ECO 120 SECTION 2
If education produces positive externalities, we would expect
A government to subsidize education
People cannot be prevented from using a good if the good is
A public good or a common resource
A corrective tax
Allocates pollution to those factories that face the highest cost of reducing it
When a good is taxed
Both buyers and sellers of the good are made worse off
Which of the followings is the most likely explanation for the imposition of a price ceiling on the market for milk?
Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.
An externality arises when a person engages in an activity that influences the well-being of
Bystanders in the market for that activity and yet neither pays nor receives any compensation for that effect
A good that is rival in consumption and not excludable is called a
Common resource
To fully understand how taxes affect economic well-being, we must compare the:
Decrease in total surplus to the increase in revenues raised by the government
A tax placed on buyers of tuxedos shifts the
Demand curve for tuxedos downward, decreasing the price received by sellers of tuxedos and causing the quantity of tuxedos to decrease
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
Suppose the equilibrium price of tuition is $8500 per year, but the government of Maine enacts a price ceiling of $5000. The price ceiling is non-binding.
False
Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding?
Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans.
National Defense is provided by the government because
Free-riders make it difficult for private markets to supply the socially optimal quantity
A minimum wage that is set below a market's equilibrium wage will
Have no impact on employment
When a policy succeeds in giving buyers and sellers in a market an incentive take into account the external effects of their actions, the policy is said to
Internalize the externality
Which of the following are private goods?
Lunch at the Memorial Union. Parking.
If a road is congested, then the use of that road by an additional person would lead to a
Negative externality
A view of a spectacular sunset along a private beach is an example of a
Nonrival but excludable good
Externalities can be corrected by each of the following except
Normal market adjusments
Most lighthouses are operated by the government because
Of the free-rider problem
When a good is rival in consumption,
One person's use of the good diminishes another person's ability to use it
A tax imposed on the sellers of a good will raise the
Price paid by buyers and lower the equilibrium quantity
When a tax is levied on a good, the buyers and sellers of the good share the burden,
Regardless of how the tax is levied
Rent control policies tend to cause
Relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run
Each of the following would be considered a common resource EXCEPT a
Streetlight
The price received by sellers in a market will increase if the government decreases a
Tax on the good sold in that market
To enhance the well-being of society, a social planner will encourage firms to increase production when
Technology spillovers are associated with production
When a market experiences a positive externality
The demand curve does not reflect the value to society of the good
If a price ceiling is not binding, then
The equilibrium price is below the price ceiling
When good X is produced, some people benefit. A free-rider problem arises when
The number of beneficiaries is large and it is impossible to prevent anyone from benefitting
What happens to the total surplus in a market when the government imposes a tax?
Total surplus decreases
An emergency siren (like we have at UMaine) is a pubic good associated with a positive externality
True
Economic theory predicts the price ceiling will result in a shortage of capacity for new and existing students
True
Which of the following is NOT a typical solution to the "tragedy of the Commons"?
Turning the common resource into a club good
The Coase theorem suggest that private markets may not be able to solve the problem of externalities
When the number of interested parties is large and bargaining costs are high
Some goods can be wither common resources or public goods depending on
Whether the food is rival in consumption