisstillefficient.

b. donotneglectthee*ternaleffectsoftheiractions,andthemarketequilibriumisefficient.

c. neglectthee*ternaleffectsoftheiractions,andthemarketequilibriumisnotefficient.

d. donotneglectthee*ternaleffectsoftheiractions,andthemarketequilibriumisnotefficient.

ANS:C PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

18. Dio*inemissionthatresultsfromtheproductionofpaperisagoode*ampleofanegativee*ternalitybecause

a. self-interestedpaperfirmsaregenerallyunawareofenvironmentalregulations.

b. therearefinesforproducingtoomuchdio*in.

c. self-interestedpaperproducerswillnotconsiderthefullcostofthedio*inpollutiontheycreate.

d. to*icemissionsarethebeste*ampleofane*ternality.

ANS:C PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

19. Ifapapermanufacturerdoesnotbeartheentirecostofthedio*initemits,itwill

a. emitalowerlevelofdio*inthanissociallyefficient.

b. emitahigherlevelofdio*inthanissociallyefficient.

c. emitanacceptablelevelofdio*in.

d. notemitanydio*ininanattempttoavoidpayingtheentirecost.

ANS:B PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

20. OneoftheTenPrinciplesofEconomicsisthat"marketsareusuallyagoodwaytoorganizemarketbehavior."Thisstatementdoesnotimplywhichofthefollowing?

a. Somemarketsproducenegativee*ternalities.

b. Theinvisiblehandofthemarketplacedoesnotalwaysleadbuyersandsellerstoma*imizetotalbenefittosociety.

c. Somemarketsarecharacterizedbymarketfailure.

d. Othertypesofeconomiesaremoreefficientthanmarketeconomies.

ANS:D PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Interpretive

21. Whichofthefollowingisane*ampleofane*ternality?

a. cigarettesmokethatpermeatesanentirerestaurant

b. aflushotthatpreventsastudentfromtransmittingthevirustoherroommate

c. abeautifulflowergardenoutsideofthelocalpostoffice

d. Alloftheabovearecorrect.

ANS:D PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

22. Whichofthefollowingstatementsisnotcorrect?

a. Governmentpoliciesmayimprovethemarket'sallocationofresourceswhennegativee*ternalitiesarepresent.

b. Governmentpoliciesmayimprovethemarket'sallocationofresourceswhenpositivee*ternalitiesarepresent.

c. Apositivee*ternalityisane*ampleofamarketfailure.

d. Withoutgovernmentintervention,themarketwilltendtoundersupplyproductsthatproducenegativee*ternalities.

ANS:D PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Interpretive

23. Whichofthefollowingrepresentsawaythatagovernmentcanhelptheprivatemarkettointernalizeane*ternality?

a. ta*inggoodsthathavenegativee*ternalities

b. subsidizinggoodsthathavepositivee*ternalities

c. Thegovernmentcannotimproveupontheoutesofprivatemarkets.

d. Bothaandbarecorrect.

ANS:D PTS:1 DIF:2 REF:10-0

TOP:E*ternalities MSC:Applicative

24. Whene*ternalitiesarepresentinamarket,

a. themarketequilibriumma*imizesthetotalbenefittosocietyasawhole.

b. participantslosesomemarketbenefitstobystanders.

c. firmsproducetoomuchoutput.

d. themarketfailstoallocateresourcesefficiently.

ANS:D PTS:1 DIF:2 REF:10-0|10-1

TOP:E*ternalities MSC:Applicative

25. Ifane*ternalityispresentinamarket,economicefficiencymaybeenhancedby

a. increasedpetition.

b. weakeningpropertyrights.

c. betterinformedmarketparticipants.

d. governmentintervention.

ANS:D PTS:1 DIF:1 REF:10-1

TOP:E*ternalities MSC:Applicative

26. Ifasawmillcreatestoomuchnoiseforlocalresidents,

a. noiserestrictionswillforceresidentstomoveoutofthearea.

b. asenseofsocialresponsibilitywillcauseownersofthemilltoreducenoiselevels.

c. thegovernmentcanraiseeconomicwell-beingthroughnoise-controlregulations.

d. thegovernmentshouldavoidinterveningbecausethemarketwillallocateresourcesefficiently.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

27. Privatemarketsfailtoaccountfore*ternalitiesbecause

a. e*ternalitiesdon'toccurinprivatemarkets.

b. sellersincludecostsassociatedwithe*ternalitiesinthepriceoftheirproduct.

c. decisionmakersinthemarketfailtoincludethecostsoftheirbehaviortothirdparties.

d. thegovernmentcannoteasilyestimatetheoptimalquantityofpollution.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

28. Whenthegovernmentintervenesinmarketswithe*ternalities,itdoessoinorderto

a. increaseproductionwhennegativee*ternalitiesarepresent.

b. protecttheinterestsofbystanders.

c. makecertainallbenefitsarereceivedbymarketparticipants.

d. reduceproductionwhenpositivee*ternalitiesarepresent.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

29. Researchintonewtechnologies

a. providespositivee*ternalitiesbecauseitcreatesknowledgeotherscanuse.

b. resultsinnegativee*ternalitiesbecausegovernmentfundingforresearchcauseslessgovernmentspendinginotherareas.

c. isprotectedbypatentlaws,whicheliminatestheneedforgovernmentintervention.

d. shouldonlybefundedbythecorporationsthatwillreceivetheprofitsfromtheresearch.

ANS:A PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

30. Atanygivenquantity,thewillingnesstopayinthemarketforgasolineisreflectedinthe

a. heightofthedemandcurveatthatquantity.

b. heightofthesupplycurveatthatquantity.

c. valuetotheproducerofthelastunitofgasolinesold.

d. totalquantityofgasolinee*changedinthemarket.

ANS:A PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

31. Thesupplycurveforaproductreflectsthe

a. willingnesstopayofthemarginalbuyer.

b. quantitybuyerswillultimatelypurchaseoftheproduct.

c. costtosellersofproducingtheproduct.

d. seller'sprofitfromproducingtheproduct.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

32. Withoutgovernmentintervention,themarketequilibriumfororangeswill

a. ma*imizethesumofproducerandconsumersurplusinthemarket.

b. bebothefficientandequitable.

c. beequitablebutnotefficient.

d. beneitherefficientnorequitable.

ANS:A PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

33. Sinceairpollutioncreatesanegativee*ternality,

a. socialwelfarewillbeenhancedwhensome,butnotallairpollutioniseliminated.

b. socialwelfareisoptimalwhenallairpollutioniseliminated.

c. governmentsshouldencourageprivatefirmstoconsideronlyprivatecosts.

d. thefreemarketresultma*imizessocialwelfare.

ANS:A PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

34. Thedifferencebetweensocialcostandprivatecostisameasureofthe

a. lossinprofittothesellerastheresultofanegativee*ternality.

b. costofane*ternality.

c. costreductionwhenthenegativee*ternalityiseliminated.

d. costincurredbythegovernmentwhenitintervenesinthemarket.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

35. Whichofthefollowingstatementsiscorrect?

a. Governmentshouldta*goodswitheitherpositiveornegativee*ternalities.

b. Governmentshouldta*goodswithnegativee*ternalitiesandsubsidizegoodswithpositivee*ternalities.

c. Governmentshouldsubsidizegoodswitheitherpositiveornegativee*ternalities.

d. Governmentshouldta*goodswithpositivee*ternalitiesandsubsidizegoodswithnegativee*ternalities.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

36. Whenamarketischaracterizedbyane*ternality,thegovernment

a. cancorrectthemarketfailureonlyinthecaseofpositivee*ternalities.

b. cancorrectthemarketfailureonlyinthecaseofnegativee*ternalities.

c. cancorrectthemarketfailureinthecaseofbothpositiveandnegativee*ternalitiesbyinducingmarketparticipantstointernalizethee*ternality.

d. cannotcorrectfore*ternalitiesduetothee*istenceofpatents.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Interpretive

Figure10-1

37. RefertoFigure10-1.Thisgraphrepresentsthetobaccoindustry.Theindustrycreates

a. positivee*ternalities.

b. negativee*ternalities.

c. noe*ternalities.

d. noequilibriuminthemarket.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

38. RefertoFigure10-1.Thisgraphrepresentsthetobaccoindustry.Withoutanygovernmentintervention,theequilibriumpriceandquantityare

a. $1.90and38units,respectively.

b. $1.80and35units,respectively.

c. $1.60and42units,respectively.

d. $1.35and58units,respectively.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

39. RefertoFigure10-1.Thisgraphrepresentsthetobaccoindustry.Thesociallyoptimalpriceandquantityare

a. $1.90and38units,respectively.

b. $1.80and35units,respectively.

c. $1.60and42units,respectively.

d. $1.35and58units,respectively.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:E*ternalities MSC:Applicative

40. RefertoFigure10-1.Thisgraphrepresentsthetobaccoindustry.Ifthegovernmentusesapollutionta*,howmuchofata*mustbeimposedoneachunitofproduction?

a. $1.90

b. $1.80

c. $1.60

d. $0.30

ANS:D PTS:1 DIF:3 REF:10-3

TOP:Correctiveta*es MSC:Analytical

41. RefertoFigure10-1.Thisgraphrepresentsthetobaccoindustry.Ifthegovernmentusesapollutionta*,howmuchta*revenuewillthegovernmentreceive?

a. $7.00

b. $10.50

c. $63.00

d. $67.20

ANS:B PTS:1 DIF:3 REF:10-3

TOP:Correctiveta*es MSC:Analytical

Figure10-2

42. RefertoFigure10-2.Supposethattheproductionofsoccerballscreatesasocialcostwhichisdepictedinthegraphabove.Withoutanygovernmentregulation,howmanysoccerballswillbeproduced?

a. 3

b. 10

c. 25

d. 50

ANS:D PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

43. RefertoFigure10-2.Supposethattheproductionofsoccerballscreatesasocialcostwhichisdepictedinthegraphabove.Withoutanygovernmentregulation,whatpricewillthefirmchargepersoccerball?

a. $3

b. $5.50

c. $7.50

d. $10

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

44. RefertoFigure10-2.Assumetheproductionoftheproductshownbythegraphimposesacostonsocietyof$7.00perunit.Ifthefreemarketequilibriumoutputis50units,thegovernmentshould

a. imposeata*of$2.50perunit.

b. increasetheoutputofthefirmby25units.

c. imposealump-sumta*of$350perperiod.

d. imposeata*of$7.00perunit.

ANS:D PTS:1 DIF:2 REF:10-3

TOP:Correctiveta*es MSC:Analytical

45. RefertoFigure10-2.Supposethattheproductionofsoccerballscreatesasocialcostwhichisdepictedinthegraphabove.Ifthegovernmentwantedtoforcethefirmtointernalizethecostofthee*ternality,whatactionshouldittake?

a. Imposeata*of$7.50persoccerball.

b. Imposeata*of$7persoccerball.

c. Offerasubsidyof$3persoccerball.

d. Offerasubsidyof$2.50persoccerball.

ANS:B PTS:1 DIF:2 REF:10-3

TOP:Correctiveta*es MSC:Analytical

Thisfigurereflectsthemarketforoutdoorconcertsinapublicparksurroundedbyresidentialneighborhoods.

Figure10-3

46. RefertoFigure10-3.Thesocialcostcurveisabovethesupplycurvebecause

a. ittakesintoaccountthee*ternalcostsimposedonsocietybytheconcert.

b. ittakesintoaccounttheeffectoflocalnoiserestrictionsonconcertsinparkssurroundedbyresidentialneighborhoods.

c. concertticketsarelikelytocostmorethantheconcertactuallycoststheorganizers.

d. residentsinthesurroundingneighborhoodsgettolistentotheconcertforfree.

ANS:A PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

47. RefertoFigure10-3.Thedifferencebetweenthesocialcostcurveandthesupplycurvereflectsthe

a. profitmarginofeachconcert.

b. costofspillovereffectsfromtheconcert(e.g.,noiseandtraffic).

c. valueofconcertstosocietyasawhole.

d. amountbywhichthecityshouldsubsidizetheconcertorganizers.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

48. RefertoFigure10-3.Attheprivatemarketoute,theequilibriumpricewillbe

a. P0.

b. P1.

c. P2.

d. Noneoftheaboveiscorrect.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

49. RefertoFigure10-3.Whatpriceandquantitybinationbestrepresentstheoptimumpriceandnumberofconcertsthatshouldbeorganized?

a. P1,Q1

b. P2,Q0

c. P2,Q1

d. Theoptimumquantityiszeroconcertsaslongasresidentsinsurroundingneighborhoodsareadverselyaffectedbynoiseandcongestion.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

50. RefertoFigure10-3.Assumethattheconcertorganizersmustpurchaseaconcertpermitbeforeorganizingtheconcertandthatthecostforthepermitisincludedintheprivatecostcurve.Whatcriteriashouldthecityuseindeterminingwhetherornottoissueapermit?

a. Themajorityvoteoftheresidentsinsurroundingneighborhoodsshoulddeterminewhetherapermitisissued.

b. Aslongasthevaluetoconsumersofconcertse*ceedsthecostofconcerts,includingthee*ternalcosts,thepermitshouldbeissued.

c. Aslongasconcertorganizersarewillingtoreturntheparktoitsoriginalconditionaftertheconcert,thepermitshouldbeissued.

d. Thepermitshouldnotbeissuedaslongasthereareidentifiablee*ternalcostsimposedonresidentsinsurroundingneighborhoods.

ANS:B PTS:1 DIF:3 REF:10-1

TOP:Negativee*ternalities MSC:Interpretive

Figure10-4

51. RefertoFigure10-4.IfthismarketiscurrentlyproducingatQ1,thentotaleconomicwell-beingwouldincreaseifoutput

a. increasedtoQ2.

b. increasedtoQ3.

c. increasedtoQ4.

d. stayedatQ1.

ANS:A PTS:1 DIF:1 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

52. RefertoFigure10-4.Thismarketischaracterizedby

a. governmentintervention.

b. apositivee*ternality.

c. anegativee*ternality.

d. Noneoftheaboveiscorrect.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

53. RefertoFigure10-4.Withoutgovernmentintervention,theequilibriumquantitywouldbe

a. Q1.

b. Q2.

c. Q3.

d. Q4.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

54. RefertoFigure10-4.Thesociallyoptimalquantitywouldbe

a. Q1.

b. Q2.

c. Q3.

d. Q4.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

55. RefertoFigure10-4.Thismarket

a. hasnoneedforgovernmentintervention.

b. wouldbenefitfromata*ontheproduct.

c. wouldbenefitfromasubsidyfortheproduct.

d. wouldma*imizetotalwell-beingatQ3.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

56. RefertoFigure10-4.IfthismarketiscurrentlyproducingatQ4,thentotaleconomicwell-beingwouldincreaseifoutput

a. increasedbeyondQ4.

b. decreasedtoQ2.

c. decreasedtozero.

d. stayedatQ4.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

57. RefertoFigure10-4.Ifalle*ternalcostswereinternalized,thenthemarket’sequilibriumoutputwouldbe

a. Q1.

b. Q2.

c. Q3.

d. Q4.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

58. RefertoFigure10-4.IfthismarketcurrentlyproducesQ2,totaleconomicwell-beingwouldbema*imizedif

a. productiondecreasedtoQ1.

b. productionincreasedtoQ3.

c. thisproductwerenolongerproduced.

d. outputstayedatQ2.

ANS:D PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

59. RefertoFigure10-4.E*ternalitiesinthismarketcouldbeinternalizedif

a. therewereata*ontheproduct.

b. therewereasubsidyfortheproduct.

c. productionwerestopped.

d. theCoasetheoremfailed.

ANS:A PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

60. RefertoFigure10-4.AtQ3

a. themarginalconsumervaluesthisproductlessthanthesocialcostofproducingit.

b. everyconsumervaluesthisproductlessthanthesocialcostofproducingit.

c. thecosttosocietyisequaltothevaluetosociety.

d. themarginalconsumervaluesthisproductmorethantheprivatecost.

ANS:A PTS:1 DIF:3 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

61. RefertoFigure10-4.IfthismarketcurrentlyproducesQ3,totaleconomicwell-beingwouldbeincreasedif

a. productiondecreasedtoQ2.

b. productionincreasedtoQ4.

c. thisproductwerenolongerproduced.

d. outputstayedatQ3.

ANS:A PTS:1 DIF:3 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

Figure10-5

62. RefertoFigure10-5.Whichpriceandquantitybinationrepresentsthesocialoptimum?

a. P0andQ1.

b. P2andQ1.

c. P1andQ0.

d. P2andQ0.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

63. RefertoFigure10-5.Whichofthefollowingstatementsiscorrect?

a. Themarginalbenefitofthepositivee*ternalityismeasuredbyP3-P1.

b. Themarginalcostofthenegativee*ternalityismeasuredbyP3-P2.

c. Themarginalcostofthenegativee*ternalityismeasuredbyP3-P1.

d. Themarginalcostofthenegativee*ternalityismeasuredbyP3-P0.

ANS:C PTS:1 DIF:3 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

64. Negativee*ternalitiesoccurwhenoneperson'sactions

a. causeanotherpersontolosemoneyinastockmarkettransaction.

b. causehisorheremployertolosebusiness.

c. revealhisorherpreferenceforforeign-producedgoods.

d. adverselyaffectthewell-beingofabystanderwhoisnotpartytotheaction.

ANS:D PTS:1 DIF:1 REF:10-1

TOP:Negativee*ternalities MSC:Definitional

65. Anegativee*ternality

a. isanadverseimpactonabystander.

b. causestheproductinamarkettobeunder-produced.

c. isanadverseimpactonmarketparticipants.

d. ispresentinmarketswherethegoodorserviceisundesirableforsociety.

ANS:A PTS:1 DIF:1 REF:10-1

TOP:Negativee*ternalities MSC:Definitional

66. Apositivee*ternality

a. causestheproducttobeoverproduced.

b. providesanadditionalbenefittomarketparticipants.

c. benefitsconsumersbecauseitresultsinalowerequilibriumprice.

d. isabenefittoamarketbystander.

ANS:D PTS:1 DIF:1 REF:10-1

TOP:Positivee*ternalities MSC:Definitional

67. Whichofthefollowingillustratestheconceptofanegativee*ternality?

a. Acollegeprofessorplaysavigorousgameofracquetballwiththeracquetherecentlypurchased.

b. Afloodwipesoutafarmer'scorncrop.

c. Acollegestudentplaysloudmusiconhisnewstereosystemat2:00a.m.

d. Ajanitoreatsahamburgerduringhislunchbreak.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Applicative

68. Whenanegativee*ternalitye*istsinamarket,thecosttoproducers

a. isgreaterthanthecosttosociety.

b. willbethesameasthecosttosociety.

c. willbelessthanthecosttosociety.

d. willdifferfromthecosttosociety,regardlessofwhetherane*ternalityispresent.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

69. Whennegativee*ternalitiesarepresentinamarket

a. privatecostswillbegreaterthansocialcosts.

b. socialcostswillbegreaterthanprivatecosts.

c. onlygovernmentregulationwillsolvetheproblem.

d. themarketwillnotbeabletoreachanyequilibrium.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

70. Supposethatlarge-scaleporkproductionhasthepotentialtocreategroundwaterpollution.Whymightthistypeofpollutionbeconsideredane*ternality?

a. Thegroundwaterpollutionreducesthecostoflarge-scaleporkproduction.

b. Theeconomicimpactofalarge-scaleporkproductionfacilityislocalizedinasmallgeographicarea.

c. Thepollutionhasthepotentialforcreatingahealthriskforwaterusersintheregionsurroundingtheporkproductionfacility.

d. Consumerswillnotreapthebenefitsoflowerproductioncostfromlarge-scaleporkproduction.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

71. Marketsareofteninefficientwhennegativee*ternalitiesarepresentbecause

a. privatecostse*ceedsocialcostsattheprivatemarketsolution.

b. e*ternalitiescannotbecorrectedwithoutgovernmentregulation.

c. socialcostse*ceedprivatecostsattheprivatemarketsolution.

d. productione*ternalitiesleadtoconsumptione*ternalities.

ANS:C PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

72. Whenthesocialcostcurveisaboveaproduct'ssupplycurve,

a. thegovernmenthasintervenedinthemarket.

b. anegativee*ternalitye*istsinthemarket.

c. apositivee*ternalitye*istsinthemarket.

d. thedistributionofresourcesisunfair.

ANS:B PTS:1 DIF:2 REF:10-1

TOP:Negativee*ternalities MSC:Analytical

73. Supposethatasteelfactoryemitsacertainamountofairpollution,whichconstitutesanegativee*ternality.Ifthemarketdoesnotinternalizethee*ternality,

a. thesupplycurvewouldadequatelyreflectthemarginalsoci