Question 1

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The actual price of gasoline paid by consumers after the tax is implemented is ________ per gallon.

Accepted Answer

The answer of Figure 5-13
  
Figure 5-13 illustrates the...

Question 2

Figure 5-11
  
Coal burning utilities release sulfur dioxide and nitric acid which react with water to produce acid rain.Acid rain damages trees and crops and kills fish.Because the utilities do not bear the cost of the acid rain, they overproduce the quantity of electricity.This is illustrated in Figure 5-11.
-Refer to Figure 5-11.S₁ represents the supply curve that reflects the private cost of production and S₂ represents the supply curve that reflects the social cost of production.One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity.What is the size of the Pigovian tax that will internalize the cost of the externality?

Accepted Answer

The Pigovian tax is equal to the difference between the social cost of production and the private cost of production. In this case, the social cost of production is S₂ and the private cost of production is S₁. Therefore, the Pigovian tax is equal to S₂ - S₁ = P₂ - P₀.

Question 3

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The market equilibrium quantity of gasoline is ________ million gallons per month.

Accepted Answer

The market equilibrium quantity of gasoline is where the supply and demand curves intersect, which is 48 million gallons per month. This is the quantity produced and consumed in the absence of any tax.

Question 4

Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain.This is an example of

Accepted Answer

A Pigovian tax is a tax imposed on a producer to internalize the external costs of production, in this case, the cost of acid rain caused by the electric utility. The purpose of the tax is to make the producer accountable for the negative externalities they create and to discourage them from producing too much.

Question 5

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists, which of the following methods of pollution control best uses economic incentives to reduce pollution?

Accepted Answer

Instituting a system of tradable emission allowances creates a market for pollution permits which allow firms to emit a certain amount of pollution. Firms that can reduce their pollution levels below their permit level can sell their excess permits to firms that are having trouble meeting their permit level. The result is that firms that reduce their pollution levels below the required amount earn an economic benefit, while firms that cannot meet their required levels are required to buy additional permits or reduce their pollution levels. This system incentivizes firms to reduce their pollution levels as much as possible, since doing so can yield financial rewards.

Question 6

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain, the government's action would

Accepted Answer

By imposing a tax on the electric utility equal to the marginal external cost of the acid rain, the government is effectively internalizing the externality. This means that the electric utility now bears the cost of the negative consequences of its actions, and will have an incentive to reduce its pollution levels or seek alternate means of production. This leads to a more efficient allocation of resources and a decrease in overall social costs.

Question 7

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

Accepted Answer

The answer of Figure 5-13
  
Figure 5-13 illustrates the...

Question 8

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The market equilibrium price of gasoline is ________ per gallon.

Accepted Answer

The market equilibrium price of gasoline is where the supply and demand curves intersect, which is at $3.75 per gallon. This is the price that would prevail in the absence of any government intervention. When the government imposes a tax to bring about the efficient level of gasoline production, the supply curve shifts upward by the amount of the tax, resulting in a new equilibrium price of $4.25 per gallon. Therefore, choice B is the correct answer.

Question 9

Policies that mandate the installation of specific pollution control devices are called

Accepted Answer

Command-and-control policies are regulatory policies that require a specific action or device to be installed to reduce pollution. These policies often involve setting a specific standard for pollution reduction and mandating that companies or individuals take certain actions to meet that standard. Benefit policies, welfare policies, and incentive policies are not specifically related to pollution control.

Question 10

Which of the following is an example of the U.S.government's use of a "command-and-control" approach to reducing pollution?

Accepted Answer

The installation of catalytic converters on all new automobiles is an example of a "command-and-control" approach because the government mandated a specific technology to be used in order to reduce pollution. The other options involve market-based or incentive-based approaches, such as taxes or tradable emission allowances.

Question 11

Which of the following describes a positive externality?

Accepted Answer

The answer of Which of the following describes a positive...

Question 12

Economists generally favor the use of tradable emission allowances to reduce pollution.However, the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

Accepted Answer

Some environmentalists believe that the use of tradable emission allowances gives firms a license to pollute, meaning that they can continue to pollute as long as they have enough allowances to cover their emissions. Therefore, these environmentalists argue that emissions reduction should be achieved through stricter regulations and standards, rather than through the use of allowances.

Question 13

Figure 5-12
  
College education benefits society by producing a more employable workforce, reducing crime, and creating a better informed citizenry.Thus, the marginal social benefits of college education exceed the marginal private benefits for any level of college education.This is illustrated in Figure 5-12.
-Refer to Figure 5-12.One way to obtain the economically efficient amount of college education is for governments to subsidize college education.What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.)

Accepted Answer

The size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits is equal to the difference between the marginal social benefit (MSB) and the marginal private cost (MPC) of the last unit of education. In Figure 5-12, this is represented by the vertical distance between the MSB curve and the supply (private cost) curve at the efficient quantity Q₁. This distance is equal to P₂ - P₁. Therefore, the correct answer is (B) P₂ - P₁.

Question 14

Which of the following is an example of a Pigovian tax?

Accepted Answer

A Pigovian tax is one that is imposed on a producer or consumer to internalize the cost of externalities, such as pollution. Option D is an example of this - a utility would be taxed in order to account for the negative externalities caused by their production, and this tax would incentivize them to reduce their pollution levels. A, B, and C do not fit the definition of a Pigovian tax, as they do not directly address externalities. Instead, A is an example of a cap-and-trade system, B is a type of tax on labor, and C is a payment for a license to pollute, but not necessarily an attempt to internalize the cost of negative externalities.

Question 15

The efficient level of paper production will occur where the

Accepted Answer

The answer of The efficient level of paper production will...

Question 16

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The gasoline tax raises the price paid by consumers by ________ per gallon.

Accepted Answer

Before the tax, the equilibrium price was $2.50 per gallon and the equilibrium quantity was 80 billion gallons. After the tax, the supply curve shifts upward by $0.50 per gallon, and the new equilibrium price is $3.00 per gallon. This means the tax raises the price paid by consumers by $0.50 per gallon. Therefore, the correct answer is B) $1.25.

Question 17

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Accepted Answer

The command-and-control approach involves the government imposing specific regulations and limits on the amount of pollution that firms are allowed to produce. This often includes setting quantitative limits or standards for emissions, rather than relying on market-based approaches such as taxes or subsidies.

Question 18

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Accepted Answer

The answer of Figure 5-13
  
Figure 5-13 illustrates the...

Question 19

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The efficient equilibrium quantity of gasoline is ________ million gallons per month.

Accepted Answer

The answer of Figure 5-13
  
Figure 5-13 illustrates the...

Question 20

State and local governments subsidize college students with grants and low-interest loans.The loans and subsidies are examples of

Accepted Answer

The subsidies and loans provided by state and local governments to college students can be seen as Pigovian subsidies. A Pigovian subsidy is a subsidy provided to correct a market failure caused by negative externalities. In this case, the negative externality is the underproduction of higher education, which leads to lower levels of human capital and reduced economic growth. The subsidies and loans provided by the government help to correct this market failure by encouraging more students to attend college and acquire higher education.

Quiz 5: Externalities, Environmental Policy, and Public Goods

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The actual price of gasoline paid by consumers after the tax is implemented is ________ per gallon.

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The market equilibrium quantity of gasoline is ________ million gallons per month.

Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain.This is an example of

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists, which of the following methods of pollution control best uses economic incentives to reduce pollution?

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain, the government's action would

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The amount of the gasoline tax is ________ per gallon.

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The market equilibrium price of gasoline is ________ per gallon.

Policies that mandate the installation of specific pollution control devices are called

Which of the following is an example of the U.S.government's use of a "command-and-control" approach to reducing pollution?

Which of the following describes a positive externality?

Economists generally favor the use of tradable emission allowances to reduce pollution.However, the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

Which of the following is an example of a Pigovian tax?

The efficient level of paper production will occur where the

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The gasoline tax raises the price paid by consumers by ________ per gallon.

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium quantity of gasoline is ________ million gallons per month.

State and local governments subsidize college students with grants and low-interest loans.The loans and subsidies are examples of