Question 1

-(Exhibit: A Market for Pollution) If there is neither too little nor too much pollution, the level of emissions per period will be _______ , and the market is _______ .

Accepted Answer

The correct level of emissions per period for neither too little nor too much pollution is Q, and when emissions are at this level, the market is considered efficient. This is because the quantity Q represents the optimal balance between the costs of pollution and the benefits of the activities causing the pollution, leading to an efficient market outcome.

Question 2

-(Exhibit: Efficiency and Pollution) If there is too much pollution in this market, the result is most likely at a point such as:

Accepted Answer

The answer of 
-(Exhibit: Efficiency and Pollution) If there is...

Question 3

-(Exhibit: Pollution Abatement and Emissions) Curve A can be read from right to left as the marginal cost of:

Accepted Answer

Curve A, when read from right to left, represents the increasing marginal cost of pollution abatement. This means that as more pollution is abated or reduced, the additional cost of reducing pollution further increases.

Question 4

-(Exhibit: A Market for Pollution) If there is too much pollution:

Accepted Answer

When there is too much pollution, it indicates that too many resources are being allocated to the production of goods that generate pollution, leading to an overallocation of resources towards these goods. This is because the external costs of pollution are not being fully accounted for in the production decisions.

Question 5

-(Exhibit: A Market for Pollution) If there is an efficient level of emissions, it will occur where:

Accepted Answer

The efficient level of emissions occurs where the marginal benefit (MB) of pollution equals the marginal cost (MC) of pollution, which is represented by the point where the price is P and quantity is Q. This point ensures that the cost of the last unit of pollution emitted equals the benefit derived from it, leading to an efficient allocation of resources.

Question 6

If the marginal benefit received from pollution is equal to its marginal cost, then:

Accepted Answer

If the marginal benefit received from pollution is equal to its marginal cost, it means that any change in the quantity of pollution will not affect the well-being of society positively or negatively. Therefore, society's well-being cannot be improved by changing the quantity of pollution.

Question 7

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

Accepted Answer

The Coase theorem states that, in the absence of transaction costs, private parties can reach a mutually beneficial solution to externalities, regardless of who is initially assigned the property rights. This means that if property rights are well defined and the cost of bargaining is low, the private market can achieve an efficient outcome. Option A is incorrect because the enforcement of property rights is not a sufficient condition in itself, as it also depends on the cost of the enforcement. Option B and C are also incorrect because property rights can be assigned to either party, but what matters is the cost of bargaining.

Question 8

-(Exhibit: Efficiency and Pollution) A situation where there is too much pollution in this market may be illustrated when the price is _______ and the quantity is _______ .

Accepted Answer

When the price is $5 and the quantity is 40, it indicates a situation where the market is producing more than the socially optimal quantity, leading to excessive pollution. This is because at lower prices, production is incentivized, potentially ignoring the external costs of pollution.

Question 9

If the marginal benefit received from pollution is equal to its marginal cost, then:

Accepted Answer

When the marginal benefit received from pollution is equal to its marginal cost, it means that the market is producing an efficient quantity of pollution. Any decrease (Option A) or increase (Option C) in the quantity of pollution would result in a reduction of overall welfare. Therefore, the market is not producing too much (Option B) or too little pollution but an optimal amount.

Question 10

The marginal benefit of pollution emissions _______ as the quantity of pollution emissions _______ .

Accepted Answer

The marginal benefit of pollution emissions decreases as the quantity of pollution emissions increases. This is due to the fact that as more pollution is emitted, the negative externalities associated with pollution (such as health problems and environmental damage) become more pronounced, reducing the overall benefit of emitting more pollution. Therefore, the correct choice is A.

Question 11

The Coase theorem emphasizes the importance of _______ in the efficient allocation of resources when external costs are present.

Accepted Answer

The Coase theorem states that with well-defined property rights and low transaction costs, parties will bargain to an efficient outcome regardless of the initial assignment of property rights. Therefore, well-defined property rights are crucial in the efficient allocation of resources when external costs are present. Enforcement of contracts and marketable pollution permits could enhance the bargaining process and make it more effective, but they are not as important as well-defined property rights. Regulation and appropriate environmental standards could also be helpful in some cases, but they may not always lead to the most efficient outcome as they may not take into account the bargaining power and preferences of the parties involved.

Question 12

-(Exhibit: Efficiency and Pollution) If this market produced _______ units, then _______.

Accepted Answer

At 30 units, the market is at the equilibrium where marginal benefit equals marginal cost, which is the definition of efficiency in economic terms.

Question 13

-(Exhibit: Efficiency and Pollution) An efficient solution is where:

Accepted Answer

An efficient solution in economics occurs when marginal cost (MC) equals marginal benefit (MB), ensuring that resources are allocated in a way that maximizes net benefits to society.

Question 14

The marginal benefit from pollution _______ as the quantity of pollution emissions _______ .

Accepted Answer

As the quantity of pollution emissions increases, the marginal benefit from pollution decreases. This is because initially the benefit may be from increased industrial activity, but as pollution increases, the costs on health and the environment outweigh the benefits. Therefore, the marginal benefit decreases.

Question 15

If the marginal benefit received from pollution is greater than its marginal cost, then:

Accepted Answer

When the marginal benefit of pollution (e.g., economic gains from activities causing pollution) exceeds its marginal cost (e.g., health or environmental damage), it suggests that the current level of pollution is less than the optimal level for maximizing societal welfare. Therefore, increasing pollution up to the point where marginal cost equals marginal benefit could improve society's well-being, indicating the market is producing too little pollution.

Question 16

If the marginal benefit received from pollution is less than its marginal cost, then:

Accepted Answer

If the marginal benefit received from pollution is less than its marginal cost, it means that society is experiencing a net loss from pollution. Therefore, reducing the quantity of pollution would improve society's well-being. Increasing the quantity of pollution would worsen society's well-being. Therefore, choice B is the best option.

Question 17

-(Exhibit: Efficiency and Pollution) An efficient solution takes place at a price of _______ and a quantity of _______ .

Accepted Answer

An efficient solution in economics typically occurs where the supply and demand curves intersect, indicating the equilibrium price and quantity. Choice B suggests a price of $15 and a quantity of 30, which could represent such an equilibrium in the context provided, assuming the supply and demand curves intersect at these values.

Question 18

If the marginal benefit received from pollution is less than its marginal cost, then:

Accepted Answer

If the marginal benefit received from pollution is less than its marginal cost, then the cost of reducing pollution by a small amount is less than the benefit of that reduction. Therefore, the market is producing too much pollution and reducing pollution would increase society's well-being.

Question 19

The proposition that if property rights are well defined and if bargaining is costless, then 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 statement describes the Coase theorem, which states that if property rights are clearly defined and transaction costs are minimal, the private market can solve the problem of externalities, irrespective of which party initially holds the property rights.

Question 20

-(Exhibit: Efficiency and Pollution) If this market produced _______ units, then _______.

Accepted Answer

At 40 units, the marginal benefit (MB) is less than the marginal cost (MC), indicating that the market is producing too much and should decrease production. At 30 units, the MB is less than the MC, indicating that the market is not producing enough and should increase production. Therefore, the best choice is C, where the market produces 40 units and the MB is less than the MC. This represents the optimal point for the market.

Quiz 18: Public Economy

-(Exhibit: A Market for Pollution) If there is neither too little nor too much pollution, the level of emissions per period will be _ , and the market is _ .

-(Exhibit: Efficiency and Pollution) If there is too much pollution in this market, the result is most likely at a point such as:

-(Exhibit: Pollution Abatement and Emissions) Curve A can be read from right to left as the marginal cost of:

-(Exhibit: A Market for Pollution) If there is too much pollution:

-(Exhibit: A Market for Pollution) If there is an efficient level of emissions, it will occur where:

If the marginal benefit received from pollution is equal to its marginal cost, then:

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

-(Exhibit: Efficiency and Pollution) A situation where there is too much pollution in this market may be illustrated when the price is _ and the quantity is _ .

If the marginal benefit received from pollution is equal to its marginal cost, then:

The marginal benefit of pollution emissions _ as the quantity of pollution emissions _ .

The Coase theorem emphasizes the importance of _______ in the efficient allocation of resources when external costs are present.

-(Exhibit: Efficiency and Pollution) If this market produced _ units, then _.

-(Exhibit: Efficiency and Pollution) An efficient solution is where:

The marginal benefit from pollution _ as the quantity of pollution emissions _ .

If the marginal benefit received from pollution is greater than its marginal cost, then:

If the marginal benefit received from pollution is less than its marginal cost, then:

-(Exhibit: Efficiency and Pollution) An efficient solution takes place at a price of _ and a quantity of _ .

If the marginal benefit received from pollution is less than its marginal cost, then:

The proposition that if property rights are well defined and if bargaining is costless, then the private market can achieve an efficient outcome regardless of which of the affected parties hold the property rights is known as the:

-(Exhibit: Efficiency and Pollution) If this market produced _ units, then _.