Question 1

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog,then at the equilibrium price and quantity of hogs:

Accepted Answer

If the government imposes a tax of $200 per hog and the marginal external cost is only $100 per hog, then the tax will be higher than the actual cost, and as a result, farmers will be discouraged from raising hogs. This will lead to a decrease in supply and higher prices, causing a shortage of hogs. Therefore, too few hogs will be raised.

Question 2

Use the following to answer question:
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _____ and a quantity of _____.

Accepted Answer

An efficient solution occurs where the marginal social cost (MSC) equals the marginal social benefit (MSB), which is at a price of $15 and a quantity of 30 units. At this point, the total pollution levels are minimized while still providing the optimal quantity of the product to society.

Question 3

According to the Coase theorem,when negative externalities are present,a market will:

Accepted Answer

The Coase theorem states that a market will reach an efficient solution when negative externalities are present, but only if transaction costs are low and property rights are well-defined. In other words, if the affected parties can negotiate and make costless bargains, the market will reach an efficient outcome without any need for government intervention or taxes. However, if transaction costs are high, it may be difficult for the parties to reach an efficient solution on their own, and government intervention or taxes may be necessary. Positive externalities are not relevant to the Coase theorem, as it focuses only on negative externalities.

Question 4

Use the following to answer question:
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.Point _____ in the figure represents an efficient solution in this market,where sulfur emissions are a result of production.

Accepted Answer

The answer of Use the following to answer question:
Figure: Pollution...

Question 5

According to the Coase theorem,the private market can achieve an efficient outcome:

Accepted Answer

The Coase theorem suggests that private market can achieve efficient outcome provided that property rights are well-defined and bargaining costs are low. This means that if parties affected by pollution can negotiate and come to a mutually beneficial agreement, then the outcome can be efficient regardless of which party is assigned the property right to clean air. Therefore, option D is the correct choice. Option A is incorrect because it only considers the cost of enforcement of property rights and ignores the importance of well-defined property rights and bargaining costs. Option B and C are incorrect as they assume that assigning the property right to one party is necessary for achieving an efficient outcome. However, this may not always be the case as parties can negotiate and come to mutually beneficial outcomes regardless of initial property rights assignment.

Question 6

An externality is said to be internalized:

Accepted Answer

When individuals take external costs and benefits into account in their decision making, they are essentially considering the impact of their actions on third parties, and therefore internalizing the externality. This can be accomplished through various means such as pricing mechanisms, regulations or voluntary actions.

Question 7

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

Accepted Answer

The idea described in the question is known as the Coase theorem, named after economist Ronald Coase. The Coase theorem states that in the presence of externalities, an efficient solution can be reached through private bargaining as long as property rights are well-defined and transaction costs are low. The theorem emphasizes the importance of defining clear property rights to encourage private bargaining between affected parties.

Question 8

When individuals take external costs and benefits into account:

Accepted Answer

When individuals take external costs and benefits into account, they are internalizing the externality. This means that they are including the external costs and benefits in their decision-making process and bearing the cost or reaping the benefit of their actions. This internalization leads to a more efficient allocation of resources as the market price reflects the true cost of production and consumption.

Question 9

A familiar example of a negative externality is traffic congestion.In principle,it should be possible to internalize this externality by permitting drivers to negotiate rights to drive during particular times.The most likely reason that these negotiations do NOT happen is that:

Accepted Answer

The transaction costs associated with identifying and establishing communication among the many interested parties would be prohibitive, making negotiations difficult to organize and enforce. Most individuals may not be familiar with the Coase theorem, but this is not the main reason why negotiations do not happen. The Constitution does not guarantee freedom of access to all public roads, and lawyers' involvement may increase transaction costs, but these are not the primary reasons why negotiations do not occur.

Question 10

Use the following to answer question: 
-(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution,the marginal social cost of pollution is _____ the marginal social benefit of pollution.

Accepted Answer

At the efficient quantity of pollution, the marginal social benefit and cost are equal, therefore the marginal social cost of pollution is equal to the marginal social benefit of pollution, making the answer B.

Question 11

Use the following to answer question:
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _____ units of emissions are produced,then _____.

Accepted Answer

The answer of Use the following to answer question:
Figure: Pollution...

Question 12

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.Without government regulation:

Accepted Answer

Without government regulation, the hog farmer does not take into account the cost of the methane gas generated by the hogs. This means that the price of hogs will be less than the marginal social cost of the last hog sold, since the external cost of the methane gas is not taken into account. Therefore, the marginal private cost to the hog farmer will be less than the marginal social cost, leading to an overproduction of hogs.

Question 13

Use the following to answer question: 
-(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.The efficient quantity of pollution is _____ tons.

Accepted Answer

The efficient quantity of pollution is where the marginal social benefit equals the marginal social cost.

Question 14

Use the following to answer question:
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution is one in which:

Accepted Answer

An efficient solution is one where the marginal social cost (MSC) is equal to the marginal social benefit (MSB), which is shown in the figure where the two curves intersect. This means that the pollution is being reduced to the optimal level while still allowing for production and consumption to occur. Therefore, the best choice is D.

Question 15

Use the following to answer question:
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _____ and the quantity is _____.

Accepted Answer

In the graph, the socially optimal level of pollution is at point A, where the marginal cost of reducing pollution (MC) intersects with the marginal benefit of reducing pollution (MB). At this point, the price is $5 and the quantity is 40 units. Any level of pollution beyond point A is considered too much pollution as the cost of reducing pollution exceeds the benefit. Therefore, the answer is B as at $5 and the quantity of 40 units, the pollution level is considered too much.

Question 16

The Coase theorem states that,in the presence of externalities,a market economy will:

Accepted Answer

The Coase theorem states that in the presence of externalities, a market economy can reach an efficient solution through bargaining and negotiation between affected parties, as long as transaction costs are sufficiently low and property rights are well-defined. Therefore, choice C is the correct answer. Option A is incorrect because the Coase theorem does not guarantee that an efficient solution will always be reached. Option B is incorrect because the Coase theorem does offer a potential solution for externalities. Option D is incorrect as it suggests that only government intervention can result in an efficient solution, but the Coase theorem suggests that voluntary agreements between parties can also be effective.

Question 17

Use the following to answer question:
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _____ units of emissions are produced,then _____.

Accepted Answer

At 40 units of emissions, the Marginal Social Cost (MSC) of pollution is greater than the Marginal Social Benefit (MSB), indicating that the social costs of pollution exceed the benefits at this level of emissions.

Question 18

The proposition that,if bargaining is costless and property rights are well-defined,the market can achieve an efficient outcome is the:

Accepted Answer

The Coase theorem states that if bargaining is costless and property rights are well-defined, then the market can achieve an efficient allocation of resources regardless of the initial assignment of property rights. Therefore, option A is the correct answer. The other options are not relevant to the Coase theorem or the concept of efficient allocation of resources.

Question 19

The proposition that,if transaction costs are low enough and property rights are well-defined,the private market can achieve an efficient outcome,regardless of which of the affected parties hold the property rights,is known as the:

Accepted Answer

The proposition described in the question is known as the Coase theorem, named after economist Ronald Coase. The Coase theorem states that as long as property rights are clearly defined and transaction costs are low, an efficient outcome can be achieved through private bargaining, regardless of who holds the initial property rights.

Question 20

A familiar example of a negative externality is loud music on a college campus.In principle,it should be possible to internalize this externality by permitting students to negotiate rights to play music during particular times.The most likely reason that these negotiations do NOT happen is that:

Accepted Answer

The transaction costs associated with identifying and establishing communication with students would be high. This means that the costs of negotiating and enforcing such agreements would be too high for the benefit gained, making it unlikely that students would engage in such negotiations, even if they were aware of the concept of externalities and the Coase theorem.

Quiz 16: Externalities

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog,then at the equilibrium price and quantity of hogs:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _ and a quantity of _.

According to the Coase theorem,when negative externalities are present,a market will:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.Point _____ in the figure represents an efficient solution in this market,where sulfur emissions are a result of production.

According to the Coase theorem,the private market can achieve an efficient outcome:

An externality is said to be internalized:

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

When individuals take external costs and benefits into account:

A familiar example of a negative externality is traffic congestion.In principle,it should be possible to internalize this externality by permitting drivers to negotiate rights to drive during particular times.The most likely reason that these negotiations do NOT happen is that:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _ units of emissions are produced,then _.

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.Without government regulation:

Use the following to answer question: -(Table: Coal Mine Pollution) Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.The efficient quantity of pollution is _____ tons.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution is one in which:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _ and the quantity is _.

The Coase theorem states that,in the presence of externalities,a market economy will:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _ units of emissions are produced,then _.

The proposition that,if bargaining is costless and property rights are well-defined,the market can achieve an efficient outcome is the:

The proposition that,if transaction costs are low enough and property rights are well-defined,the private market can achieve an efficient outcome,regardless of which of the affected parties hold the property rights,is known as the:

A familiar example of a negative externality is loud music on a college campus.In principle,it should be possible to internalize this externality by permitting students to negotiate rights to play music during particular times.The most likely reason that these negotiations do NOT happen is that:

Quiz 16: Externalities

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog,then at the equilibrium price and quantity of hogs:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _____ and a quantity of _____.

According to the Coase theorem,when negative externalities are present,a market will:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.Point _____ in the figure represents an efficient solution in this market,where sulfur emissions are a result of production.

According to the Coase theorem,the private market can achieve an efficient outcome:

An externality is said to be internalized:

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

When individuals take external costs and benefits into account:

A familiar example of a negative externality is traffic congestion.In principle,it should be possible to internalize this externality by permitting drivers to negotiate rights to drive during particular times.The most likely reason that these negotiations do NOT happen is that:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _____ units of emissions are produced,then _____.

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.Without government regulation:

Use the following to answer question: -(Table: Coal Mine Pollution) Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.The efficient quantity of pollution is _____ tons.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution is one in which:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _____ and the quantity is _____.

The Coase theorem states that,in the presence of externalities,a market economy will:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _____ units of emissions are produced,then _____.

The proposition that,if bargaining is costless and property rights are well-defined,the market can achieve an efficient outcome is the:

The proposition that,if transaction costs are low enough and property rights are well-defined,the private market can achieve an efficient outcome,regardless of which of the affected parties hold the property rights,is known as the:

A familiar example of a negative externality is loud music on a college campus.In principle,it should be possible to internalize this externality by permitting students to negotiate rights to play music during particular times.The most likely reason that these negotiations do NOT happen is that:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _ and a quantity of _.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _ units of emissions are produced,then _.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _ and the quantity is _.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _ units of emissions are produced,then _.