Question 1

Who loses surplus when consumers in a market are forced to internalize a negative externality?

Accepted Answer

A)  Consumers
B)  Producers
C)  Others affected by the externality
D)  Both producers and consumers lose surplus when negative externalities are internalized.E) A) and C)
F) None of the above

Question 2

The net increase to total surplus when a negative externality is internalized is due to:

Accepted Answer

A)  the transfer of surplus from those affected by the externality to the consumer.
B)  the reduced number of transactions in the market.
C)  the transfer of surplus from consumer or producer to those affected by the externality.
D)  None of these statements is true.E) A) and B)
F) A) and C)

Question 3

Who gains surplus when consumers in a market internalize a positive externality?

Accepted Answer

A)  Consumers
B)  Producers
C)  Others affected by the externality
D)  Both consumers and producers gain surplus when positive externalities are internalized.E) B) and C)
F) None of the above

Question 4

Total surplus in the presence of a positive externality that has not been internalized equals:

Accepted Answer

A)  consumer surplus + producer surplus - external benefit
B)  consumer surplus + producer surplus + external benefit
C)  consumer surplus - producer surplus - external benefit
D)  consumer surplus - producer surplus + external benefitE) B) and D)
F) C) and D)

Question 5

Who are the only ones not affected when a negative externality becomes internalized in a market?

Accepted Answer

A)  Producers
B)  Consumers
C)  Those affected by the externality
D)  All of these groups are affected when it becomes internalized.E) B) and D)
F) C) and D)

Question 6

A tax on cigarettes:

Accepted Answer

A)  increases total surplus.
B)  increases efficiency in the market.
C)  will increase both total surplus and efficiency in the market.
D)  like any tax,will always reduce surplus and efficiency in markets.E) B) and C)
F) A) and D)

Question 7

Correcting a market with an externality through taxation creates ___________ total surplus compared to correcting it through a quota.

Accepted Answer

A)  more
B)  less
C)  the same
D)  Any of these statements could be true depending on whether the tax is imposed on the buyer or seller.E) B) and D)
F) A) and D)

Question 8

If a Pigovian tax is levied on producers,the supply curve will shift:

Accepted Answer

A)  straight up,decreasing quantity.
B)  straight down,decreasing quantity.
C)  straight up,increasing quantity.
D)  straight down,increasing quantity.E) A) and D)
F) B) and C)

Question 9

When we add private benefits and external benefits together,the result is called:

Accepted Answer

A)  production benefits.
B)  social benefits.
C)  public costs.
D)  network benefits.E) A) and D)
F) C) and D)

Question 10

If companies who internalized an externality want to supply less at any given price compared to the original market supply,it must be a:

Accepted Answer

A)  positive externality.
B)  negative externality.
C)  network externality.
D)  social externality.E) B) and C)
F) A) and D)

Question 11

We typically call an external cost:

Accepted Answer

A)  a societal drain.
B)  a negative externality.
C)  a negative cost.
D)  a network externality.E) B) and D)
F) A) and D)

Question 12

If a Pigovian tax is not large enough,the resulting:

Accepted Answer

A)  outcome will not maximize surplus.
B)  quantity will be too high.
C)  outcome will be inefficient.
D)  All of these statements are true.E) A) and C)
F) C) and D)

Question 13

A Pigovian tax is a tax:

Accepted Answer

A)  meant to counter the effect of a negative externality.
B)  that increases efficiency in a market.
C)  that increases total surplus in a market.
D)  All of these statements are true.E) A) and B)
F) A) and C)

Question 14

A Pigovian tax imposed on consumers ___________ the price,and if the same tax were imposed on producers,it would _____________ the price.

Accepted Answer

A)  increases;increase
B)  increases;decrease
C)  decreases;increase
D)  decreases;decreaseE) None of the above
F) A) and B)

Question 15

All externalities:

Accepted Answer

A)  are harmful to society and create costs external to the decision maker.
B)  are beneficial to society and create benefits external to the decision maker.
C)  create either a cost or benefit to a person other than the person who caused it.
D)  are addressed by the government through taxation.E) A) and C)
F) None of the above

Question 16

An example of a positive network externality is:

Accepted Answer

A)  the telephone.
B)  Facebook.
C)  a union.
D)  All of these are examples of a positive network externality.E) C) and D)
F) A) and C)

Question 17

Total surplus in the presence of a negative externality that has not been internalized equals:

Accepted Answer

A)  consumer surplus + producer surplus - external cost
B)  consumer surplus + producer surplus + external cost
C)  consumer surplus - producer surplus - external cost
D)  consumer surplus - producer surplus + external costE) A) and C)
F) B) and C)

Question 18

When an externality is present in a market,and internalizing it increases the efficiency of the market,we can conclude it is a:

Accepted Answer

A)  negative externality.
B)  positive externality.
C)  network externality.
D)  It could be a negative or positive externality.E) A) and B)
F) None of the above

Question 19

We call costs that fall directly on an economic decision maker:

Accepted Answer

A)  private costs.
B)  social costs.
C)  external costs.
D)  network costs.E) B) and C)
F) B) and D)

Question 20

Who loses surplus when consumers in a market are forced to internalize a positive externality?

Accepted Answer

A)  Consumers
B)  Producers
C)  Others affected by the externality
D)  Both producers and consumers lose surplus when positive externalities are internalized.E) B) and C)
F) A) and B)

Exam 18: Externalities

Who loses surplus when consumers in a market are forced to internalize a negative externality?

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When an externality is present in a market,and internalizing it increases the efficiency of the market,we can conclude it is a:

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Who are the only ones not affected when a negative externality becomes internalized in a market?

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We typically call an external cost:

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If a Pigovian tax is levied on producers,the supply curve will shift:

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A Pigovian tax imposed on consumers ___________ the price,and if the same tax were imposed on producers,it would _____________ the price.

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If a Pigovian tax is not large enough,the resulting:

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A Pigovian tax is a tax:

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We call costs that fall directly on an economic decision maker:

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When we add private benefits and external benefits together,the result is called:

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The net increase to total surplus when a negative externality is internalized is due to:

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All externalities:

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If companies who internalized an externality want to supply less at any given price compared to the original market supply,it must be a:

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Total surplus in the presence of a positive externality that has not been internalized equals:

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Correcting a market with an externality through taxation creates ___________ total surplus compared to correcting it through a quota.

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Who loses surplus when consumers in a market are forced to internalize a positive externality?

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An example of a positive network externality is:

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Who gains surplus when consumers in a market internalize a positive externality?

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Total surplus in the presence of a negative externality that has not been internalized equals:

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A tax on cigarettes:

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A Pigovian tax imposed on consumers _ the price,and if the same tax were imposed on producers,it would ___ the price.

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