Question 13) An externality refers to the idea that

13) An externality refers to the idea that

A) explicit costs differ from implicit costs.

B) decision-makers do not internalize all the costs.

C) we cannot do anything that does not affect other people.

D) private and internal costs differ.

14) Your neighbor has just planted some fragrant flowers. The wonderful scent drifts into your

room and makes you happy.

A) This scent is an internal cost to you.

B) This cannot be an externality since you are enjoying the scent.

C) This is an externality since you get a benefit from your neighbor’s flowers.

D) The social cost of this activity is entirely borne by you neighbor.

15) If all firms had to bear all the social costs of their actions, we should observe marginal cost

curves

A) of all firms shifting up.

B) of some firms shifting up, of some others shifting down, and of the rest not shifting at all.

C) of all firms that had generated externalities shifting up while there would be no change for the

rest of the firms.

D) of some firms shifting up and of the rest shifting down.

16) In order to correct the problems associated with external costs,

A) the signals given to the economy must change so that decision-makers will take into account

all the costs of their actions.

B) the government must take over production of industries that are responsible for most of the

pollution.

C) standards must be established that make it illegal to pollute.

D) the prices of all goods must be raised so people will consume less of the world’s resources.

17) Which of the following methods could be used to correct for external costs?

A) Impose a tax or an effluent fee on the offenders.

B) Have the offender clean up the pollution it caused.

C) Require firms in the industry to install pollution control devices.

D) All of the above would be appropriate.

18) Suppose cars are taxed according to the amount of pollution they emit per gallon of gasoline

consumed. We would expect to observe all of the following EXCEPT

A) an increase in quantity demanded of less-polluting automobiles and a reduction in quantity

demanded of more-polluting automobiles.

B) an increase in quantity demanded of more fuel-efficient cars.

C) an increase in production of automobiles that were less polluting.

D) an increase in the miles driven.

19) The most efficient way to get firms to reduce pollution is to

A) set uniform emission standards and require all firms to meet the standards.

B) make the worst polluters shut down and go out of business.

C) make them pay for the social costs of production and let them decide how to respond to the

higher costs.

D) provide firms and consumers with the information about the effects of their actions and

encourage them to behave responsibly.

20) When a polluter has to bear the full social cost of their actions, they will

A) weigh the costs and benefits of each potential action and might decide to not stop polluting by

paying a fine.

B) go out of business since pollution abatement is expensive.

C) will always decide to reduce the amount of pollution by reducing the quantity they produce.

D) increase the price of the product and the quantity produced to pay for the additional costs.

21) To efficiently improve environmental quality, it is usually

A) better to focus on the hardest areas to clean up first since these usually are the biggest

problems.

B) more appropriate to concentrate on the physical quantities of pollution rather than on

economic costs.

C) best to set up stringent emission standards that must be followed by everyone.

D) better to focus on economic damages rather than physical quantities of pollution.

22) A uniform tax according to the physical quantities of pollution may not be the appropriate

way to correct for an externality because

A) it places a unfair burden on small producers.

B) a uniform tax can only account for social costs and not external costs.

C) a firm will reduce production.

D) it may not adequately account for economic damages.

23) Which of the following might be a way that an automobile driver’s pollution costs could be

internalized?

A) The driver could purchase abatement equipment for her car.

B) The state could eliminate the gas tax.

C) The state could pay a gas subsidy for everyone who drives.

D) The state could allow her to drive in the HOV lane.

24) When an external cost exists that is NOT taken into account in the production of a product,

A) the level of output is too low, and the supply curve should shift to the right to account for the

externality.

B) the level of output is optimal, and there should be no change in the supply curve.

C) the price of the product is too high, and production should be expanded to lower the price.

D) the level of output is too high, and the supply curve should shift to the left to account for the

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.