Question_Doc14_15Dec_10th

Question # 00005676 Posted By: smartwriter Updated on: 12/22/2013 02:30 PM Due on: 12/31/2013
Subject Business Topic General Business Tutorials:
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83) An externality occurs whenever

A) private costs are the same as social costs.

B) private costs are the same as internal costs.

C) private costs diverge from social costs.

D) private costs plus internal costs equal social costs.

84) A good that has external benefits associated with its production will be

A) produced at the optimal level.

B) underproduced.

C) overproduced.

D) not produced.

85) A large farm uses fertilizer that nearby landowners complain may contaminate their water.

Tests are conducted and contaminants are found. The costs resulting from this decision are

referred to as

A) implicit costs.

B) factor costs.

C) external costs.

D) opportunity costs.

86) All of the following are examples of goods for which external costs commonly exist

EXCEPT

A) cigarettes.

B) automobiles.

C) vaccinations.

D) oil transportation.

87) Which of the following is the main reason for externalities?

A) The full cost of a transaction is not borne by the buyer/seller of the product.

B) Police enforcement of scalping is not uniformly enforced.

C) the lack of organized exchanges for all goods and services

D) The production of public goods uses up scarce resources.

88) Which one of the following is an example of an external cost?

A) the cost to attend college

B) labor costs to a firm

C) emissions from a factory

D) a house payment owed by a friend

89) You enter a classroom, which is littered with newspapers. This is because

A) students are too lazy to clean up.

B) maintenance people only clean once a day.

C) it is a way to protest against the tuition rates.

D) students do not pay for littering.

.

90) Social costs of a good are equal to

A) external costs minus private costs.

B) private costs minus external costs.

C) private costs plus external costs.

D) external costs divided by the private costs.

91) There is an externality present only when

A) private costs diverge from social costs.

B) private benefits diverge from social benefits.

C) private costs or benefits diverge from social costs or benefits.

D) private costs equal social costs.

92) An externality exists when

A) there are private costs.

B) there are internal costs.

C) there are external costs.

D) there are opportunity costs.

93) A situation in which a private cost diverges from a social cost is

A) internal costs.

B) an externality.

C) an internality.

D) a transactions cost.

94) A situation in where the costs of an action are not fully borne by the two parties engaged in

exchange is

A) an externality.

B) an internality.

C) internal costs.

D) a transactions cost.

95) An externality is a situation in which

A) private costs diverge from social costs.

B) internal costs diverge from private costs.

C) there are no social costs.

D) the cost borne by the consumer is greater than the monetary price.

96) Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the

supply curve that includes social costs. If the firm sets output by focusing on private costs, the

per-unit external cost will equal

A) P2.

B) P4 - P2.

C) P4 - P1.

D) P2 - P1.

97) Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the

supply curve that includes social costs. The free market rate of output is ________ and the

corrected, socially optimal amount of output is ________.

A) Q4; Q1

B) Q2; Q1

C) Q4; Q2

D) Q2; Q4

.

98) Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the

supply curve that includes social costs. From this figure we know that

A) an external benefit exists.

B) private costs are less than social costs.

C) private costs equal social costs.

D) private costs are greater than social costs.

99) The marginal cost curve of a firm measures

A) external costs.

B) pollution costs.

C) private costs.

D) social costs.

100) A good which has social costs that exceed private costs has a price

A) equal to marginal social cost.

B) that is too low.

C) that is too high.

D) that is inefficient because price exceeds marginal social cost.

101) A good that has social costs that exceed private costs has a quantity that is

A) too high.

B) too low.

C) just right.

D) the best society can do.

102) A good that has social costs that are equal to private costs has a price that is

A) too high.

B) too low.

C) just right.

D) equal to marginal cost.

103) A good that has social costs that are less than private costs has a quantity that is

A) too high.

B) too low.

C) just right.

D) equal to zero.

104) The inclusion of external costs in the decision making process determining equilibrium

price and quantity leads to

A) lower priced items and increased quantity.

B) lower priced items and a decline in quantity.

C) higher priced items and increased quantity.

D) higher priced items and a decline in quantity.

105) The inclusion of external benefits in the decision making process determining equilibrium

price and quantity leads to

A) lower priced items and increased quantity.

B) lower priced items and a decline in quantity.

C) higher priced items and increased quantity.

D) higher priced items and a decline in quantity.

106) What are social costs? How do they differ from private costs?

107) What is an externality?

108) Why don't people take into consideration the external costs of their actions and reduce the

amount of externalities?

109) What are the private costs of driving an automobile? What are the external costs?

110) "Private costs are borne by individuals while social costs are borne by society." Do you

agree or disagree? Why?

1) Which of the following is NOT a possible solution to the problem of pollution?

A) Subsidizing the costs of production of activities that generate pollution

B) Converting a resource that is communally owned into a privately owned resource

C) Regulating the quantity of pollution that can be generated

D) Imposing a pollution tax on producers

2) If external costs are included and added to a firm's private costs, then

A) the demand curve will shift to the right.

B) the demand curve will shift to the left.

C) the supply curve will shift to the right.

D) the supply curve will shift to the left.

3) A method of forcing a company to internalize the total cost of production is

A) to impose a tax on the company to reduce production.

B) to provide a subsidy to encourage production.

C) for government not to interfere in the company's activities.

D) to force the company to reduce the wages it pays to its employees.

4) If a firm is forced to take external costs into account, it will

A) reduce production and charge a higher market price.

B) increase production and charge a lower market price.

C) reduce prices and hire more workers.

D) reduce prices and hire fewer workers.

5) If a firm is not forced to pay for external costs, it will

A) continue to overproduce the good.

B) continue to under produce the good.

C) request a subsidy from the government.

D) raise prices.

6) Economists typically suggest three choices that allow a polluter to decide how to absorb most,

or perhaps all, of the social costs of its actions, which are

A) continuing to overproduce the good, lowering the price of the good, or cutting output.

B) reducing the pollution-causing activity, changing production techniques, or paying a price to

pollute.

C) installing pollution abatement equipment, paying to pollute, or just ignoring the issue.

D) paying a pollution tax, continuing to use existing production techniques, or continuing the

polluting behavior without regard to the social implications.

7) Which of the following statements about pollution or pollution control is TRUE?

A) A nationwide uniform tax on emissions is the appropriate way to reduce pollution levels.

B) A tax to reduce pollution levels should be based on the economic damages rather than on the

absolute amount of pollution.

C) Private costs of pollution usually exceed social costs.

D) The optimum amount of pollution abatement is where the total benefits of pollution

abatement equal the total costs of pollution abatement.

8) There are two coal-burning electrical utilitiesone in tiny, rural Wanunu, Montana, and

another in metropolitan Detroit, Michiganand each produces the same amount of pollution per

unit of output. If a permit tax is going to be used to force these firms to internalize pollution

costs, the tax levied should be

A) the same in each city.

B) higher in Wanunu than in Detroit.

C) higher in Detroit than in Wanunu.

D) less than zero in

9) A difficulty with using a uniform per-unit tax to address a negative externality is that

A) the tax will reduce output.

B) the tax will increase price.

C) the social cost of pollution might vary across geographic regions.

D) the social cost of pollution should not be assessed on the consumers, but should be assessed

on the firms.

10) In order to internalize the externality due to pollution, the government should impose a tax

based on

A) the economic damage associated with the pollution.

B) the physical amount of pollution.

C) the size of the firm causing the pollution.

D) the value of the pollution-causing business activity.

11) To totally internalize an externality, a government can levy a tax related only to the physical

quantity of pollution if

A) the economic damages associated with the pollution are different across different locations.

B) the economic damages are too large to be determined.

C) the economic damages associated with the pollution are the same across different locations.

D) the economic damages are zero.

12) To correct for a negative externality, a government might impose a uniform tax related only

to the physical quantity of pollution if

A) the administrative costs are high.

B) the cost of ascertaining the actual economic costs are relatively small.

C) the economic damages are zero.

D) the economic damages associated with the pollution are different across different locations.

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  1. Tutorial # 00005470 Posted By: smartwriter Posted on: 12/22/2013 02:31 PM
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    do not pay for littering. Answer: D . 90) Social costs of ...
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