Question 1

Which of the following best describes a negative externality in production?

Accepted Answer

A cost imposed on someone not directly involved in the production or consumption of a good or service.

Question 2

Suppose the marginal private cost of producing electricity is given by $$S_1$$, and the marginal social cost is given by $$S_2. If $$the government imposes a tax equal to the external cost, what happens to the market equilibrium?

Accepted Answer

The equilibrium quantity decreases and the equilibrium price increases.

Question 3

Which of the following is an example of a positive externality in consumption?

Accepted Answer

Vaccination against infectious diseases.

Question 4

According to the Coase theorem, private bargaining can solve the externality problem if:

Accepted Answer

Property rights are assigned and enforceable, and transaction costs are low.

Question 5

A Pigovian tax is designed to:

Accepted Answer

Correct a market failure caused by an externality.

Question 6

If the marginal benefit of reducing pollution is greater than the marginal cost, what should be done to achieve economic efficiency?

Accepted Answer

Increase pollution reduction efforts.

Question 7

Which of the following best describes the 'tragedy of the commons'?

Accepted Answer

A situation where common resources are overused because individuals ignore the external cost of their consumption.

Question 8

Which government policy is most likely to address a positive externality in the market for college education?

Accepted Answer

A subsidy to students or colleges.

Question 9

A cap-and-trade system for pollution control is designed to:

Accepted Answer

Allow firms to trade emissions allowances, reducing pollution at the lowest possible cost.

Question 10

Which of the following goods is both non-rival and non-excludable?

Accepted Answer

National defense.

Question 11

Suppose the marginal social benefit of college education is greater than the marginal private benefit. What does this imply about the market equilibrium quantity of college education?

Accepted Answer

It is less than the efficient quantity.

Question 12

Which of the following is a likely criticism of cap-and-trade systems?

Accepted Answer

They give firms 'licenses to pollute,' which some view as inappropriate.

Question 13

If a common resource is overused, what is the most likely cause?

Accepted Answer

Lack of property rights or inability to enforce them.

Question 14

Which of the following best explains why public goods are often underprovided in a free market?

Accepted Answer

People can free ride, enjoying benefits without paying.

Question 15

A government wants to reduce carbon dioxide emissions efficiently. Which policy would economists most likely recommend?

Accepted Answer

A Pigovian tax equal to the marginal social cost of emissions.

Question 16

If the government imposes a Pigovian tax on a good with a negative externality, what happens to the supply curve?

Accepted Answer

It shifts upward by the amount of the tax.

Question 17

Which of the following is NOT a requirement for the Coase theorem to hold?

Accepted Answer

Government-imposed Pigovian taxes.

Question 18

Which of the following is an example of a quasi-public good?

Accepted Answer

A toll road.

Question 19

Suppose the government wants to address the overuse of a fishery (a common resource). Which policy would be most effective?

Accepted Answer

Imposing a quota on the number of fish that can be caught.

Question 20

Which of the following statements about market failure is correct?

Accepted Answer

Market failure occurs when there are externalities, leading to deadweight loss.

Externalities, Environmental Policy, and Public Goods – Microeconomics Study Notes

Guida di studio - Domande di pratica

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