Q&A Hero

Q: When emissions are measured on the horizontal axis, the marginal cost of abating emissions is A) downward-sloping because emissions become more and more easy to eliminate once the firm makes the initial commitment to do so. B) downward-sloping because a high level of emissions is cheap to attain, and a low level of emissions is expensive to attain. C) upward-sloping because emissions become more and more easy to eliminate once the firm makes the initial commitment to do so. D) upward-sloping because a high level of emissions is cheap to attain, and a low level of emissions is expensive to attain. E) horizontal because the technology to remove emissions is assumed constant.

Q: Given that MEC(q) = 2q2, what can be inferred about the total cost of pollution as output increases? A) The total cost of pollution is increasing. B) The total cost of pollution is positive. C) The total cost of pollution is growing at a positive rate. D) The total cost of pollution is growing at an increasing rate. E) The total cost of pollution is changing.

Q: The optimum level of pollution emissions A) is zero. B) occurs where the marginal external benefit is zero. C) occurs where no damage to the environment is being done. D) occurs where the marginal external benefit equals the marginal external cost. E) occurs where the marginal external cost equals the marginal cost of abatement.

Q: If a firm had a fixed proportions technology, then the pollution produced by this firm A) cannot be reduced. B) can be reduced only by lowering the level of output (holding technology constant). C) can be reduced by changing how the output is produced within the bounds of the existing technology. D) can be reduced only by increasing the number of firms in the industry. E) can be reduced only by changing the technology.

Q: Use the following statements to answer this question. I. The bubble concept allows an emitter to sum emission limits for all sources of pollutants within a particular firm, and to set emissions reductions from each source as it pleases as long as the total pollutant limit at the plant is not exceeded. II. Under an emissions offsets program, a new source of emissions can locate in a region only if their new emissions are accompanied by reduced emissions from existing sources by at least as much. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

Q: Use the following statements to answer this question: I. The efficient amount of recycling of scrap materials is the amount that equates the marginal social cost of scrap disposal to the marginal cost of recycling. II. The efficient amount of recycling of scrap materials occurs when society recycles all recyclable wastes. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

Q: The food processing industry involves the canning of fruit products, among other things, and the canning process produces canned goods and waste products. The manufacturer of one kind of fruit product produces an external cost for third parties. This external cost is expressed as: MEC = 0.00005Q, where MEC represents marginal external cost (dollars/unit), and Q represents cases produced per week. The marginal cost of production (supply), ignoring MEC, at the industry level is: MC = 2 + 0.000175Q. The industry demand for the product is: P = 10 - 0.00025Q, where price P is in dollars per unit. a. Determine the output rate and price that would be established by profit maximizing firms. b. Determine the efficient output rate and price. c. Determine the cost to society of firms producing at the profit maximizing rate rather than at the efficient output rate.

Q: The demand for injections to immunize against a disease is given as: P = 13 0.0005Q, where P = price in dollars, and Q = quantity measured as number of shots per month. The marginal social benefit function has the same vertical intercept as the demand curve and one half the slope (one half in absolute value). The marginal cost of injections is a constant $8. a. With a competitive market, what price and quantity will prevail, assuming that there is no government intervention? b. Explain why the demand curve and marginal social benefit functions are different in this case. What is the socially optimal quantity in the market? c. What government policies could be used to bring about the optimal outcome?

Q: When a man invests in controlling weeds and trash that tend to accumulate in his yard, both he and his neighbors benefit from his action. Is an externality associated with his private decision? If so, explain its effect, and determine whether the efficient level of weed control occurs when the individual invests in weed control.

Q: When peach canners process fresh peaches, they produce three products. The first, canned peaches, is sold in the marketplace. The others, liquid and solid wastes, are by-products that must be removed. The liquid is sometimes temporarily kept in holding ponds and later released into a nearby stream or sewer. Liquid dumped in the stream represents a negative externality to downstream users. In the peach growing region, the marginal external costs of the canning process have been estimated as: MEC = 0.000043Q, where Q represents output of canned peaches in cases per week. The marginal cost of canning peaches (ignoring MEC) is: MC = 2.00 + 0.000157Q, and the demand for canned peaches is: P = 9.00 - 0.000243Q. a. How many cases of peaches will be produced per week during the growing season, and what will the selling price per case be if producers ignore the costs imposed on others? b. If producers are forced to incorporate the marginal external costs into their production decisions, what will the new production rate and selling price be? c. In taking account of the external costs imposed on others (part b), what was the impact on the selling price and production rate of canned peaches? Explain the impact on market efficiency.

Q: The market for paper in a particular region has the supply and demand curves: QD = 160,000 - 2,000P QS = 40,000 + 2,000P, where Q is measured in hundred-pound lots, and P is price per hundred-pound lot. There is currently no attempt to regulate the dumping of effluent into streams and rivers by the paper mills. As a result, dumping is widespread. The marginal external cost associated with the paper production is given by the expression: MEC = 0.0002Q. a. Calculate the competitive price and output, assuming that no attempt is made to monitor or regulate the dumping of effluent. b. Determine the socially optimal levels for price and output. If your answers in (a) and (b) are different, explain the source of the difference. c. Sketch a diagram showing the costs or benefits to society of allowing the market to operate in an unregulated fashion.

Q: A plastics factory emits water pollutants into a nearby river. The marginal private cost of producing plastics is constant, the marginal external cost of the pollutants increases with the quantity of plasticis, and the demand for plastics is downward sloping. What happens to the socially optimal level of output and market price if the marginal external cost curve shifts upward? A) Optimal price and quantity decrease B) Optimal price increases, optimal quantity remains unchanged C) Optimal price increases, optimal quantity decreases D) Optimal price and quantity decline

Q: A plastics factory emits water pollutants into a nearby river. The marginal private cost of producing plastics and the marginal external cost of the pollutants are both constant with respect to the quantity of plastics produced. If the demand for plastics is downward sloping, what happens to the socially optimal level of output and market price if the demand curve for plastics shifts rightward? A) Optimal price and quantity increase B) Optimal price increases, optimal quantity remains unchanged C) Optimal price remains unchanged, optimal quantity increases D) Optimal price and quantity remain unchanged

Q: Loud music from a neighbor's party is A) a negative externality whether or not you like it. B) a positive externality whether or not you like it. C) a positive externality if you like the music, and a negative externality if you don't. D) a negative externality if you like the music, and a positive externality if you don't. E) not an externality.

Q: A positive externality is shown by a marginal social benefit (MSB) curve that is A) above and to the right of the demand curve for the good that generates it. B) below and to the left of the demand curve for the good that generates it. C) above and to the left of the supply curve for the good that generates it. D) below and to the right of the supply curve for the good that generates it. E) positively related to both the supply curve and the demand curve for the good that generates it.

Q: Due to externalities generated by home landscaping, its price A) is above the optimal level, and quantity that is below the optimal level. B) is below the optimal level, and quantity that is above the optimal level. C) and quantity traded are both above the optimal level. D) and quantity traded are both below the optimal level. E) must fall in order for the market to reach equilibrium.

Q: Because of the kind of externalities that tend to be generated from general R&D resources bought by firms, the equilibrium price of R&D A) is above the optimal level, and quantity is below the optimal level. B) is below the optimal level, and quantity is above the optimal level. C) and quantity of R&D are both above the optimal level. D) and quantity of R&D are both below the optimal level. E) must fall in order for the market to reach equilibrium.

Q: Which of the following is a negative externality connected to attending college? A) The fact that completion of a college degree acts as a signaling mechanism to employers. B) The fact that other costs, such as books and materials, are incurred in addition to tuition and fees. C) The fact that your college has required that all individuals living in student housing either get or show they have already obtained vaccinations against all communicable diseases. D) The fact that the people in the next room play loud music at hours you want to sleep. E) The fact that you will get benefits from college that you don't currently anticipate.

Q: Figure 18.1All producers in the corbomite industry dump wastes in the river in the production of their output.Given the information in Figure 18.1, the efficient output in the corbomite industry is:A)B) Q0.C) Q1.D) Q2.

Q: Figure 18.1All producers in the corbomite industry dump wastes in the river in the production of their output.Given the information in Figure 18.1, the competitive output in the corbomite industry is:A) Q0.B) Q1.C) Q2.D) any level as long as price is P0.

Q: The marginal benefit and marginal private cost curves for aphrodisiacs are given as follows: MB = 200 - Q MPC = Q In addition to private costs, there is a marginal external cost of $10 per unit of output. What is the efficient level of output? A) 0 B) 55 C) 95 D) 100 E) none of the above

Q: Which of the following is a negative externality connected to automobile transportation? A) Driving faster than the 65 mph speed limit is not allowed, even though individuals are able to do it, and many want to. B) In an accident, a person who chooses not to wear a seatbelt becomes an object moving around the inside of the car, possibly hitting other, belted-in, passengers with lethal force. C) Gasoline is taxed on a per-gallon basis. D) Gasoline is imported, and thus increases the trade deficit. E) While stuck in traffic, you have a chance to listen to your favorite CD, which you haven't had the time to do in other places.

Q: The presence of pollution in the trucking industry leads in the long run to dynamic inefficiencies because A) marginal external cost rises over time. B) marginal external cost is constant over time. C) average private cost in trucking is lower than average social cost, so that some trucking firms remain in the industry (or are induced to enter) when efficiency calls for them to leave (or stay out). D) average private cost in trucking is higher than average social cost, so that some firms trucking firms exit the industry when efficiency calls for them to stay (or for more firms to enter). E) fewer resources are devoted to transportation than the economy really needs.

Q: Because air cargo as an industry involves the generation of pollutants in engine exhaust, the equilibrium price of air cargo services A) is above the optimal level, and quantity is below the optimal level. B) is below the optimal level, and quantity is above the optimal level. C) and quantity of trucking services are both above the optimal level. D) and quantity of trucking services are both below the optimal level. E) must fall in order for the market to reach equilibrium.

Q: Because trucking as an industry involves the generation of pollutants in engine exhaust, A) the supply curve of trucking services overstates the true cost of providing those services. B) the supply curve of trucking services understates the true cost of providing those services. C) the demand curve for trucking services overstates the true benefit of providing those services. D) the demand curve for trucking services understates the true benefit of providing those services. E) the market for trucking services will always be away from equilibrium by an amount equal to the value of the externality.

Q: The presence of pollution in the dry cleaning industry leads in the long run to dynamic inefficiencies because A) people will buy fewer clothes that need dry cleaning than they otherwise would have. B) people will develop substitutes for dry cleaning that are wasteful. C) firms will be induced to leave the industry because of artificially high costs. D) firms whose average private cost is less than price will stay in (or enter) the dry cleaning industry even though their average social cost exceeds price. E) firms whose average private cost exceeds the price will exit (or fail to enter) the dry cleaning industry even though their average social cost is less than price.

Q: Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, the equilibrium price A) and output are too low to be optimal. B) and output are too high to be optimal. C) is too low to be optimal, and equilibrium quantity is too high. D) is too high to be optimal, and equilibrium quantity is too low. E) is optimal, but there is an excess supply.

Q: Constructing plastic containers produces air pollutants. Therefore, in the market for plastic containers, A) the marginal social cost curve is above and to the right of the demand curve. B) the marginal social cost curve is below and to the left of the demand curve. C) the marginal social cost curve is above and to the left of the supply curve. D) the marginal social cost curve is below and to the right of the supply curve. E) there is a gap between quantity supplied and quantity demanded in equilibrium.

Q: Externalities A) are not reflected in market prices, so they can be a source of economic inefficiency. B) do become reflected in market prices, so they can be a source of economic inefficiency. C) are not reflected in market prices, so they do not adversely affect economic efficiency. D) do become reflected in market prices, so they do not adversely affect economic efficiency. E) may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event.

Q: Use the following statements to answer this question: I. Majority-voting always leads to an economically efficient outcome. II. Majority-voting may generate too much or too little of a particular public good. A) I and II are true B) I is true and II is false C) I is false and II is true D) I and II are false

Q: How does government provision of public goods solve the free rider problem? A) Governments can impose compulsory taxes to pay for public goods. B) Governments can convert nonrival goods to rival goods by assigning property rights. C) Governments can tax public goods to prevent over-use of the resources. D) Governments cannot solve the free rider problem

Q: Efficient voting outcomes would assign weights to each vote that are: A) equal. B) egalitarian. C) higher for the median voter and lower for other voters. D) proportional to the voter's strength of preference.

Q: Majority-rule voting A) usually emphasizes the preferences of extremist voters on one side or the other. B) usually allows extremist voters to band together and swamp the preferences of the median voter. C) never reflects the preferences of the median voter. D) reflects the preferences of the median voter. E) generates economically efficient outcomes in most cases.

Q: Majority-rule voting A) is economically efficient. B) is never economically efficient. C) may or may not be efficient, depending upon the preferences of the voters. D) is economically efficient only in a democracy. E) is economically efficient only if there is a median voter.

Q: Smog Corporation and Grimy Corporation emit pollution in their production processes. The local government has established a standard for the pollution levels of Smog Corporation and Grimy Corporation of 25,000 units of pollution. To ensure this level of pollution, the government has allocated 15,000 pollution permits to Smog Corporation and 10,000 pollution permits to Grimy Corporation. Smog Corporation has the following demand function for pollution emission permits:= 15,000 - . Grimy Corporation's demand function for pollution emission permits is:= 13,000 - . Is the government's allocation of pollution permits efficient? If the government allowed the corporations to trade permits, would the firms be motivated to trade? If so, what would be the efficient level of trading?

Q: Smog Corporation and Grimy Corporation emit pollution in their production processes. The local government has established a standard for the pollution levels of Smog Corporation and Grimy Corporation of 25,000 units of pollution. To ensure this level of pollution is achieved efficiently, the government sells permits to the corporations that entitle them to emit a unit of pollution. Smog Corporation has the following demand function for pollution emission permits: = 15,000 - . Grimy Corporation's demand function for pollution emission permits is: = 13,000 - .What is the equilibrium price of pollution permits? If the government makes the standard more stringent and allows only 15,000 units of pollution, what happens to the equilibrium price of pollution permits?

Q: The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. A 50 gallon can of recyclable trash costs a resident $3.50 to be collected. The marginal social cost of garbage disposed is: MSCd (gd) = 12.50 where gd is a 50 gallon drum of garbage disposed. The marginal social cost of garbage recycled is: MSCr (gr) = 2.50gr. The marginal benefit function of garbage removed from residences is: MB(gd, gr) = 800 - 2(gd+ gr). Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? How much will each resident recycle with this payment plan? Is this level of disposal and recycling efficient? Why or why not? What is the optimal level of garbage disposed and garbage recycled in Econoville? How can Econoville encourage residents to dispose and recycle the optimal amounts of garbage?

Q: The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. The marginal social cost of garbage disposed is: MSCd (gd) = 15.50, where gd is a 50 gallon drum of garbage disposed. The marginal benefit function of garbage removed from residences is: MB(g) = 800 - 2g. Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? Is this level of disposal efficient? Why or why not? Suppose the marginal cost of recycling is: MSCr (gr) = 2.50gr. The marginal benefit of garbage removed from residences is: MB(gd, gr) = 800 - 2(gd+ gr). What is the optimal level of garbage disposed and garbage recycled in Econoville?

Q: The city of Econoville currently does not charge a fee to residents to use the city garbage services. The marginal social cost of garbage is: MSCd (gd) = 23gd, where gd is tons of garbage disposed per year. The marginal benefit function of garbage removed from residences is: MB(g) = 1,000 - 2g. Given the lack of a payment plan for garbage disposal, what level of garbage are the city residents disposing each year? Is this level of disposal efficient? Why or why not? Suppose the marginal cost of recycling is: MSCr(gr) = 46gr. The marginal benefit of garbage removed from residences is: MB(gd, gr) = 1,000 - 2(gd+ gr). What is the optimal level of garbage disposed and garbage recycled in Econoville?

Q: Ms. Moneynickel has a monopoly in oil refinement in the local market. The demand for Ms. Moneynickel's oil is: P = 75 - q. The relevant marginal revenue function is: MR(q) = 75 - 2q. Ms. Moneynickel's marginal cost function is: MC(q) = 5q. In the refinement of oil, Ms. Moneynickel emits pollution that has the marginal external cost function: MEC(q) = What level of output will Ms. Moneynickel select to maximize profits? What is the marginal social cost of Ms. Moneynickel's profit maximizing output? What do consumers pay for Ms. Moneynickel's refined oil? Is this level of output efficient? Should more or less oil be refined to reach the optimum output level? Should the local government charge Ms. Moneynickel a pollution fee for each unit of oil she refines?

Q: Ms. Moneynickel has a monopoly in oil refinement in the local market. The demand for Ms. Moneynickel's oil is: P = 65 - q. The relevant marginal revenue function is: MR(q) = 65 - 2q. Ms. Moneynickel's marginal cost function is: MC(q) = In the refinement of oil, Ms. Moneynickel emits pollution that has the marginal external cost function: MEC(q) = What level of output will Ms. Moneynickel select to maximize profits? What is the marginal social cost of Ms. Moneynickel's profit maximizing output? What do consumers pay for Ms. Moneynickel's refined oil? Is this level of output efficient? Should more or less oil be refined to reach the optimum output level? Should the local government charge Ms. Moneynickel a pollution fee for each unit of oil she refines?

Q: Mr. Barnes has a monopoly in the production of power in the local market. The demand for Mr. Barnes power is: P = 100 - 0.25q  MR(q) = 100 - 0.5q. Mr. Barnes marginal costs are constant at 5. In the generation of power, Mr. Barnes plant emits pollution that causes marginal external damages according to: MEC(q) = 0.05q. If the local government does nothing, how much will Mr. Barnes produce to maximize profits? What is the marginal social cost of his level of output? What price do consumers pay for each unit of Mr. Barnes' output? Is this level of production optimal? Should the local government institute a pollution fee? If so, what is the optimal fee?

Q: Mr. Barnes operates a power plant in the local market. Mr. Barnes' marginal cost function is: MC(q) = 2 + 0.1q. Mr. Barnes can sell all the output he produces for $9 per unit. In generating power, Mr. Barnes also emits pollution that causes damage to the local community. The marginal external cost of his production is: MEC(q) = 0.05q. What level of output will Mr. Barnes choose to maximize profits? Is this level of production efficient? If not, what could the local community do to ensure efficiency?

Q: Visitors to National Parks cause damage and increased maintenance costs on the parks. The marginal external cost of visitors is: MEC(q) = 1.5q, where q is the number of visitors to National Parks in thousands. The marginal benefit to visitors of attending National Parks is: MB(q) = 75 - 0.5q. If the Parks do not charge a fee, how many visitors will attend the National Parks. What is the optimal level of park visitation? If the National Parks were to establish a park visitation fee, what is the optimal level of the fee?

Q: The operation of large trucks in Econoville causes damages to public roads. The marginal external cost function of operating large trucks in Econoville is: MEC(m) = 0.05m, where m is the number of miles large trucks are driven in Econoville in thousands. The marginal benefit of large truck operation in Econoville is: MB(m) = 1,000 - 2m. How many miles do large trucks drive in Econoville if they are not forced to pay for damage to roads? If Econoville charges a fee for every thousand miles a large truck drives in Econoville, what is the optimal fee? If Econoville sets a standard for the quantity of miles large trucks drive in Econoville, what is the optimal standard? If the profitability of large truck operation in Econoville increases the marginal benefit function to: MB(m) = 1,500 - 2m and Econoville is using a standard, is it optimal for Econoville to increase the standard?

Q: The city of Econoville has 100 residents who each have the identical demand function for roads: P = 100 - 1.99Q. The marginal cost of providing road area is: MC(Q) = 2,500 + Q. Road area is a public good. That is, if the city of Econoville provides public access to roads, all of the residents can enjoy the roads. If the city of Econoville does not offer public roads, how much area of roads will each individual resident maintain on their own? What is the optimal area of public roads in Econoville? What flat road tax should Econoville implement on residents for units of roads the city provides? With this flat tax, what is the total contribution of each resident for the roads?

Q: The city of Econoville has 100 residents who each have the identical demand function for lake area: P = 1,000 - 9.95Q. The marginal cost of maintaining lake area is MC(Q) = 1,500 + 5Q. Lake area is a public good. That is, if the city of Econoville provides public access lake area, all of the residents can enjoy the area. If the city of Econoville does not offer public lake area, how much area of lakes will each individual resident maintain on their own? What is the optimal area of public lakes in Econoville? What flat lake tax should Econoville implement on residents for units of lake area the city provides? With this flat tax, what is the total contribution of each resident for the lake?

Q: The city of Econoville has 100 residents who each have the identical demand function for park area: P = 10 - Q. The marginal cost of providing parks is MC(Q) = 10 + 10Q. Park area is a public good. That is, if the city of Econoville provides park area, all of the residents can enjoy the area. If the city of Econoville does not offer public park area, how much area of parks will each individual resident maintain on their own? What is the optimal level of public parks in Econoville?

Q: The European demand for access to satellite transmissions can be divided into three groups: A, B, and C. The demand curves for the three groups are: PA = 500 - 2QA (for Q < 250) PB = 300 - QB (for Q < 300) PC = 400 - 2QC (for Q < 200), where Q = number of hours access per month, and P = price per hour. Satellite transmission is a pure public good with zero marginal cost. a. Explain the difference between horizontal and vertical summation of demand curves. Derive the horizontally and vertically summed demand curves. Explain the circumstances under which vertical summation is appropriate. When is horizontal summation appropriate? b. Determine the efficient quantity of satellite service. Explain the process of finding the efficient quantity including a justification for the demand curve. What price is optimal?

Q: Three individuals consume a public good, and their demands are expressed as: P1 = 1.5 - 0.005Q (for Q < 300); P2 = 4.5 - 0.007Q (for Q < 643); P3 = 3.0 - 0.002Q (for Q < 1500), where P represents price in dollars per unit and Q represents output in units per day. The marginal cost of providing the service is given as a constant $5.00 per unit. Determine the efficient level of output of this public good.

Q: Which of the following is NOT a public good? A) Public fireworks display B) National defense C) Books in a public library D) Clean air

Q: What type of good is clean air? A) Rival and exclusive B) Nonrival and exclusive C) Rival and nonexclusive D) Nonrival and nonexclusive

Q: A consumer or producer who does not pay for use of a nonexclusive good but expects others to pay is known as a: A) free rider. B) price setter. C) fringe element. D) none of the above

Q: To find the social marginal benefit of public goods, one needs to A) sum the consumers' demand curves vertically. B) sum the consumers' demand curves horizontally. C) sum the marginal private benefit and the marginal external benefit for each unit. D) sum the marginal private cost and the marginal external cost for each unit. E) subtract the individual portion of the tax burden necessary for the government to provide the good from the demand curve of each consumer who desires the good.

Q: The government provides public education because A) public education is a public good. B) public education is non-rival and nonexclusive. C) private education is rival and exclusive. D) public education combats the negative externalities of private education. E) public education provides positive externalities.

Q: The provision of an education in public school is A) exclusive and rival. B) exclusive and non-rival. C) nonexclusive and non-rival. D) nonexclusive and rival. E) a public good, regardless of exclusivity and rivalness.

Q: A lighthouse is a public good A) because it doesn't cost any more to light the way for 105 ships than it does to light the way for 104 ships, but for no other reason. B) because there is no way to prevent those who haven't contributed to the lighthouse from seeing better because of it, but for no other reason. C) because the government produces it, and for no other reason. D) for the reasons in A and B together. E) for the reasons in A, B, and C together.

Q: Access to the movie "Casablanca," showing in a half-empty theater, is A) a rival good because other movies are available in other theaters. B) a rival good because it is used up as it is seen. It is not enjoyed as a whole all at once. C) a rival good because individuals were willing and able to pay a positive amount to get in to the theater. D) a non-rival good because no other movie is available in that theater. E) a non-rival good because when a new viewer enters the theater, there is not less of the movie for everybody else.

Q: Access to the movie "Casablanca," showing in a half-empty theater, is A) a public good because individuals watch movies together. B) a public good only if the theater is run by the government. C) not a public good because it is a rival good. D) not a public good because it is an exclusive good. E) not a public good because it is both a rival good and an exclusive good.

Q: Corn flakes are A) a rival good because many firms produce them. B) a rival good because if another person wants some corn flakes society has to use additional resources to produce corn flakes for that person. C) a non-rival good because there are only a few firms in the industry. D) a non-rival good because even if another person wants some corn flakes so many corn flakes are produced that no additional resources are used to satisfy this new customer's needs. E) a public good.

Q: Which of the following is a public good? A) Telephone service B) Broadcast TV C) A daily newspaper D) The Red Cross E) all of the above

Q: The most popular state park in the Craggy Mountains recently reached the point where a common property resources problem arose too many people hunted for wild boar each season. The boar population became over hunted and was in peril of extinction. An economist at the local university studied the problem for the park management and estimated the following cost and revenue relationships: Demand: P = 10 - 0.008Q Marginal social cost: MSC = 1.00 + 0.0067Q Marginal private cost: MPC = 1.00 + 0.0010Q. The variable Q represents the number of boars killed each season and price P is in hundreds ($). a. Determine the equilibrium number of boars killed per season, when there is unlimited access to the park. b. Determine the per boar fee that must be charged to reduce the harvest to the efficient level. c. Determine the social cost of unlimited hunting of the boar.

Q: The marginal social cost and private cost curves for a particular common property resource are upward sloping. What happens to the gap between teh actual quantity and the socially optimal quantity as the demand for the resource becomes more inelastic? A) Gap widens B) Gap declines C) Gap does not change D) We do not have enough information to answer this question

Q: Although digital storage costs have declined sharply in the past few years, many universities and companies still have limited storage space for email messages and impose a fixed limit on the amount of file storage space per user. May we view this as a common property resource problem, and do the fixed limits resolve the problem? A) Yes, the storage space used by one person is not available to another person, and the storage limit is a type of quota that allocates the property rights to the storage space. B) Yes, the storage space used by one person is not available to another person, and the storage limit represents a form of single-person ownership that resolves the common property resource problem. C) No, one person's use of the storage space does not have an impact on other people, so this is not a common property resource problem. D) This is an example of a common property resource problem, but the fixed limits on storage space do not resolve the problem.

Q: Suppose the private marginal cost of pumping water from an aquifer remains constant as the quantity of water pumped increases, and the marginal social cost is upward sloping. If the demand for water shifts to the right as population increases, then the amount of water pumped based only on private costs ________ and the social cost of the common property resource ________. A) decreases, decreases. B) decreases, increases C) increases, decreases D) increases, increases

Q: For some fisheries in the U.S., the state or federal government imposes "gear restrictions" that limit the size of boats, nets, or other equipment that may be used to harvest the fish in a given body of water. The purpose of the gear restrictions is to: A) prevent everyone from using the common property resource (fish). B) make it harder for other members of society to harvest the resource. This reduces the opportunity cost of the resource for other members of society, and the marginal social cost is closer to the private cost. C) increase the private cost of using the resource so that the private cost is closer to the marginal social cost. D) maintain traditional ways of harvesting fish, which is valuable for promoting tourism.

Q: Which of the following is NOT an example of a common property resource? A) Water in underground aquifers B) Public highways in large cities C) Fish stocks in open waters D) Outdoor concerts

Q: The difference between the marginal social cost and the private cost of a common property resource represents: A) the social discount rate. B) a deadweight loss. C) is generally negative because the people who use the resources assign higher value to them than other members of society. D) the opportunity cost of reducing the resource by one unit for other members of society.

Q: Common property resources like fish stocks in open waters tend to be over-utilized because: A) the marginal social cost is less than the private marginal cost. B) the marginal social cost is always equal to the private marginal cost. C) the marginal social cost is greater than the private marginal cost. D) none of the above

Q: One difficulty in managing common property resources is that A) the monopoly firm that owns such a resource typically has great economic power, so that breaking it up into smaller firms is not practical. B) the monopoly firm that owns such a resource typically is a natural monopoly, so that it is undesirable to break it up into smaller firms. C) many common property resources are so small that management would have to be done on a micro level, greatly increasing government activity in the economy. D) many common property resources are so vast that single ownership or management of them is not practical, especially if they cross international borders. E) more and more of them come into being as pollution increases.

Q: Common property resources tend to be A) overused. B) underused. C) not used at all. D) efficiently used. E) used by the government only.

Q: Which of the following move the handling of a common property resource closest to efficiency? A) ensuring that the sellers of the resource are perfectly competitive B) ensuring that the seller of the resource is a monopolist C) banning the sale of the resource D) banning the use of the resource E) assigning a usage fee for access to the resource

Q: Common property rights A) increase efficiency over individual property rights. B) enable the Coase theorem to work. C) are responsible for the increasing success of preservation of African elephants. D) are responsible for the increasing success of preservation of worldwide fishing resources. E) result in faster depletion of resources than do individual property rights.

Q: You share a room in a large apartment complex with three other students, and you want to have an end-of-semester party that may become very noisy. Your lease clearly states that you are not to disturb the other residents, but you believe the Coase Theorem implies that you should be able to bargain with your neighbors and reach an agreement on hosting the party. However, you are wrong and bargaining is unlikely to achieve an efficient outcome. Which condition of the Coase Theorem is not met in your situation? A) Property rights are not clearly assigned. B) The costs of bargaining are too high. C) You must have the property right to host noisy parties for the Coase Theorem to work in this case. D) All of the Coase Theorem conditions are met.

Q: When one party suffers negative external effects due to the actions of another party, a lawsuit may not lead to the efficient outcome if: A) property rights are not clearly assigned. B) the parties have incomplete information. C) the legal costs of the lawsuit are too high. D) All of the above

Q: Suppose your neighbor likes to repair motorcycles in his front yard during evenings and on weekends, and he earns $400 per week from this work. However, the sight of piles of greasy motorcycle parts and the additional noise and traffic caused by his customers reduces your value of living in this neighborhood by $300 per week. If you have a right to live in peace and quiet, the efficient outcome can be achieved as long as the bargaining costs: A) are less than $100. B) are greater than $100. C) only include opportunity costs. D) The Coase Theorem assumes zero transaction costs, so the bargaining costs must be zero in order to achieve the efficient outcome.

Q: Suppose your neighbor likes to repair motorcycles in his front yard during evenings and on weekends, and he earns $400 per week from this work. However, the sight of piles of greasy motorcycle parts and the additional noise and traffic caused by his customers reduces your value of living in this neighborhood by $300 per week. If you have a right to live in peace and quiet, how can you achieve the efficient outcome? A) He cannot afford to pay you enough money to allow him to work on motorcycles. B) He pays you some value between $0 and $100 to allow his home business. C) He pays you some value between $300 and $400 to allow his home business. D) He pays you at least $400 to allow his home business.

Q: Suppose your neighbor likes to repair motorcycles in his front yard during evenings and on weekends, and he earns $400 per week from this work. However, the sight of piles of greasy motorcycle parts and the additional noise and traffic caused by his customers reduces your value of living in this neighborhood by $500 per week. If your neighbor has a right to operate this business, how can you achieve the efficient outcome? A) You cannot afford to pay him enough money to stop working on motorcycles, and he continues to operate the business. B) You pay him some value between $0 and $100 to close his home business. C) You pay him some value between $400 and $500 to close his home business. D) You pay him at least $500 to close his home business.

Q: Suppose your neighbor likes to repair motorcycles in his front yard during evenings and on weekends, and he earns $400 per week from this work. However, the sight of piles of greasy motorcycle parts and the additional noise and traffic caused by his customers reduces your value of living in this neighborhood by $300 per week. If your neighbor has a right to operate this business, what is the efficient outcome? A) He continues to operate the business. B) You can pay him to move the business to another location. C) He pays you to let him continue working on motorcycles at his home. D) There is no efficient outcome from this situation.

Q: Trisha's Fashion Boutique is considering a profit sharing arrangement with her employees. Currently, the employees receive an annual bonus. In a "Boom" market, Trisha can sell all the output she produces for $225 per unit. In a "Bust" market, Trisha can sell all the output she produces for $125 per unit. The probability of a "Boom" market is 75% and the probability of a bust market is 25%. Trisha's total cost function (including bonus payments to employees) is: TC(Q) = 75Q + 2.5Q2. The marginal cost function is: MC(Q) = 75 + 5Q. The profit sharing plan would pay employees 30% of profits. However, due to greater cost saving initiatives from employees, Trisha's total cost function becomes: TC(Q) = 50Q + 2Q2. The relevant marginal cost function becomes: MC(Q) = 50 + 4Q. Which plan offers Trisha the greatest expected profits for herself? Suppose the employees will only approve a profit sharing plan if they are guaranteed their portion of profits will be at least $400. Will the employees approve of the profit sharing program?