Chapter 10 quiz

This graph represents the tobacco industry. The socially optimal price and quantity are

$1.80 and 35 units, respectively

If the government imposed a corrective tax that successfully move the market from market equilibrium to social optimum and tax revenue for the government would amount to

$2,000

Referred to figure 10-3 Taking into account, private and external cost, the maximum total surplus that can be achieved in this market is

$55

Referred to figure 10-8 what is the social optimal quantity of output in this market?

10 units

The social optimal quantity of output is

280 units, since the value to society of the 280th unity is equal to the cost incurred by the seller of the 280th unit

Suppose that the production of plastic creates a social cost, which is depicted in the graph above, what is the social optimal quantity of plastic?

500 unit

Suppose that the production of plastic creates a social cost, which is depicted in the graph above, without any government regulation, how much plastic will be produced?

650

Which of the following statements about a well maintained yard best conveys the general nature of the externality

A well maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood

An externality exists whenever

Bobbi engages in an activity that influences the well-being of Rosa and yet Bobbi neither pays nor receives payment for that influence.

Which of the following statements is not correct?

Corrective taxes required the government to set a target level of pollution

Panel (c). The market equilibrium is

P4b

An alternative label for the quantity would be

Q optimum

The social optimal quantity would be

Q2

Refer to figure 10-7: Which quantity represents the social optimum for this market

Q3

Referred to figure 10-11, which of the following magnitude is constant overall units output

The external benefit of the last unit of output that was purchased and sold

A positive externality arises when a person engages in an activity that has

a beneficial effect on a bystander who does not pay the person who causes the effect

The best remedy for market failure is often

a market-based solution

A negative externality arises when a person engages in an activity that has

an adverse effect on a bystander who is not compensated by the person who causes the effect.

A patent is used to

assign property rights

The supply curve for a product reflects the

cost to sellers of producing the product

If an aluminum manufacturer does not bear the entire cost of the smoke it emits, it will

emit a higher level of smoke than is socially efficient.

Market failure can be caused by

externalities

Command and control policy is another term for

government regulation

An externality is

results in an equilibrium that does not maximize the total benefits to society

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

subsidizing production, which would increase supply.