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1) When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students it is an example of ? a. an attempt to internalize a positive externality b. an attempt to internalize a negative externality c. a Pigouvian tax d. a command-and-control policy
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2) A pigovian tax on pollution ? a. Sets the quantity of pollution b. reduces the incentive for technological innovations to further reduce pollution c. Sets the price of pollution d. determines the demand for pollution rights.
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3) Which of the following is true regarding tradable pollution permits and Pigouvian taxes ? a. All of these answers are true b. Pigouvian taxes and tradable pollution permits create an efficient market for pollution. c. Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest d. To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights. e. Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.
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4) 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 ? a. It 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
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5) To internalize a positive externality an appropriate public policy response would be to ? a. ban the good creating the externality b. tax the good c. subsidize the good d. have the government produce the good until the value of an additional unit is zero
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6) The most efficient pollution control system would ensure that ? a. the regulators decide how much each polluter should reduce its pollution. b. no pollution of the environment is tolerated c. each polluter reduces its pollution an equal amount d. the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount
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7) The government engages in a technology policy ? a. by allocating tradable technology permits to high technology industry. b. to internalize the positive externality associated with technology-enhancing industries. c. to help stimulate private solution to the technology externality d. to internalize the negative externality associated with industrial pollution
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8) A positive externality (that has not been internalized) caused the ? a. equilibrium quantity to exceed the optimal quantity b. equilibrium quantity to equal the optimal quantity c. optimal quantity to exceed the equilibrium quantity d. equilibrium quantity to be either above or below the optimal quantity
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9) A positive externality generates ? a. a social cost curve that is above the supply curve (private cost curve) for a good b. none of these answers c. a social value curve that is above the demand curve (private value curve) for good d. a social value curve that is below the demand curve (private value curve) for a good
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10) An externality is ? a. the benefit that accrues to the buyer in a market b. the cost that accrues to the seller in a market c. none of these answers d. the compensation paid to a firm’s external consultants. e. The uncompensated impact of one person’s actions on the well-being of a bystander
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