Econ Final

Network externalities are often:

a reason for natural monopolies.

To be called an oligopoly, an industry must have:

a small number of interdependent firms

The demand curve for a monopoly is:

above the MR curve

Which of the following is an environmental policy based on tradable emission permits?

allowing companies to buy and sell the right to a certain level of emissions

Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment. This is:

an environmental standard

A good is subject to a network externality when:

an increase in the number of other people using the good increases its value to an individual.

Both emissions taxes and tradable emissions permits:

are efficient cost-minimizing methods of pollution reduction.

(Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if there are external costs, a tax imposed on sellers will:

decrease the equilibrium quantity.

Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.

decreases; increases

Whether or not they pay for them, people cannot be excluded from receiving the benefits of:

either public goods or common resources.

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation:

firms in the market produce the socially optimal level of pollution.

An example of a common resource is:

fishing in the ocean.

Common resources tend to be overused because:

individuals tend to ignore the cost to others of their use of the resource.

No individual is willing to pay for the efficient quantity of a public good, because the marginal benefit to an individual _____ the marginal social benefit.

is less than.

A monopolistically competitive firm has a downward-sloping demand curve for its product, primarily because:

its product is differentiated

A market produces too much of a good when the price of the good is:

less than the marginal social cost of providing it.

The GoSports Company is a profit-maximizing firm with a monopoly in the production of school team pennants. The firm sells its pennants for $10 each. We can conclude that GoSports is producing a level of output at which:

marginal cost equals marginal revenue

The best example of a good whose consumption is NOT excludable is:

national defense.

When Joe watched a television movie, his viewing was _____ in consumption because other people _____ able to view the movie at the same time Joe did.

nonrival; were

If drivers decide to make phone calls without considering the costs imposed on others, the:

number of phone calls made while driving will be more than the socially optimal quantity.

External benefits are associated with the production of batteries. Without government regulation, the market will:

price batteries at less than the marginal social benefit.

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

produce at an economic loss

If a good is subject to the free-rider problem and an inefficiently low level of production when left to the private market, the good must be a(n):

public good.

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

reach an efficient solution if transaction costs are low and property rights are well-defined.

One way the government of Alaska could prevent an inefficiently large production of crab fishing would be to:

sell exclusive licenses for the right to fish.

After many years, a small community builds a toll road but discovers it is little used. If it wishes the road to be used at the socially optimal level, the community should:

set the toll lower.

The efficient rate of emissions occurs when:

the change in social benefits and the change in social costs due to an additional unit of emissions are equal.

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is:

the level at which the marginal social cost is equal to the marginal social benefit.

(Figure: The Quantity of Pollution) Look at the table The Quantity of Pollution. If the amount of pollution emitted is 150:

the production of pollution is not socially optimal.

(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

too little pollution, because its marginal social benefit would exceed its marginal social cost.

(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. If 5 tons of pollution is produced:

too much pollution is produced.

The total product curve:

will become flatter as output increases if there are diminishing returns to variable input

(Scenario: Alexander and Vanessa) Refer to the scenario Alexander and Vanessa. If the socially optimal level of scientific research is produced and if both Vanessa and Alexander are truthful in disclosing the marginal private benefits they expect to receive from this research, what is the price per unit of research that Vanessa is willing to pay?

$0

(Table: Marginal Benefit, Cost, and Consumer Surplus) The table Marginal Benefit, Cost, and Consumer Surplus shows six consumers' willingness to pay for one iTunes download. If the marginal social cost is constant at $0, then the efficient price is _____ and consumer surplus is _____.

$0; $37

(Figure: Traffic Lights in Plymouth) Look at the figure Traffic Lights in Plymouth. Plymouth has 1,000 residents. Each of the residents has the same individual marginal benefit per traffic light. Without government intervention, the town will have _____ traffic lights.

0

(Figure: Market Failure) Look at the figure Market Failure. Suppose it represents the demand for and marginal cost per pound of shrimp in the bay. The additional cost of the shrimp due to the depletion of the common resource is equal to AC. Without government intervention, the market will produce _____ pounds of shrimp.

F

(Figure: Market Failure) In the figure Market Failure, where is the equilibrium for a competitive market?

K

The best example of a good that is excludable in consumption is:

a bicycle.

Assigning property rights helps to correct the problems associated with common resources:

because it allows property owners to exclude users and to manage the resource more efficiently.

For the same amount of pollution emitted, an emissions tax is said to be more efficient than an environmental standard because all polluters:

emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax.

The purpose of trusts established in the United States in the late 1800s was to:

engage in monopoly pricing

(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 1 acre is dedicated to the park, the park is:

too small