QUESTION 1 One problem with the effectiveness of Pigovian taxes is:the tax does not directly compensate those who are affected by the externality.

QUESTION 1

1. One problem with the effectiveness of Pigovian taxes is:
2. A.the tax does not directly compensate those who are affected by the externality.
3. B.knowing whether to impose it on the consumer or producer.
4. C.identifying who is affected by the externality.
5. D.All of these are problems.

12 points  

QUESTION 2

1. When a negative externality is present in a market, total surplus is:
2. A.lower when buyers only consider private costs.
3. B.higher when buyers only consider private costs.
4. C.lower when buyers consider social costs.
5. D.None of these statements is true.

12 points  

QUESTION 3

1. The distribution of surplus received from a subsidy offered in a market where a positive externality is present depends on:
2. A.where the government gets the money to pay for the subsidy.
3. B.how the subsidy is distributed among those affected by the externality.
4. C.if those who are affected receive their true value of the externality.
5. D.None of these statements is true.

12 points  

QUESTION 4

1. A production or consumption quota that can be bought or sold is called:
2. A.a tradable allowance.
3. B.a buyers' or sellers' quota.
4. C.a tax.
5. D.a subsidy.

12 points  

QUESTION 5

1. One way to make consumers take a positive externality into account in their demand decision is to:
2. A.place a tax on the item.
3. B.subsidize the purchase of the item.
4. C.tax the producers of the item.
5. D.None of these statements is true.

12 points  

QUESTION 6

1. The effect of a government subsidy in a market where a positive externality is present is:
2. A.to increase surplus.
3. B.to increase efficiency.
4. C.to make consumers internalize the external benefit.
5. D.All of these statements are true.

12 points  

QUESTION 7

1. When positive externalities exist in a market, if it is internalized:
2. A.those who interact in the market will lose surplus.
3. B.those who interact in the market will gain surplus.
4. C.those who do not interact in the market, but are affected by the externality, will gain surplus.
5. D.None of these statements is necessarily true.

12 points  

QUESTION 8

1. Who is affected when a negative externality becomes internalized in a market?
2. A.Producers
3. B.Consumers
4. C.Those affected by the externality
5. D.All of these groups are affected when it becomes internalized.

12 points  

QUESTION 9

1. Total surplus in the presence of an externality that has not been internalized:
2. A.is greater than total surplus when the externality is internalized.
3. B.is less than total surplus when the externality is internalized.
4. C.is the same as total surplus when the externality is internalized.
5. D.is zero, since it has not been internalized.

12 points  

QUESTION 10

1. When a positive externality is internalized, efficiency increases by shifting the:
2. A.external benefit from those not involved in the market to those involved.
3. B.private cost from those involved in the market to those not involved.
4. C.private cost from those not involved in the market to those involved.
5. D.social cost from those not involved in the market to those involved.

12 points