Question 1

To eliminate the inefficiency resulting from an external cost of production, the government can impose a tax on producers that is equal to the

Accepted Answer

Imposing a tax equal to the marginal external cost (MEC) internalizes the externality by making the producer bear the full cost of production, including the external cost, thus aligning private costs with social costs and eliminating the inefficiency.

Question 2

Suppose a firm produces pollution when it generates electricity. The cost of the pollution for an additional unit of electricity is called the

Accepted Answer

The marginal external cost is the cost of the negative externality, such as pollution, that affects third parties when an additional unit of electricity is produced.

Question 3

-Refer to the above figure. A tax of _______ per tonne is necessary to achieve the efficient output of _______
Tonnes of paper.

Accepted Answer

The answer of 
-Refer to the above figure. A tax...

Question 4

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established,

Accepted Answer

The Coase theorem posits that under conditions of low transaction costs, a small number of parties, and well-defined property rights, private negotiations will lead to an efficient allocation of resources and resolve externalities without the need for government intervention.

Question 5

The marginal social cost of production is the

Accepted Answer

The marginal social cost of production includes both the marginal private cost incurred by the producer and the marginal external cost borne by society but not by the producer directly. Therefore, it is the sum of these two costs.

Question 6

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that _______.

Accepted Answer

The correct choice is B) MSC = MC + T. This equation represents the principle that to achieve the efficient quantity of a good that generates an external cost, the government can impose a tax (T) that aligns the marginal social cost (MSC) with the marginal cost (MC) to the producer. The tax essentially internalizes the external cost, making the producer account for the broader social impacts of their production.

Question 7

The cost of producing a good or service that is paid by people other than the producers is

Accepted Answer

An external cost, also known as a negative externality, is a cost associated with producing a good or service that is not borne by the producer but by other people or society at large.

Question 8

The cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service is the

Accepted Answer

Marginal external cost refers to the cost of producing an additional unit of a good or service that is borne by individuals other than the producer, such as environmental damage or health issues affecting the public.

Question 9

When external costs are present

Accepted Answer

A tax can internalize external costs, aligning private costs with social costs, potentially leading to more efficient market outcomes.

Question 10

-The figure above shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A. If the government wanted to achieve the efficient quantity of good A, it could issue marketable permits. If the marketable permits result in the efficient quantity of good A, then the quantity of good A produced is

Accepted Answer

The answer of 
-The figure above shows the demand curve,...

Question 11

To achieve the efficient amount of use of a common resource, the use should be such that _______ equals _______ .

Accepted Answer

The efficient use of a common resource is achieved when the marginal social cost (MSC) equals the marginal social benefit (MSB). This ensures that the resource is used in a way that maximizes societal welfare, taking into account all externalities.

Question 12

Taxes can yield the efficient level of pollution if the tax is set equal to the

Accepted Answer

The efficient level of pollution is achieved when the tax is equal to the marginal external cost of the pollution, as this aligns the private cost of pollution with its social cost, leading to an optimal allocation of resources.

Question 13

Marginal social cost is the

Accepted Answer

Marginal social cost (MSC) is the total cost to society of producing an additional unit of a good or service. It is calculated as the sum of the marginal private cost (the cost to the producer of producing one more unit of a good or service) and the marginal external cost (the cost of the negative externalities associated with the production of one more unit of a good or service). Therefore, the correct answer is the sum of the marginal external cost and the marginal private cost.

Question 14

If the marginal external cost of building a children's playground equals zero, then the

Accepted Answer

When the marginal external cost is zero, it means there are no additional costs to society beyond what the private entity incurs. Therefore, the marginal private cost equals the marginal social cost, as there are no external costs to add or subtract from the private cost.

Question 15

-The figure above 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?

Accepted Answer

The efficient quantity is where the demand curve intersects the marginal social cost curve, which is at 5 units.

Question 16

-The figure above shows the private marginal cost curve, the social marginal cost curve and the market demand curve. If the market is unregulated, then the quantity produced is

Accepted Answer

In an unregulated market, the quantity produced is determined by the intersection of the market demand curve and the private marginal cost curve, which is at point Q3.

Question 17

In which of the following cases does the tragedy of the commons occur?
I. Cattle grazing on private pastures
II. Catching Bluefin Tuna in the Atlantic Ocean
III. Raising salmon on salmon farms
IV. Using legal services provided by the courts

Accepted Answer

The tragedy of the commons occurs when individuals, acting independently and rationally according to each's self-interest, behave contrary to the whole group's long-term best interests by depleting a common resource. This is seen in case II with Bluefin Tuna in the Atlantic Ocean, where the fish are a common resource that can be overfished. Cases I, III, and IV involve private pastures, farmed salmon, and services with controlled access, respectively, which do not fit the tragedy of the commons scenario.

Question 18

Let MC be the marginal private cost per megawatt hour (MWh) of producing electricity using coal. Let MSC be the marginal social cost per MWh and T be the tax per MWh. To achieve efficiency, the tax should be set so that

Accepted Answer

The tax should be set so that the marginal social cost (MSC) equals the marginal private cost (MC) plus the tax (T). This ensures that the external costs are internalized, leading to an efficient outcome.

Question 19

-The figure above shows the private marginal cost curve, the social marginal 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

Accepted Answer

The efficient quantity is Q1, where SMC = P1. A tax of P3 - P1 would raise the private marginal cost to SMC + (P3 - P1), which would lead to an efficient quantity of Q1.

Question 20

If an external cost exists, who bears it in an unregulated, competitive market transaction?

Accepted Answer

External costs are borne by third parties not directly involved in the transaction, such as the public or the environment, rather than by the producers or consumers directly involved in the market transaction.

Quiz 9: Economics of the Environment

To eliminate the inefficiency resulting from an external cost of production, the government can impose a tax on producers that is equal to the

Suppose a firm produces pollution when it generates electricity. The cost of the pollution for an additional unit of electricity is called the

-Refer to the above figure. A tax of _ per tonne is necessary to achieve the efficient output of _ Tonnes of paper.

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established,

The marginal social cost of production is the

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that _______.

The cost of producing a good or service that is paid by people other than the producers is

The cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service is the

When external costs are present

To achieve the efficient amount of use of a common resource, the use should be such that _ equals _ .

Taxes can yield the efficient level of pollution if the tax is set equal to the

Marginal social cost is the

If the marginal external cost of building a children's playground equals zero, then the

-The figure above 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?

-The figure above shows the private marginal cost curve, the social marginal cost curve and the market demand curve. If the market is unregulated, then the quantity produced is

In which of the following cases does the tragedy of the commons occur? I. Cattle grazing on private pastures II. Catching Bluefin Tuna in the Atlantic Ocean III. Raising salmon on salmon farms IV. Using legal services provided by the courts

Let MC be the marginal private cost per megawatt hour (MWh) of producing electricity using coal. Let MSC be the marginal social cost per MWh and T be the tax per MWh. To achieve efficiency, the tax should be set so that

-The figure above shows the private marginal cost curve, the social marginal 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

If an external cost exists, who bears it in an unregulated, competitive market transaction?

Quiz 9: Economics of the Environment

To eliminate the inefficiency resulting from an external cost of production, the government can impose a tax on producers that is equal to the

Suppose a firm produces pollution when it generates electricity. The cost of the pollution for an additional unit of electricity is called the

-Refer to the above figure. A tax of _______ per tonne is necessary to achieve the efficient output of _______ Tonnes of paper.

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established,

The marginal social cost of production is the

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that _______.

The cost of producing a good or service that is paid by people other than the producers is

The cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service is the

When external costs are present

To achieve the efficient amount of use of a common resource, the use should be such that _______ equals _______ .

Taxes can yield the efficient level of pollution if the tax is set equal to the

Marginal social cost is the

If the marginal external cost of building a children's playground equals zero, then the

-The figure above 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?

-The figure above shows the private marginal cost curve, the social marginal cost curve and the market demand curve. If the market is unregulated, then the quantity produced is

In which of the following cases does the tragedy of the commons occur? I. Cattle grazing on private pastures II. Catching Bluefin Tuna in the Atlantic Ocean III. Raising salmon on salmon farms IV. Using legal services provided by the courts

Let MC be the marginal private cost per megawatt hour (MWh) of producing electricity using coal. Let MSC be the marginal social cost per MWh and T be the tax per MWh. To achieve efficiency, the tax should be set so that

-The figure above shows the private marginal cost curve, the social marginal 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

If an external cost exists, who bears it in an unregulated, competitive market transaction?

-Refer to the above figure. A tax of _ per tonne is necessary to achieve the efficient output of _ Tonnes of paper.

To achieve the efficient amount of use of a common resource, the use should be such that _ equals _ .