Microeconomics Chapter 10
Refer to Figure 10-1. This graph represents the tobacco industry. If the government uses a pollution tax, how much of a tax must be imposed on each unit of production?
$0.30
Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are
$1.60 and 42 units
Refer to Figure 10-1. This graph represents the tobacco industry. The socially optimal price and quantity are
$1.80 and 35 units
Refer to Figure 10-1. This graph represents the tobacco industry. If the government uses a pollution tax, how much tax revenue will the government receive?
$10.50
Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates
Negative Externalities
A technology spillover is a type of negative externality.
False
Barking dogs can not be considered an externality because externalities must be associated with some sort of market exchange.
False
Government subsidized scholarships are an example of a government policy aimed at correcting for negative externalities associated with education.
False
Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.
False
Organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture.
False
A corrective tax places a price on the right to pollute.
True
According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.
True
Despite the appealing logic of the Coase theorem, private actors often fail to resolve on their own the problems caused by externalities.
True
Even if possible, it would be inefficient to prohibit all polluting activity.
True
If the social cost of producing robots is less than the private cost of producing robots, the private market produces too few robots.
True
In a market characterized by externalities, the market equilibrium fails to maximize the total benefit to society as a whole.
True
Social welfare can be enhanced by allowing firms to trade their rights to pollute.
True
The government can "help" firms to internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.
True
The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.
True
When a transaction between a buyer and a seller directly affects a 3rd party, the interaction is called an externality.
True
When firms internalize a negative externality, the market demand curve, shifts to the left
True
