Question 83) An externality occurs whenever

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.

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