Economics MCQs

Page No. 201

When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students it is an example of ?


aan attempt to internalize a positive externality


b an attempt to internalize a negative externality


ca Pigouvian tax


da command-and-control policy



A pigovian tax on pollution ?


aSets the quantity of pollution


b reduces the incentive for technological innovations to further reduce pollution


cSets the price of pollution


ddetermines the demand for pollution rights.



Which of the following is true regarding tradable pollution permits and Pigouvian taxes ?


aAll of these answers are true


bPigouvian taxes and tradable pollution permits create an efficient market for pollution.


cTradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest cost.


dTo set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights.



Roberto and Thomas live in a university hall of residence Roberto values playing loud music at a value of €100. Thomas values Pease and quiet at a value of €150. Which of the following statements is true ?


aIt is efficient for Roberto to stop playing loud music regardless of who has the property right to the level of sound


b it is efficient for Roberto to continue to play loud music


c It is efficient for Roberto to stop playing loud music only if Thomas has the property right to peace and quiet


d It is efficient for Roberto to stop playing loud music only if Roberto has the property right to play loud music



To internalize a positive externality an appropriate public policy response would be to ?


aban the good creating the externality


btax the good


csubsidize the good


d have the government produce the good until the value of an additional unit is zero


View Answer subsidize the good

The most efficient pollution control system would ensure that ?


athe regulators decide how much each polluter should reduce its pollution.


b no pollution of the environment is tolerated


ceach polluter reduces its pollution an equal amount


dthe polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount



The government engages in a technology policy ?


aby allocating tradable technology permits to high technology industry.


bto internalize the positive externality associated with technology-enhancing industries.


cto help stimulate private solution to the technology externality


dto internalize the negative externality associated with industrial pollution



A positive externality (that has not been internalized) caused the ?


aequilibrium quantity to exceed the optimal quantity


b equilibrium quantity to equal the optimal quantity


coptimal quantity to exceed the equilibrium quantity


d equilibrium quantity to be either above or below the optimal quantity



A positive externality generates ?


aa social cost curve that is above the supply curve (private cost curve) for a good B. none of these answers


ba social value curve that is above the demand curve (private value curve) for good


ca social value curve that is below the demand curve (private value curve) for a good


d none of these answers



An externality is ?


a the benefit that accrues to the buyer in a market


bthe cost that accrues to the seller in a market


cnone of these answers


d The uncompensated impact of one person’s actions on the well-being of a bystander



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