Chapter 10 Quizlet

Corrective taxes differ from most taxes in that corrective taxes a. reduce economic efficiency. b. do not raise revenue for the government. c. do not cause deadweight losses. d. always result in a high burden on sellers of goods to which the corrective tax applies.

C. do not cause deadweight losses.

c. industrial robots.

Refer to Figure 10-12. The graph, as drawn, could apply to the market for a. automobiles. b. aluminum. c. industrial robots. d. All of the above are correct.

b. social value

Refer to Figure 10-12. Which of the following is an appropriate label for Line 2? a. social cost b. social value c. private cost d. private value

d. $83

Table 10-5 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. 5. Refer to Table 10-5. If the government wanted to reduce pollution from 16 units to 6 units, which of the following fees per unit of pollution would achieve that goal? a. $67 b. $68 c. $81 d. $83

Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? a. Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke. b. Mary pays Cathy $16 so that Mary can smoke. c. Mary pays Cathy $14 so that Mary can smoke. d. Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke.

b. Mary pays Cathy $16 so that Mary can smoke.

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots 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.

c. The equilibrium quantity is less than the socially optimal quantity.

The supply curve for a product reflects the a. willingness to pay of the marginal buyer. b. quantity buyers will ultimately purchase of the product. c. cost to sellers of producing the product. d. seller's profit from producing the product.

c. cost to sellers of producing the product.

Which of the following suggests that private markets can be effective in dealing with externalities? a. the "invisible hand" b. the law of diminishing social returns c. the Coase theorem d. technology policy

c. the Coase theorem

A positive externality a. causes the product to be overproduced. b. provides an additional benefit to market participants. c. benefits consumers because it results in a lower equilibrium price. d. is a benefit to a market bystander.

d. is a benefit to a market bystander.