uestion 81) In the above figure, S1 represents the supply curve which includes private costs, and S2 is

81) In the above figure, S1 represents the supply curve which includes private costs, and S2 is

the supply curve which includes social costs. If the firm is producing a product that has external

costs that the firm does NOT have to pay, what will be the equilibrium price and quantity?

A) P1, Q4

B) P2, Q3

C) P4, Q1

D) P3, Q2

82) In the above figure, S1 represents the supply curve which includes private costs, and S2 is

the supply curve which includes social costs. If the firm is producing a product that has external

costs that the firm does have to pay, what will be the equilibrium price and quantity?

A) P1, Q4

B) P2, Q3

C) P4, Q1

D) P3, Q2

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.

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