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Assignment 11

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Question 1 (1 point)
Which of the following is an example of a negative externality?
  1. Your roommate plays the tuba at 3 a.m. the night before your economics exam
  2. Electricity generation from coal-fired plants causes acid rain
  3. Your neighbor's dog barks incessantly
  4. You drive your car and emit carbon monoxide
  5. All of these
Question 2 (1 point)
An externality occurs when
  1. the full costs of the good are not included in the price of the good
  2. the full benefits of a good are not included in the price of the good
  3. costs or benefits accrue to individuals not directly involved in the transaction
  4. All of these
  5. None of these
Question 3 (1 point)
Which of the following is an example of a positive externality?
  1. A flu shot
  2. The smoke from a steel factory
  3. Litter
  4. A traffic jam
  5. The noise of your neighbor's leaf blower
Question 4 (1 point)
When all costs of a transaction are borne by the participants of that transaction,
  1. positive externalities exist
  2. then private costs and social costs are identical
  3. negative externalities exist
  4. the market outcome will be inefficient
  5. None of these
Question 5 (1 point)
External Cost

The market for steel

In the figure above, external costs are equal to
  1. P s - P p
  2. Q p - Q s
  3. b � c
  4. a
  5. d
Question 6 (1 point)
When the government imposes a tax on production,
  1. production will invariably increase
  2. the benefits of consumption increase, so the demand curve shifts to the right
  3. both the demand and supply curves shift to the left
  4. there is no change in demand or supply
  5. the costs of production increase, so the supply curve shifts to the left
Question 7 (1 point)
The Clean Air Act of 1972 required some companies to install the "best available" pollution control technologies. This was an example of
  1. the government using a subsidy to encourage a negative externality
  2. a marketable pollution permit
  3. the government using the command approach to discourage a negative externality
  4. a pollution tax
  5. the government using the command approach to encourage a positive externality
Question 8 (1 point)
Suppose that the current price of a marketable permit to emit one ton of gunk is $60. For firm A, the marginal cost of reducing one more ton of gunk is $50. For firm B, the marginal cost of reducing one ton of gunk is $70. Under a marketable permit system,
  1. both firms will buy a permit and emit one more ton of gunk
  2. both firms will shut down
  3. firm A will buy a permit and emit one more ton of gunk, while firm B will reduce its emissions of gunk by one ton
  4. both firms will reduce their emissions of gunk by one ton
  5. firm B will buy a permit and emit one more ton of gunk, while firm A will reduce its emissions of gunk by one ton
Question 9 (1 point)
In its simplest form, the Coase theorem states that
  1. a private solution such as bargaining will never lead to efficiency, so government intervention is always necessary
  2. bargaining can lead to an efficient solution only in the case of positive externalities
  3. command regulation is the most efficient method of reducing the harm caused by negative externalities
  4. governments should tax those externalities with the most inelastic demand
  5. bargaining can lead to an efficient allocation of resources in the presence of negative externalities, as long as the transactions costs of bargaining are low
Question 10 (1 point)
The problem of common ownership arises due to
  1. a lack of clearly defined property rights
  2. the internalization of external costs
  3. the fact that costs accrue solely to the individual, but the benefits go to the society as a whole
  4. the fact that benefits are shared in common
  5. the fact that most people are cranky
Question 11 (1 point)
One of the reasons why communism failed in the Soviet Union is because, under communism,
  1. no one has a property right to anything, so there is little incentive to use resources efficiently
  2. there are high rates of unemployment and homelessness
  3. there is a high degree of economic freedom
  4. planners have all the information necessary to make efficient decisions
  5. there is a high degree of political freedom
Question 12 (1 point)
Which of the following is an example of the problem of common ownership?
  1. Acid rain
  2. The extinction of the American bison
  3. Clear-cutting of Brazilian rainforests
  4. Excessive hunting of African elephants and Asian rhinos
  5. All of these
Question 13 (1 point)
For public goods,
  1. costs are imposed on individuals not directly involved in the transaction
  2. the principle of mutual exclusivity holds strongly
  3. one individual's consumption of a good prohibits others from consuming that good
  4. the principle of mutual exclusivity does not apply
  5. None of these
Question 14 (1 point)
Which of the following is a public good?
  1. The protection offered by a nation's air force
  2. Public safety
  3. A national park
  4. The light from a lighthouse
  5. All of these
Question 15 (1 point)
Suppose that you must complete a class group project, and your group consists of five people. Each member of your group receives the same grade. If four of you do all of the work and the fifth member contributes nothing, but receives the same grade, this is an example of
  1. negative externalities
  2. the free-rider problem
  3. comparative advantage
  4. the group-project problem
  5. the law of demand
Question 16 (1 point)
Which of the following statements is false?
  1. Public goods must be provided by government if they are to be provided at all
  2. National defense is an example of a public good
  3. A private market will provide an inefficiently small quantity of public goods
  4. The free-rider problem often arises with the provision of public goods
  5. None of these; they are all true
Question 17 (1 point)
The result of adverse selection is that
  1. low quality consumers or producers drive higher quality consumers or producers out of the market
  2. higher quality consumers or producers drive low quality consumers or producers out of the market
  3. higher quality consumers provide low quality producers a lucrative market position
  4. only higher quality consumers drive low quality producers out of the market
  5. only low quality consumers drive low quality producers out of the market
Question 18 (1 point)
Which of the following is an example of a moral hazard?
  1. A person dodges the national draft even though that person feels a strong sense of national pride
  2. A person sees a friend profiled on America's Most Wanted but cannot decide whether to tell the authorities his or her whereabouts
  3. A person sees a shoplifter but does not know what to do
  4. A person knows she shouldn't drink alcohol before driving, but does so after purchasing car insurance and stating that she is a nondrinker
  5. A person wants to play football on Sunday but playing sport on a Sunday conflicts with his religious beliefs
Question 19 (1 point)
One way to solve problems of asymmetric information is to have both parties share in the costs of the exchange. In the market for health insurance, such sharing of costs can be accomplished by
  1. having national health insurance
  2. forcing doctors to provide medical care for free
  3. requiring co-payments and deductibles
  4. requiring a down payment
  5. All of these
Question 20 (1 point)
When economic resources are devoted to transferring wealth from one sector of the economy to another, rather than being used for productive purposes, the process is known as
  1. negative externalities
  2. rent seeking
  3. public goods
  4. logrolling
  5. highly efficient
Question 1 (4.00 points)
What is the difference between a positive externality and a negative externality? Give an example of each.
Question 2 (3.00 points)
What is meant by the term overfishing? What is the fundamental problem associated with overfishing of the oceans? What might lead to underfishing?
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Assignment 11. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/introduction-to-microeconomics-1/assignment11.htm. This work is licensed under a Creative Commons License Creative Commons License