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1.
If private bargaining
to resolve an externality is to result in an efficient outcome,
A) rights
must be protected by liability rules.
B) there
must be tradable pollution rights.
C) there
must be direct regulation of externalities.
D) the
initial assignment of rights must be clear to both parties.
2.
For the Coase theorem
to apply, all of the following conditions must be satisfied EXCEPT
A) The
basic rights of the individuals must be clearly understood.
B) There
must be no impediments to bargaining.
C) Only
a few people can be involved.
D) Liability
rules must be established and enforced.
3.
An efficient outcome
can always be reached by requiring the individual who produces the externality
to fully compensate individuals for any damage inflicted.
A) TRUE
B) FALSE
4.
In any case where
there is a negative externality, it is better to form a government agency to
solve the problem.
A) TRUE
B) FALSE
5.
Public goods represent
a market failure because
A) they
are provided by firms with market power.
B) positive
externalities are created through their production.
C) by
their very nature they are nonexcludable and nonrival which makes it difficult
for the private sector to supply them profitably.
D) there
is incomplete information regarding their quality.
6.
Which of the following
contains most of the characteristics of a public good?
A) Education
B) Trash
collection
C) A
public library
D) National
defense
7.
A television signal
sent by cable is ________ in consumption and viewers are ________.
A) rival;
excludable
B) nonrival;
excludable
C) nonrival;
nonexcludable
D) rival;
nonexcludable
8.
You will still be able
to listen to NPR (National Public Radio) whether or not you contribute to their
fund-raising campaign, so you decide not to contribute. This is an example of
the
A) private
good problem.
B) free-rider
problem.
C) rival
in consumption problem.
D) drop-in-the-bucket
problem.
9.
Refer to the figure
above. Suppose the government assigns property rights to the airlines. No
negotiations occur between the parties. The resulting level of air travel is
________.
A) 0
units
B) 100
units
C) 120
units
D) Indeterminate
from the given information.
10.
Refer to the figure
above. Suppose the government assigns property rights to the airlines. No
negotiations occur between the parties. The marginal damage cost associated
with the resulting level of air travel is ________.
A) $25
B) $120
C) $265
D) $385
11.
Refer to the figure
above. Suppose the government assigns property rights to the airlines, then the
airlines and the residents engage in negotiations. The resulting efficient
level of air travel is ________.
A) 0
units
B) 100
units
C) 120
units
D) Indeterminate
from the given information.
12.
Refer to the figure
above. The marginal damage cost associated with the efficient level of air
travel is ________.
A) $0
B) $100
C) $225
D) $265
13.
Refer to the figure
above. The marginal damage cost ________ as the quantity of air travel
increases.
A) increases
B) decreases
C) remains
constant
D) becomes
negative
14.
Refer to the figure
above. Suppose the government assigns property rights to the nearby residents
affected by the airlines. No negotiations occur between the parties. The
resulting level of air travel is ________.
A) 0
units
B) 100
units
C) 120
units
D) Indeterminate
from the given information.
15.
For the following
question, you will need to fill in the blanks with the correct
numbers. When filling in the blanks, enter the NUMBERS only. Do NOT enter
commas, dollar signs, percent signs, or text. If your answer is a decimal,
include your decimal point and round to the nearest tenth.
Suppose you are hired
by the Martin guitar company as an economic consultant. You estimate the demand
for Martin guitars to be Q = 8000 – 2P. Suppose the supply of Martin Guitars is
given by Q = –2000 +3P.
What is the
equilibrium price of Martin guitars?
What is the
equilibrium quantity of Martin guitars?
What is the price
elasticity of demand at the equilibrium price and quantity?
What is the price
elasticity of supply at the equilibrium price and quantity?
For the next seven
questions, suppose a per-unit excise tax of $40 per guitar is levied on the
consumers.
What price will
sellers receive after the tax is levied?
What price will
consumers pay after the tax is levied?
What percent of the
tax will be paid by the consumers of Martin guitars? (give
an answer between 0 and 100)
What percent of the
tax will be paid by the suppliers of Martin guitars? (give
an answer between 0 and 100)
How many guitars will
be sold after the tax is imposed?
How much consumer
surplus do consumers get after the tax?
What is the deadweight
loss created by this tax?
16.
For the following
question, you will need to fill in the blanks with the correct
numbers. When filling in the blanks, enter the NUMBERS only. Do NOT enter
commas, dollar signs, percent signs, or text. If your answer is a decimal,
include your decimal point and round to the nearest tenth.
Consider the market
for laptop computers. The demand for laptops is Q = 1800 – 3P. Suppose the
supply of laptops is given by Q = –200 +2P.
What is the
equilibrium price of laptops?
What is the
equilibrium quantity of laptops?
What is the price
elasticity of demand at the equilibrium price and quantity?
What is the price
elasticity of supply at the equilibrium price and quantity?
For the next seven
questions, suppose a per-unit excise tax of $80 per laptops is levied on the
consumers.
What price will
sellers receive after the tax is levied?
What price will
consumers pay after the tax is levied?
What percent of the
tax will be paid by the consumers of laptops? (give
an answer between 0 and 100)
What percent of the
tax will be paid by the suppliers of laptops? (give
an answer between 0 and 100)
How many laptops will
be sold after the tax is imposed?
How much consumer
surplus do consumers get after the tax?
What is the deadweight
loss created by this tax?
17.
An externality is
A) a
cost or benefit resulting from some activity or transaction that is imposed or
bestowed on parties outside the activity or transaction.
B) the
total cost to society of producing an additional unit of a good or service.
C) the
amount a consumer pays to consume an additional amount of a particular good.
D) a
problem intrinsic to public goods: The good or service is so costly that its
provision generally does not depend on whether or not any single person pays.
18.
Air pollution
generated by a steel mill is an example of
A) a
positive production externality.
B) a
negative production externality.
C) a
public good.
D) the
free-rider problem.
19.
Assuming no
externalities exist, if a goodʹs price is less than its marginal cost, then the
benefits consumers derive are
A) greater
than the cost of resources needed to produce it and less should be produced.
B) greater
than the cost of resources needed to produce it and more should be produced.
C) less
than the cost of resources needed to produce it and less should be produced.
D) less
than the cost of resources needed to produce it and more should be produced.
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