Question 1

Use the following to answer questions 
-(Table: Coal Mine Pollution) The table Coal Mine Pollution 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.
A) greater than
B) equal to
C) less than
D) unrelated to

Accepted Answer

The answer of Use the following to answer questions 
-(Table:...

Question 2

The proposition that if bargaining is costless, the market can achieve an efficient outcome is the:
A) Coase theorem.
B) property rights paradigm.
C) market rights theorem.
D) efficient environment paradigm.

Accepted Answer

The Coase theorem states that if bargaining is costless, and property rights are clearly defined, then the market can achieve an efficient outcome without government intervention. Therefore, choice A is the correct answer. The other options given are not relevant or accurate in terms of the proposition that if bargaining is costless, the market can achieve an efficient outcome.

Question 3

Use the following to answer questions 
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _____ units of emissions, then _____.
A) 30; it would be efficient
B) 30; MSB > MSC
C) 45; total cost would equal total benefits
D) 45; MSC = 0

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 4

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 this does NOT happen is that:
A) most individuals are unfamiliar with the Coase theorem.
B) the transaction costs associated with identifying and establishing communication among the many interested parties would be prohibitive.
C) agreements arising from such negotiations could not be enforced, since the Constitution guarantees all individuals freedom of access to all public roads.
D) lawyers would find a way to prohibit such negotiations unless they were actively involved, and this would make transaction costs prohibitive.

Accepted Answer

The transaction costs associated with identifying and establishing communication among the many interested parties would be prohibitive. This means that the costs of negotiating such deals would be too high, making it impractical to internalize the negative externality of traffic congestion. As a result, alternative solutions such as congestion pricing or public transportation investments are often used to address this issue. The other options presented do not accurately reflect the reasons for the failure to internalize the externality in this case.

Question 5

According to the Coase theorem, when negative externalities are present, a market will:
A) always reach an efficient solution.
B) reach an efficient solution if transaction costs are low and property rights are well-defined.
C) reach an efficient solution only if the government intervenes in the market.
D) reach an efficient solution only if the negative externalities are offset by positive externalities.

Accepted Answer

According to the Coase theorem, if transaction costs are low and property rights are well-defined, then parties affected by negative externalities can engage in bargaining and reach an efficient solution without the need for government intervention. However, if transaction costs are high or property rights are not clear, then the market may not reach an efficient solution. Option A is incorrect because the market only reaches an efficient solution if transaction costs are low and property rights are well-defined. Option C is incorrect because Coase theorem suggests that government intervention is not necessary if transaction costs are low and property rights are well-defined. Option D is incorrect because offsetting negative externalities with positive externalities does not necessarily lead to an efficient outcome.

Question 6

Use the following to answer questions 
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, an efficient solution is one in which:
A) MSB < MSC.
B) MSC < MSB.
C) total cost = total benefit.
D) MSC = MSB.

Accepted Answer

An efficient solution in this market is where MSC (marginal social cost) equals MSB (marginal social benefit). This is because at this point, the society is getting the maximum benefit from the production that is happening, and the production is not harming the environment any more than it needs to. Therefore, D is the best choice as it represents the equality of MSC and MSB.

Question 7

Use the following to answer questions 
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, too much pollution is found when the price is _____ and the quantity is _____.
A) $5; 15
B) $5; 40
C) $25; 20
D) $5; 30

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 8

Use the following to answer questions 
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emissions are a result of production, produced _____ units of emissions, then _____.
A) 40; MSB = MSC
B) 30; MSB < MSC
C) 40; MSB < MSC
D) 30; MSC < MSB

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 9

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:
A) a Pigouvian tax.
B) a network externality.
C) a technology spillover.
D) the Coase theorem.

Accepted Answer

The Coase theorem posits that externalities do not necessarily need government intervention to reach an efficient outcome, as long as transaction costs are low and property rights are clearly defined. This means that parties involved in an externality can negotiate and reach a mutually beneficial agreement without interference from a third party.

Question 10

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 this does NOT happen is that:
A) most students are unfamiliar with the Coase theorem.
B) the transaction costs associated with identifying and establishing communication with students would be high.
C) agreements arising from such negotiations could not be enforced.
D) most students don't view loud music as a negative externality.

Accepted Answer

The high transaction costs associated with identifying and establishing communication with students would make it difficult to negotiate individual rights to play music during specific times. Coordinating and monitoring these agreements would also require significant resources.

Question 11

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) Coase theorem.
B) property rights paradigm.
C) market rights theorem.
D) green environment paradigm.

Accepted Answer

The proposition described is the Coase theorem, which states that in the absence of transaction costs and with well-defined property rights, the private market can reach an efficient outcome regardless of the initial assignment of property rights.

Question 12

An externality is said to be internalized:
A) when individuals take external costs and benefits into account in their decision making.
B) when the Coase theorem is irrelevant or cannot be applied.
C) when individuals successfully petition the government to ban or restrict activities that generate negative externalities.
D) when individuals learn to adapt to negative externalities through introspection or internal acceptance of what are viewed as unchangeable facts of life.

Accepted Answer

When individuals take external costs and benefits into account in their decision making, they are said to internalize the externality. For example, a factory that pollutes a river may decide to invest in cleaner technology or pay for the cost of cleaning up the river, thus internalizing the cost of their pollution. This can be done voluntarily or through regulations imposed by the government.

Question 13

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:
A) too few hogs will be raised.
B) the price will be less than the marginal social cost.
C) the price will be less than the marginal social benefit.
D) the price will be less than the marginal cost to hog farmers.

Accepted Answer

The tax of $200 per hog exceeds the marginal external cost of $100 per hog. Therefore, farmers will reduce production to avoid paying the tax, resulting in too few hogs being raised.

Question 14

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

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 15

Use the following to answer questions 
Figure: Pollution and Efficiency 
-(Figure: Pollution and Efficiency) Look at the 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 _____.
A) $5; 40
B) $15; 30
C) $25; 30
D) $15; 15

Accepted Answer

An efficient solution occurs at the intersection of the marginal private cost curve (MPC) and the marginal social cost curve (MSC). In the figure, the efficient solution occurs at a price of $15 and a quantity of 30.

Question 16

The Coase theorem states that in the presence of externalities, a market economy will:
A) always reach an efficient solution.
B) never reach an efficient solution.
C) reach an efficient solution if transaction costs are sufficiently low and property rights are well-defined.
D) reach an efficient solution only in the case of government regulation.

Accepted Answer

The Coase theorem states that efficient solutions can be reached in the presence of externalities if transaction costs are sufficiently low and property rights are well-defined. This means that if parties are able to negotiate and bargain with each other without incurring significant transaction costs, they can reach a mutually beneficial outcome that internalizes the cost of the externality. However, if transaction costs are too high or property rights are not clearly defined, the outcome may not be efficient. The theorem does not rely on government regulation.

Question 17

When individuals take external costs and benefits into account:
A) there are no external costs.
B) they internalize the externality.
C) the government should intervene in the market.
D) the market will not reach an efficient solution.

Accepted Answer

When individuals take external costs and benefits into account, they internalize the externality. This means that individuals consider the costs and benefits that affect parties outside of the transaction and adjust their behavior accordingly. By doing so, they are able to account for the full social cost and benefit of their actions, leading to a more efficient outcome.

Question 18

Use the following to answer questions 
-(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. The efficient quantity of pollution is _____ tons.
A) 0
B) 2
C) 4
D) 8

Accepted Answer

The efficient quantity of pollution is where marginal social benefit equals marginal social cost, which is at 4 tons of pollution. At 4 tons, the marginal social benefit is $6 and the marginal social cost is $6. Therefore, producing 4 tons of pollution is the most efficient choice.

Question 19

According to the Coase theorem, the private market can achieve an efficient outcome:
A) as long as the enforcement of property rights costs less than the marginal benefit of emissions.
B) only if the property right to clean air is assigned to the polluter.
C) only if the property right to clean air is assigned to the party harmed by pollution.
D) if bargaining costs are low and property rights are well-defined.

Accepted Answer

The Coase theorem states that as long as bargaining costs are low and property rights are well-defined, the private market can achieve an efficient outcome regardless of which party owns the property rights. Therefore, options A, B, and C are incorrect. Option D correctly summarizes the conditions under which the Coase theorem applies.

Question 20

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. Without government regulation, the equilibrium price and quantity of pigs raised means that:
A) too few hogs will be raised.
B) the price will be less than the marginal social cost.
C) the price will be less than the marginal benefit.
D) the price will be less than the marginal cost to hog farmers.

Accepted Answer

Without government regulation, the market price for hogs will only consider the private cost to farmers, but not the external costs such as methane gas emissions. Therefore, the market price will be less than the marginal social cost, leading to an excessive quantity of hogs being produced and potentially negative impacts on the environment.

Quiz 15: Externalities

The proposition that if bargaining is costless, the market can achieve an efficient outcome is the:

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _ units of emissions, then _.

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 this does NOT happen is that:

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

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, an efficient solution is one in which:

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, too much pollution is found when the price is _ and the quantity is _.

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emissions are a result of production, produced _ units of emissions, then _.

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:

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 this does NOT happen is that:

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:

An externality is said to be internalized:

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

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the 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 _.

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

When individuals take external costs and benefits into account:

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

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

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. Without government regulation, the equilibrium price and quantity of pigs raised means that:

Quiz 15: Externalities

The proposition that if bargaining is costless, the market can achieve an efficient outcome is the:

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _____ units of emissions, then _____.

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 this does NOT happen is that:

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

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, an efficient solution is one in which:

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, too much pollution is found when the price is _____ and the quantity is _____.

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emissions are a result of production, produced _____ units of emissions, then _____.

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:

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 this does NOT happen is that:

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:

An externality is said to be internalized:

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

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the 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 _____.

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

When individuals take external costs and benefits into account:

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

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

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. Without government regulation, the equilibrium price and quantity of pigs raised means that:

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _ units of emissions, then _.

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, too much pollution is found when the price is _ and the quantity is _.

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emissions are a result of production, produced _ units of emissions, then _.

Use the following to answer questions Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the 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 _.