Eco test 3
Refer to Figure 10-5. The graph represents a market in which
there is a positive externality.
A cost-benefit analysis of a highway is difficult to conduct because analysts
will have difficulty estimating the value of the highway.
If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be
worse off if Colombia doesn't remove the subsidies in response to the threat.
Refer to Figure 9-3. The size of the tariff on computers is
$100
Refer to Figure 10-1. This graph represents the tobacco industry. The socially optimal price and quantity are.
$2.80 and 48 units, respectively.
Refer to Figure 9-2. With trade, the price of scooters in this country is
$11, with 400 scooters produced in this country and another 640 scooters imported.
Refer to Figure 10-5. The socially optimal quantity of output is
140 units, since the value to society of the 140th unit is equal to the cost incurred by the seller of the 140th unit.
Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?
At the current output level, the marginal social benefit exceeds the marginal private benefit.
Suppose China exports televisions to the United States and imports wine from Argentina. This situation suggests
China has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to China in producing wine.
Which of the following statements is not correct?
Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution.
Which of the following statements is not correct?
Government policies cannot improve upon private market outcomes.
Which of the following is usually true about government-provided goods?
People do not have to pay an explicit fee to enjoy these goods.
Import quotas and tariffs produce some common results. Which of the following is not one of those common results?
Producer surplus of domestic producers decreases.
What causes the Tragedy of the Commons?
Social and private incentives differ, and common resources are not excludable but are rival in consumption.
A state-owned bridge is
a common resource when it is congested, but it is a public good when it is not congested.
Which of the following is not a commonly-advanced argument for trade restrictions?
The efficiency argument
which of the following is not an advantage of corrective taxes?
They subsidize the production of goods with positive externalities.
Which of the following is not a typical solution to the "Tragedy of the Commons?"
Turning the common resource into a club good
Refer to Figure 9-1. From the figure it is apparent that
Uganda will export coffee if trade is allowed.
Which of the following is an example of a positive externality?
Your neighbor plants a nice garden in front of his house.
Which of the following is not a common resource?
an ice cream cone
Governments can improve market outcomes for
both public goods and common resources
Refer to Figure 9-2. If this country allows free trade in scooters,
consumers will gain and producers will lose.
Refer to Figure 9-3. The imposition of a tariff on computers
decreases the number of computers imported by 140.
Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Uganda
increases by the area B + D + G.
When an externality is present, the market equilibrium is
inefficient, and the equilibrium does not maximize the total benefit to society as a whole.
Refer to Figure 10-3. If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would
introduce a subsidy of $16 per unit.
Refer to Figure 10-1. The social cost curve is above the supply curve because
it takes into account the external costs imposed on society by tobacco consumption.
When property rights are not well established
markets fail to allocate resources efficiently.
When a good is rival in consumption,
one person's use of the good diminishes another person's ability to use it
Assume, for China, that the domestic price of apples without international trade is higher than the world price of apples. This suggests that, in the production of apples
other countries have a comparative advantage over China and China will import apples.
Goods that are excludable include both
private goods and club goods
Because of the free-rider problem,
private markets tend to undersupply public goods
The North American Free Trade Agreement
reduced trade restrictions among Canada, Mexico, and the United States
Dioxin emission that results from the production of paper is a good example of a negative externality because
self-interested paper producers will not consider the full cost of the dioxin pollution they create.
The overuse of a common resource relative to its economically efficient use is called
the Tragedy of the Commons.
