Deck 16: Externalities

Question 1

Air pollution generated by a paper mill factory is an example of a

A)positive production externality.
B)positive consumption externality.
C)negative consumption externality.
D)marginal external benefit.
E)negative production externality.

Answer 1

E

Question 2

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then

A)the quantity produced is efficient but price is too low.
B)the quantity produced is less than the efficient quantity.
C)the quantity produced is greater than the efficient quantity.
D)the quantity produced is efficient but the price is too high.
E)the externality is eliminated.

Answer 2

C

Question 3

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then the price is

A)P₁.
B)P₄.
C)below P₁.
D)P₂.
E)P₃.

Answer 3

D

Question 4

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then at the equilibrium output the marginal social cost of production is

A)less than the marginal benefit to consumers.
B)greater than the marginal benefit to consumers.
C)equal to the marginal benefit to consumers.
D)equal to the marginal private cost of production.
E)less than the marginal private cost of production.

Question 5

Smoking tobacco creates a ________ externality.

A)negative consumption
B)negative production
C)positive consumption
D)positive production
E)marginal

Question 6

An externality is defined as

A)an additional cost imposed by the government on producers.
B)an additional gain received by consumers from decisions made by the government.
C)a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer.
D)a marginal social cost.
E)the additional amount consumers have to pay to consume an additional amount of a good or service.

Question 7

Which of the following illustrates the concept of external cost?

A)Bad weather reduces the size of the wheat crop.
B)A reduction in the size of the wheat crop causes income of wheat farmers to fall.
C)Smoking harms the health of the smoker.
D)Smoking harms the health of nearby nonsmokers.
E)Public health services reduce the transmission of disease.

Question 8

An externality is a cost or benefit arising from an economic activity that falls on

A)consumers but not producers.
B)producers but not consumers.
C)consumers or producers.
D)someone other than consumers or producers.
E)foreigners.

Question 9

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.To promote an efficient allocation of resources, the government could impose a constant per unit tax equal to

A)zero.
B)P₁.
C)P₃ - P₁.
D)P₄ - P₁.
E)P₃ - P₂.

Question 10

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If a constant per unit tax is imposed that generates an efficient allocation of resources, then consumers pay a per unit price of

A)zero.
B)P₁.
C)P₂.
D)P₃.
E)P₄.

Question 11

If the marginal private cost of producing one kilowatt of power in British Columbia equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt.

A)five cents
B)nine cents
C)four cents
D)fourteen cents
E)forty-five cents

Question 12

A homeowner planting an attractive garden in front of his house creates ________. A bakery baking bread creates ________.

A)no externality; a positive production externality
B)a positive consumption externality; no externality
C)no externality; no externality
D)a positive consumption externality; a positive production externality
E)a positive production externality; no externality

Question 13

An example of an activity that creates a positive consumption externality is

A)logging, which pollutes rivers.
B)locating beehives next to an orange orchard.
C)smoking, which harms the health of a bystander.
D)a flu vaccination.
E)a noisy party.

Question 14

An example of an activity that creates a negative consumption externality is

A)logging, which pollutes rivers.
B)locating beehives next to an orange orchard.
C)smoking, which harms the health of a bystander.
D)a flu vaccination.
E)a sales tax.

Question 15

A well-maintained waterfront property that is enjoyed by other property owners is an example of

A)an inefficient allocation of resources.
B)a negative consumption externality.
C)a positive consumption externality.
D)a negative production externality.
E)a positive production externality.

Question 16

A private cost of production is a cost that is borne by the ________ of a good or service. A social cost of production is a cost that is ________.

A)consumer; borne by the producer and by everyone else on whom the cost falls
B)consumer; not borne by the producer but borne by other people
C)producer; not borne by the producer but borne by other people
D)producer; borne by the producer and by everyone else on whom the cost falls
E)producer; borne by the consumer

Question 17

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If the market is unregulated, then the quantity produced is

A)zero.
B)Q₁.
C)Q₂.
D)Q₃.
E)too low.

Question 18

An externality is

A)the amount by which price exceeds marginal private cost.
B)the amount by which price exceeds marginal social cost.
C)the effect of government regulation on market price and output.
D)someone who consumes a good without paying for it.
E)a cost or benefit that arises from an activity but affects people not part of the original activity.

Question 19

A person driving while talking on a cellphone creates ________.A beautiful sunset creates ________.

A)a negative production externality; a positive consumption externality
B)a negative production externality; no externality
C)a negative consumption externality; a positive consumption externality
D)a negative consumption externality; no externality
E)a negative consumption externality; a positive production externality

Question 20

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If a constant per unit tax is imposed that generates an efficient allocation of resources, then the quantity produced is

A)zero.
B)Q₁.
C)Q₂.
D)Q₃.
E)greater than Q₃.

Question 21

When an additional unit of output is produced, the extra cost to society is the

A)average total cost.
B)marginal social cost.
C)marginal private cost.
D)marginal external cost.
E)marginal damage.

Question 22

In the absence of government intervention, a profit-maximizing firm producing a good with an external cost will produce a quantity at which

A)price is greater than marginal private cost.
B)price is less than marginal revenue.
C)price is less than marginal private cost.
D)price equals marginal private cost.
E)marginal revenue equals marginal social cost.

Question 23

Use the table below to answer the following questions.
Table 16.2.2
Chemical Fertilizer Market

Refer to Table 16.2.2.Fertilizer has a marginal

A)external cost of $100 a tonne.
B)social cost of $100 a tonne.
C)external cost of $30 a tonne.
D)private cost of $30 a tonne.
E)external cost of $0.

Question 24

A battery acid producer pollutes the water upstream from the Polar Bear Club, a swimming club.If transactions costs are low, the quantity of pollution will be efficient

A)only if Ronald Coase is a member of the Polar Bear Club.
B)only if Ronald Coase is not a member of the Polar Bear Club.
C)only if water property rights are assigned to the producer.
D)only if water property rights are assigned to the Polar Bear Club.
E)if water property rights are assigned either to the producer or to the Polar Bear Club.

Question 25

Means of coping with negative externalities include all of the following except

A)implementing abatement technology.
B)patents.
C)property rights.
D)Pigovian taxes.
E)cap-and-trade.

Question 26

Use the figure below to answer the following questions.

Figure 16.2.2
Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.What is the efficient quantity of good A?

A)0 units
B)5 units
C)6 units
D)8 units
E)impossible to determine without additional information

Question 27

Use the figure below to answer the following questions.

Figure 16.2.2
Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.Production of the 6th unit of output generates a marginal external

A)cost of $1.50.
B)cost of $3.
C)cost of $6.
D)benefit of $3.
E)benefit of $6.

Question 28

Use the table below to answer the following questions.
Table 16.2.1

Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.Under these circumstances,

A)there are positive externalities in this market.
B)there are negative externalities in this market, equal to $10 per unit.
C)there are no externalities in this market.
D)not enough information is provided to determine whether or not there are externalities.
E)there are negative externalities in this market, equal to $20 per unit.

Question 29

Use the table below to answer the following questions.
Table 16.2.2
Chemical Fertilizer Market

Refer to Table 16.2.2.If the fertilizer market is perfectly competitive and unregulated, output (in tonnes)is

A)1.
B)2.
C)3.
D)4.
E)5.

Question 30

Use the table below to answer the following questions.
Table 16.2.1

Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.Assume the market is perfectly competitive.If the market is unregulated, the marginal

A)social cost equals the marginal private benefit.
B)private cost is less than the marginal social benefit.
C)private cost equals the marginal social benefit.
D)social cost equals the marginal private cost.
E)private cost is greater than the marginal social benefit.

Question 31

Use the table below to answer the following questions.
Table 16.2.1

Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.If the market is unregulated, the quantity produced is

A)1 unit.
B)2 units.
C)3 units.
D)4 units.
E)5 units.

Question 32

The Coase theorem states that

A)patents and copyrights will solve the problem of external costs.
B)taxes will solve the problem of external costs.
C)global warming is hard to solve due to the prisoners' dilemma aspect of the problem.
D)property rights are social arrangements governing ownership, use and disposal of factors of production and goods and services.
E)if property rights are established, and if only a small number of parties are involved, and if transactions costs are low, then private transactions are efficient.

Question 33

Use the table below to answer the following questions.
Table 16.2.1

Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.If the market is unregulated

A)the quantity produced is the efficient quantity.
B)the quantity produced is greater than the efficient quantity.
C)the quantity produced is less than the efficient quantity.
D)marginal external cost is maximized.
E)production is technologically inefficient.

Question 34

Use the figure below to answer the following questions.

Figure 16.2.1
Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If a constant per unit tax is imposed that generates an efficient allocation of resources, then producers receive a per unit price of

A)zero.
B)P₄.
C)P₃.
D)P₂.
E)P₁.

Question 35

Use the table below to answer the following questions.
Table 16.2.2
Chemical Fertilizer Market

Refer to Table 16.2.2.The efficient output of fertilizer is

A)1 tonne.
B)2 tonnes.
C)3 tonnes.
D)4 tonnes.
E)5 tonnes.

Question 36

Effective strategies for addressing the problem of negative externalities include

A)taxing the profit of polluting companies at twice the rate of non-polluting companies.
B)imposing taxes on the activity that generates the pollution.
C)stressing the use of renewable resources.
D)imposing recycling laws.
E)closing down a polluting industry.

Question 37

Use the figure below to answer the following questions.

Figure 16.2.2
Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A.How many units of good A are produced in an unregulated market?

A)0 units
B)5 units
C)6 units
D)8 units
E)9 units

Question 38

Which one of the following is a means of coping with a negative externality?

A)emission subsidies
B)patents
C)vouchers
D)Pigovian taxes
E)copyrights

Question 39

Use the table below to answer the following questions.
Table 16.2.1

Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.If the government decides to correct the externality problem, it could

A)subsidize production by $20 per unit.
B)subsidize production by $10 per unit.
C)provide the good itself.
D)tax production by $10 per unit.
E)tax production by $20 per unit.

Question 40

Use the table below to answer the following questions.
Table 16.2.1

Refer to Table 16.2.1.Given in the table are the marginal private cost and the marginal social cost of the production of chemical fertilizer and the marginal social benefit from the consumption of fertilizer.If the market is unregulated, the market price is

A)$10 a unit.
B)$20 a unit.
C)$30 a unit.
D)$40 a unit.
E)$50 a unit.

Question 41

If the production of a good creates pollution, then the

A)marginal social benefit curve lies above the marginal private benefit curve.
B)marginal social cost curve lies above the marginal private cost curve.
C)marginal social benefit curve lies below the marginal private benefit curve.
D)marginal social cost curve lies below the marginal private cost curve.
E)marginal social benefit curve intersects the marginal private cost curve at the efficient quantity.

Question 42

Betty and Anna work at the same office in Calgary.They both must attend a meeting in Edmonton, and they have decided to drive to the meeting together.Betty is a cigarette smoker and her marginal benefit from smoking one package of cigarettes a day is $40.Cigarettes are $6 a pack.Anna dislikes cigarette smoke and her marginal benefit from a smoke-free environment is $50 a day.If Betty drives her car with Anna as a passenger, ________.If Anna drives her car with Betty as a passenger, ________.

A)Anna will offer Betty an amount between $34 and $50 and Betty will not smoke; Betty does not smoke because Betty will not offer Anna a high enough price to be allowed to smoke.
B)Betty will smoke because she owns the property rights in the car; Betty does not smoke because Betty will not offer Anna a high enough price to be allowed to smoke.
C)Betty will smoke because she owns the property rights in the car; Betty will offer Anna $51 and Betty will smoke.
D)Anna will offer Betty an amount between $34 and $50 and Betty will not smoke; Betty will offer Anna $51 and Betty will smoke.
E)Betty will smoke because she is the car owner; Betty will offer Anna an amount between $34 and $50 and Betty will smoke.

Question 43

The Coase theorem will apply only when

A)an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality.
B)transactions cost are low.
C)the market is perfectly competitive.
D)the courts can be used to determine the amount of compensation that must be made to the damaged party.
E)the amount of compensation that must be made to the damaged party is small.

Question 44

One way to solve negative externality problems is

A)to organize a limited boycott of the products.
B)subsidize the externalities.
C)eliminate transactions costs when property rights are not legally established.
D)issue pollution permits to polluting firms and establish a system of cap-and-trade.
E)establish and enforce patents and copyrights.

Question 45

If negative externalities exist, then in a market with no property rights,

A)

Question 46

When the production of a good has an external cost, the

A)marginal social cost curve lies below the marginal private cost curve.
B)marginal social benefit curve lies above the marginal private benefit curve.
C)equilibrium quantity in an unregulated, competitive market has a marginal social cost greater than the marginal social benefit.
D)equilibrium quantity in an unregulated, competitive market has a marginal social cost less than the marginal social benefit.
E)good should not be produced.

Question 47

Use the table below to answer the following questions.
Table 16.2.2
Chemical Fertilizer Market

Refer to Table 16.2.2.The Pigovian tax that achieves the efficient quantity of output is

A)$0.
B)$10 a tonne.
C)$20 a tonne.
D)$30 a tonne.
E)$40 a tonne.

Question 48

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day, and allowing trading.This is an example of

A)cap-and-trade.
B)emission charges.
C)the Coase theorem.
D)a pollution tax.
E)a voucher.

Question 49

Pollution occurs when lumber is produced.If the lumber market is unregulated, there would be

A)overproduction of lumber compared to the efficient amount.
B)underproduction of lumber compared to the efficient amount.
C)sometimes overproduction and sometimes underproduction of lumber compared to the efficient amount.
D)an external benefit from producing lumber.
E)no deadweight loss from production.

Question 50

The Coase theorem tells us that in the presence of external costs in production,

A)the government must intervene in the market to assure that the efficient level of output is produced.
B)private parties can negotiate to produce the good at a level where marginal willingness to pay for the good by consumers is zero.
C)private parties can never arrive at the efficient solution.
D)then under certain conditions, private parties can arrive at the efficient solution without government involvement.
E)and if transactions costs are high, then only the private sector will be able to produce the efficient amount of the good.

Question 51

The marginal private cost curve (MC)is a positively-sloped straight line starting at the origin.If marginal external cost increases as output increases, then the marginal social cost curve is a positively-sloped straight line

A)parallel to and above the MC curve.
B)parallel to and below the MC curve.
C)starting at the origin, above the MC curve, and with a slope greater than the MC curve.
D)starting at the origin, below the MC curve, and with a slope less than the MC curve.
E)starting above the origin, with a slope less than the MC curve.

Question 52

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then

A)a competitive, unregulated market produces less than the efficient quantity of Good A.
B)a competitive, unregulated market produces the efficient quantity of Good A.
C)a competitive, unregulated market produces more than the efficient quantity of Good A.
D)the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.
E)a competitive, unregulated market does not create a deadweight loss.

Question 53

According to the Coase theorem, if transactions costs are low and property rights exist,

A)negative externalities cause deadweight losses.
B)positive externalities cause deadweight losses.
C)private transactions are efficient.
D)public transactions are efficient.
E)the efficient level of pollution will be zero.

Question 54

Use the figure below to answer the following questions.

Figure 16.2.3
Refer to Figure 16.2.3.The unregulated outcome in the paper market is

A)a quantity of 40 tonnes and a price of $11 a tonne.
B)a quantity of 40 tonnes and a price of $13 a tonne.
C)a quantity of 50 tonnes and a price of $12 a tonne.
D)a quantity of 50 tonnes and a price of $14 a tonne.
E)a quantity of 60 tonnes and a price of $13 a tonne.

Question 55

Use the table below to answer the following question.
Table 16.2.3

Refer to Table 16.2.3.The first two columns of the table show the demand schedule for electricity from a coal burning utility; the second and third columns show the utility's cost of producing electricity. The marginal external cost of the pollution created is equal to the marginal cost.
Suppose the government levies a pollution tax such that the utility generates the efficient quantity of electricity.The pollution tax is ________ cents a kilowatt hour.

A)2
B)4
C)6
D)8
E)10

Question 56

The Coase theorem applies when transactions costs are

A)low and property rights exist.
B)low and property rights do not exist.
C)high and property rights exist.
D)high and property rights do not exist.
E)low and there are no externalities.

Question 57

Use the figure below to answer the following questions.

Figure 16.2.3
Refer to Figure 16.2.3.In this market there is a marginal external

A)cost of $14 a tonne.
B)cost of $12 a tonne.
C)cost of $2 a tonne.
D)benefit of $2 a tonne.
E)benefit of $12 a tonne.

Question 58

Use the figure below to answer the following questions.

Figure 16.2.3
Refer to Figure 16.2.3.A tax of ________ per tonne is necessary to achieve the efficient output of ________ tonnes of paper.

A)$14; 50
B)$14; 30
C)$13; 40
D)$2; 50
E)$2; 40

Question 59

A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?

A)Market forces determine both the demand for pollution permits and their supply.
B)Public choice determines both the demand for pollution permits and their supply.
C)Market forces determine the demand for pollution permits, and property rights determine their supply.
D)Property rights determine the demand for pollution permits, and the government determines their supply.
E)Market forces determine the demand for marketable permits, and the government determines their supply.

Question 60

Consider some type of industrial pollution that generates air pollution.This industry, if left unregulated, will produce

A)more than the efficient level because they will ignore the marginal external costs.
B)the efficient level of output.
C)less than the efficient level because they will ignore the marginal external costs.
D)less than the efficient level because they will ignore the marginal external benefits.
E)more than the efficient level because they will ignore the marginal external benefits.

Question 61

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then

A)the quantity produced is less than the efficient quantity.
B)the quantity produced is greater than the efficient quantity.
C)price is greater than marginal social benefit quantity.
D)the marginal cost curve is horizontal.
E)the quantity produced is zero.

Question 62

A chemical factory and a fishing club share a lake.Producing chemicals creates water pollution that harms the fish.Initially the lake is owned by no one.Keeping in mind the Coase theorem, suppose transactions costs are low and the chemical factory is given ownership of the lake.Compared to the situation with no property rights, the quantity of chemicals produced

A)decreases.
B)stays the same.
C)increases.
D)changes but the direction of the change is unknown.
E)decreases only if the marginal external benefit decreases.

Question 63

Environment Canada was created in

A)1971.
B)1961.
C)1981.
D)1991.
E)2001.

Question 64

Use the table below to answer the following questions.
Table 16.3.1

Refer to Table 16.3.1.The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer.Choose the correct statement.

A)The marginal external benefit is $20 per unit.
B)The marginal external cost is $10 per unit.
C)There are no externalities associated with this market.
D)The marginal external benefit is $10 per unit.
E)There is not enough information provided to determine whether or not there are externalities.

Question 65

When Good A is produced, pollution is also produced.When the marginal social cost of production of Good A equals marginal social benefit from Good A, then I. there is no pollution.
II. resources are used efficiently.

A)I only
B)II only
C)neither I nor II
D)both I and II
E)sometimes I and sometimes II, but never both simultaneously

Question 66

Use the information below to answer the following question.
Fact 16.2.1 Global Solutions for Local Gridlock
Gridlock costs Toronto $6 billion a year, with average commutes of 80 minutes. By 2013, an additional 27 minutes will be added to the daily grind. Civic leaders are looking at road tolls, a regional gas tax, and parking levies.
Source: Toronto Star, June 24, 2011
Refer to Figure 16.2.1.Toll roads, a regional gas tax, and parking levies ________ make Toronto streets less congested because ________.

A)will not; drivers will switch to using public transport only if TTC prices fall
B)will not; additional charges on Toronto's motorists will not change driving habits
C)will; motorists will consider the external benefit from driving in Toronto
D)will; motorists will consider the external cost of driving in Toronto
E)will not; construction on Toronto's streets always results in congestion

Question 67

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then the price is

A)P₁.
B)P₃.
C)P₂.
D)greater than P₄.
E)P₄.

Question 68

A production technology that reduces or prevents pollution is

A)anti-pollution technology.
B)Coase technology.
C)abatement technology.
D)cap-and-trade technology.
E)inefficient.

Question 69

The government department charged with monitoring and protecting the environment is

A)Protection Canada.
B)Revenue Canada.
C)Environment Canada.
D)Industry Canada.
E)the EPA.

Question 70

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then the quantity produced is

A)zero.
B)Q₁.
C)Q₂.
D)Q₃.
E)between 0 and Q₁.

Question 71

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If a voucher is given to consumers that generates an efficient outcome, then consumers pay

A)zero.
B) P₁ per unit.
C)P₂ per unit.
D)P₃ per unit.
E)P₄ per unit.

Question 72

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.To promote an efficient quantity the government could grant a subsidy equal to

A)zero.
B)P₁.
C)P₃ - P₁.
D)P₄ - P₁.
E)P₂ - P₁.

Question 73

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then at the equilibrium quantity the marginal social benefit from consumption is

A)less than the marginal cost to producers.
B)less than the marginal social cost of production.
C)equal to the marginal cost to producers.
D)equal to the marginal private benefit from consumption.
E)greater than the marginal cost to producers.

Question 74

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If a voucher is given to consumers that generates an efficient outcome, then producers receive a price of

A)zero.
B)P₁ per unit.
C)P₂ per unit.
D)P₃ per unit.
E)P₄ per unit.

Question 75

Choose the statement that is incorrect.

A)Firms that have a high marginal abatement cost sell pollution permits.
B)A cap is an upper limit.
C)A cap is a pollution quota.
D)A government that uses cap-and-trade must first estimate the efficient quantity of pollution and set the overall cap at that level.
E)The government solves the problem of allocating the cap by making an initial distribution of the cap across firms and allowing them to trade in a market for pollution permits.

Question 76

Use the table below to answer the following questions.
Table 16.3.1

Refer to Table 16.3.1.The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer.If production is left to the private market, the quantity produced is

A)1 unit.
B)2 units.
C)3 units.
D)4 units.
E)5 units.

Question 77

Choose the statement that is incorrect.

A)Between 2008 and 2012, carbon emissions in British Columbia remained constant.
B)As of 2012, British Columbia applies a carbon tax of $30 per tonne of carbon emitted.
C)British Columbia's carbon tax is revenue-neutral.
D)Australia has a carbon tax.
E)A high gas tax in the United Kingdom cuts carbon emissions by inducing people to drive smaller cars and to drive less.

Question 78

Use the figure below to answer the following questions.

Figure 16.3.1
Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If a subsidy is granted that generates an efficient quantity, then the quantity produced is

A)zero.
B)Q₁.
C)Q₂.
D)Q₃.
E)greater than Q₃.

Question 79

The marginal private benefit curve (MB)is a negatively-sloped straight line.If marginal external benefit decreases as output increases, the marginal social benefit curve is a negatively-sloped straight line

A)parallel to and above the MB curve.
B)parallel to and below the MB curve.
C)above the MB curve and steeper than the MB curve.
D)above the MB curve and flatter than the MB curve.
E)below the MB curve and flatter than the MB curve.

Question 80

Producing paper creates pollution.There is no externality in the consumption of paper.The efficient quantity of paper produced occurs when the

A)marginal social benefit from paper is equal to zero.
B)marginal social cost of the pollution from making paper is equal to zero.
C)marginal private cost of the pollution from making paper is equal to zero.
D)marginal private cost of paper equals the marginal private benefit from paper.
E)marginal social benefit from paper is equal to the marginal social cost of paper.