Question 41) Refer to the above figure. It represents supply and demand for The Black Ash Steel

41) Refer to the above figure. It represents supply and demand for The Black Ash Steel

Company’s output. The firm’s plant belches large quantities of smelly fumes and black ash into

the air. Residents in the surrounding area have higher medical bills as a result. If the firm is

forced to pay the full social cost of its production, what will occur?

A) Black Ash’s supply curve will shift from SA to SB.

B) Demand for the firm’s steel will shift to the left.

C) The company’s supply curve will shift from SB to SA.

D) Black Ash will increase its own output to cover the cost increase.

42) Private costs are

A) external costs borne by private firms.

B) explicit costs rather than implicit costs.

C) costs borne by private members of society rather than governmental bodies.

D) costs borne solely by the individuals who incur them.

43) Costs borne solely by the individuals who incur them are

A) private costs.

B) social costs.

C) internality.

D) common property.

44) Which of the following is not a private cost?

A) The health insurance costs a firm must pay for its employees.

B) The pollution caused by a firm dumping its wastes into the river.

C) The coffee pot that Jan dropped and broke this morning.

D) The amount that a firm must pay for raw materials to make its product.

45) John raises bees to pollinate his apple trees. One of the bees just stung him. This is a(n)

A) private cost.

B) social cost.

C) internality.

D) common property.

46) John raises bees to pollinate his orchard. A couple of bees which escaped ended up

pollinating his neighbor’s orchard, so

A) John’s neighbor has received an internal cost of John’s bee-keeping.

B) John’s neighbor has received an external cost of John’s bee-keeping.

C) John’s neighbor has received an external benefit of John’s bee-keeping.

D) None of the above is correct.

47) External costs are

A) borne by individuals other than those who incurred them.

B) another term for implicit costs.

C) borne by the public but incurred by the government.

D) borne by the government but incurred by the public.

48) The sum of internal and external costs is

A) private costs.

B) social costs.

C) internality.

D) common property.

49) Social costs are

A) costs that are borne by the government.

B) the full cost borne by society whenever a resource use occurs.

C) borne by individuals who incur them.

D) another term for external costs.

50) The total costs of using a resource are made up of

A) private costs only.

B) external costs only.

C) social costs only.

D) internal and private costs only.

51) The sum of internal and external costs is

A) externalities.

B) social costs.

C) internalities.

D) private costs.

52) When a person drives an automobile, that individual is creating

A) internal costs only.

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