ch-10 micro econ

*graph* The socially optimal quantity of output is a. 58 units. b. 73 units. c. between 73 and 94 units. d. 94 units.

73 units.

Without government intervention, the equilibrium quantity would be a. Q1. b. Q2. c. Q3. d. Q4.

Q3.

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced? a. They are equal. b. The equilibrium quantity is greater than the socially optimal quantity. c. The equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.

The equilibrium quantity is less than the socially optimal quantity.

This market is characterized by a. government intervention. b. a positive externality. c. a negative externality. d. None of the above is correct.

a negative externality.

The social optimum can be reached if a. a subsidy of $36 is applied to each unit of the good. b. a subsidy of $23 is applied to each unit of the good. c. a tax of $23 is applied to each unit of the good. d. a tax of $15 is applied to each unit of the good.

a subsidy of $36 is applied to each unit of the good.

*graph* Each unit of plastics that is produced results in an external a. cost of $6 b. cost of $8. c. benefit of $6. d. benefit of $8.

cost of $8.

*graph* If this market is currently producing at Q4, then total economic well-being would be maximized if output a. decreased to Q1. b. decreased to Q2. c. decreased to Q3. d. stayed at Q4.

decreased to Q2.

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then a. less than the socially optimal quantity. b. greater than the socially optimal quantity. c. equal to the socially optimal quantity. d. There is not enough information to answer the question.

equal to the socially optimal quantity.

If an externality is present in a market, economic efficiency may be enhanced by a. increased competition. b. weakening property rights. c. better informed market participants. d. government intervention.

government intervention.

Negative externalities lead markets to produce a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels. b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels. c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels. d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.

greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.

In order to reach the social optimum, the government could a. impose a tax of $2 per unit on plastics. b. impose a tax of $6 per unit on plastics. c. impose a tax of $8 per unit on plastics. d. offer a subsidy of $6 per unit on plastics.

impose a tax of $8 per unit on plastics.

When an externality is present, the market equilibrium is a. efficient, and the equilibrium maximizes the total benefit to society as a whole. b. efficient, but the equilibrium does not maximize the total benefit to society as a whole. c. inefficient, but the equilibrium maximizes the total benefit to society as a whole. d. inefficient, and the equilibrium does not maximize the total benefit to society as a whole.

inefficient, and the equilibrium does not maximize the total benefit to society as a whole.

In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because a. it is hard to estimate the market demand curve and thus charge the "right" corrective tax. b. selling pollution permits create a net increase in pollution.Corrective taxes distort incentives. c. Corrective taxes provide greater flexibility to firms that can reduce pollution at a low cost. d. Corrective taxes | Tradable pollution permits MSC: Interpretive

it is hard to estimate the market demand curve and thus charge the "right" corrective tax.

Research into new technologies provides a a. negative externality, and too few resources are devoted to research as a result. b. negative externality, and too many resources are devoted to research as a result. c. positive externality, and too few resources are devoted to research as a result. d. positive externality, and too many resources are devoted to research as a result.

positive externality, and too few resources are devoted to research as a result.

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then a. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. b. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. d. There is not enough information to answer the question.

the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked.

Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality, a. the supply curve would adequately reflect the marginal social cost of production. b. consumers will be required to pay a higher price for steel than they would have if the externality were internalized. c. the market equilibrium quantity will not be the socially optimal quantity. d. producers will produce less steel than they otherwise would if the externality were internalized.

the market equilibrium quantity will not be the socially optimal quantity.