Question 1

An externality is
A) a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction.
B) the total cost to society of producing an additional unit of a good or service.
C) the amount a consumer pays to consume an additional amount of a particular good.
D) a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays.

Accepted Answer

An externality is a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. It is an unintended consequence of economic activity that affects third parties. Examples include pollution, noise, and congestion.

Question 2

The field of environmental economics is concerned with ________.
A) externalities
B) public goods
C) government inefficiency
D) economies of scale

Accepted Answer

A

Question 3

Assuming there are no externalities, if a firm is producing at an output level where the benefits to consumers exceed the cost to the suppliers to produce it, then price
A) equals marginal cost.
B) is greater than marginal cost.
C) is less than marginal cost.
D) is less than marginal revenue.

Accepted Answer

If the benefits to consumers exceed the cost to the suppliers to produce it, then the product is in high demand and the supplier can charge a premium price above marginal cost. In this situation, the market price will be greater than the marginal cost of production.

Question 4

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. To force this firm to produce the efficient level of output, the government should impose a tax of
A) $5.00 per bag of fertilizer.
B) $10.00 per bag of fertilizer.
C) $15.00 per bag of fertilizer.
D) an amount that is indeterminate from this information.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 5

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. The ________ amount of fertilizer is 50 bags.
A) efficient
B) unregulated
C) break-even
D) equitable

Accepted Answer

The term "efficient" in economics often refers to the optimal point where the maximum benefit is achieved. In the context of the question, if 50 bags of fertilizer is the amount that maximizes benefits or outcomes, it would be considered the efficient amount.

Question 6

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. To force this firm to produce the ________ level of output, the government should ________ of $5.00 per bag of fertilizer.
A) efficient; impose a tax
B) market; issue a subsidy
C) efficient; issue a subsidy
D) market; impose a tax

Accepted Answer

To achieve the efficient level of output, the government should impose a tax to internalize the externality, aligning private costs with social costs.

Question 7

Vaccinations convey ________ to third parties.
A) positive externalities
B) negative externalities
C) economies of scale
D) public goods

Accepted Answer

Vaccinations provide positive externalities by not only protecting the individual who receives the vaccine but also those who come into contact with them. This includes those who cannot receive vaccinations due to medical reasons, as well as those who are simply not vaccinated. Therefore, vaccinations have benefits for people beyond the individual who receives them, making them a positive externality.

Question 8

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. The ________ imposed as a result of producing the efficient level of fertilizer is $250.
A) marginal social cost
B) total damage
C) marginal private cost
D) tax

Accepted Answer

The correct answer is B) total damage because the term refers to the overall harm or cost imposed on society, which is not accounted for by the private market. In the context of producing fertilizer, the efficient level involves considering both the private costs and the external costs (damages) to society, leading to the total damage being a relevant measure.

Question 9

Second hand cigarette smoke is an example of a(n) ________.
A) economy of scale
B) externality
C) public good
D) government failure

Accepted Answer

Second hand cigarette smoke is an example of a negative externality, which is an unintended impact imposed on individuals or society as a whole by the actions of others. In this case, individuals who choose to smoke are contributing to air pollution and health risks for those around them, without taking into account the costs imposed on others.

Question 10

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. The ________ imposed as a result of producing the market (unregulated) level of fertilizer is $300.
A) marginal social cost
B) total damage
C) marginal private cost
D) tax

Accepted Answer

The correct answer is B) total damage because the $300 represents the external cost or damage to society (not accounted for by the market) due to the production of fertilizer at the unregulated market level. This is not the marginal social cost, marginal private cost, or a tax, but rather the total external cost or damage imposed on society.

Question 11

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. ________, 60 bags of fertilizer will be produced.
A) With a price ceiling
B) With government intervention
C) Absent government intervention
D) To avoid shutting down

Accepted Answer

The production level of 60 bags of fertilizer is the point where the marginal cost (MC) equals the marginal revenue (MR) and is the profit-maximizing level of output. This production level would be reached in the absence of government intervention, as shown by the intersection of the MC and MR curves in the graph.

Question 12

A well-maintained house and yard is an example of
A) a positive externality.
B) a negative externality.
C) a public good.
D) logrolling.

Accepted Answer

A well-maintained house and yard provides a positive externality to the surrounding community by increasing the value of nearby properties and improving the aesthetic of the neighborhood.

Question 13

Air pollution generated by a steel mill is an example of
A) a positive production externality.
B) a negative production externality.
C) a public good.
D) the free-rider problem.

Accepted Answer

The air pollution generated by a steel mill has negative effects on both the environment and public health, making it a negative production externality.

Question 14

Assuming no externalities exist, if a good's price is less than its marginal cost, then the benefits consumers derive are
A) greater than the cost of resources needed to produce it and less should be produced.
B) greater than the cost of resources needed to produce it and more should be produced.
C) less than the cost of resources needed to produce it and less should be produced.
D) less than the cost of resources needed to produce it and more should be produced.

Accepted Answer

When a good's price is less than its marginal cost, it indicates that the cost of producing an additional unit of the good is higher than what consumers are willing to pay for it. This suggests that the resources could be better utilized elsewhere, implying that less of the good should be produced.

Question 15

The many types of pollution do not include ________ pollution.
A) air
B) price
C) water
D) sound

Accepted Answer

Price is not a type of pollution. The other three options (air, water, and sound) are all recognized types of pollution that can have harmful effects on the environment and human health.

Question 16

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. Absent government intervention, how much fertilizer will be produced?
A) Zero because any level of production involves an external cost.
B) 50 bags
C) 60 bags
D) indeterminate from this information

Accepted Answer

The quantity of fertilizer produced absent government intervention will be determined by the market equilibrium, where the private supply and demand curves intersect. Without seeing Figure 16.1, the specific answer cannot be determined from the information provided. However, the question implies that there is a specific quantity that can be identified, suggesting that the correct answer is based on an assumption of typical market behavior rather than the presence of external costs or the need for additional information.

Question 17

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. What is the total damage imposed as a result of producing the market (unregulated) level of fertilizer?
A) $250
B) $300
C) $500
D) $600

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 18

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. The efficient amount of fertilizer is
A) zero because any level of production involves an external cost.
B) 50 bags.
C) 60 bags.
D) indeterminate from this information.

Accepted Answer

The efficient amount of fertilizer is determined at the point where the marginal social cost (MSC) equals the marginal private benefit (MPB). In the context of environmental economics, this is where the external costs of using the fertilizer (such as pollution) are fully accounted for alongside the private benefits (such as increased crop yields). Without seeing Figure 16.1, the correct answer cannot be determined directly from the question. However, based on standard economic principles, the efficient amount would be where these two curves intersect. Since the specific choice must be made from the provided options and without the figure, this explanation outlines the general principle for determining the efficient amount of a resource like fertilizer.

Question 19

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow.  Figure 16.1
-Refer to Figure 16.1. What is the total damage imposed as a result of producing the efficient level of fertilizer?
A) $0
B) $250
C) $300
D) $500

Accepted Answer

The efficient level of production is where the marginal social cost (MSC) equals the marginal private cost (MPC) plus the marginal external cost (MEC). The total damage at the efficient level is the area under the MEC curve up to the efficient quantity. Without seeing Figure 16.1, the correct answer typically involves calculating the total external costs imposed by the production, which is often represented by the area under the MEC curve up to the efficient production level. Given the options and typical scenarios where such a question might be asked, the total damage could be represented by a specific monetary value.

Question 20

Assuming there are no externalities, if a firm is producing at an output level where the benefits to consumers are less than the cost to the suppliers to produce it, then price
A) equals marginal cost.
B) is greater than marginal cost.
C) is less than marginal cost.
D) is less than marginal revenue.

Accepted Answer

When the benefits to consumers (reflected by the price they are willing to pay) are less than the cost to suppliers to produce it (reflected by the marginal cost), it indicates that the price is less than the marginal cost. This situation suggests inefficiency, as the resources could be better utilized elsewhere.

Quiz 16: Externalities, Public Goods, and Common Resources

An externality is

The field of environmental economics is concerned with ________.

Assuming there are no externalities, if a firm is producing at an output level where the benefits to consumers exceed the cost to the suppliers to produce it, then price

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. To force this firm to produce the efficient level of output, the government should impose a tax of

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ amount of fertilizer is 50 bags.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. To force this firm to produce the level of output, the government should of $5.00 per bag of fertilizer.

Vaccinations convey ________ to third parties.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ imposed as a result of producing the efficient level of fertilizer is $250.

Second hand cigarette smoke is an example of a(n) ________.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The ________ imposed as a result of producing the market (unregulated) level of fertilizer is $300.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. ________, 60 bags of fertilizer will be produced.

A well-maintained house and yard is an example of

Air pollution generated by a steel mill is an example of

Assuming no externalities exist, if a good's price is less than its marginal cost, then the benefits consumers derive are

The many types of pollution do not include ________ pollution.

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. Absent government intervention, how much fertilizer will be produced?

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. What is the total damage imposed as a result of producing the market (unregulated) level of fertilizer?

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. The efficient amount of fertilizer is

Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. Figure 16.1 -Refer to Figure 16.1. What is the total damage imposed as a result of producing the efficient level of fertilizer?

Assuming there are no externalities, if a firm is producing at an output level where the benefits to consumers are less than the cost to the suppliers to produce it, then price