Principles of Economics 2e Chapter 12 Test Bank Questions and Answers
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Principles of Economics
Institution
Principles Of Economics
Using the term "spillover" is a less formal means of describing
A. an externality.
B. social costUsing the term "spillover" is a less formal means of describing
A. an externality.
B. social costUsing the term "spillover" is a less formal means of describing
A. an externality.
B. social cos...
Principles of Economics 2e Chapter 12
Test Bank Questions and Answers
The supply and demand conditions facing a firm that makes widgets and generates a
negative externality by dumping a highly toxic sludge in a nearby river is given in the
table below.
The equilibrium price and quantity when social costs are taken into account are
A. Price = $55, Quantity = 30
B. Price = $40, Quantity = 55
C. Price = $30, Quantity = 20
D. Price = $30, Quantity = 80
✓ ~~~ A
The term ____________ refers to a market exchange that affects a third party who is
outside or external to the exchange.
A. social costs
B. spillover
C. market failure
,D. private costs
✓ ~~~ B
Using the term "spillover" is a less formal means of describing
A. an externality.
B. social costs.
C. private costs.
D. market failure.
✓ ~~~ A
____________________ describes a situation where a third party, outside the
transaction, suffers from a market transaction by others.
A. Negative externality
B. Positive externality
C. A spillover
D. A market failure
✓ ~~~ A
A positive externality arises in a situation where a third party, outside the transaction,
,A. fails to allocate resources efficiently.
B. suffers from a market transaction by others.
C. benefits from a market transaction by others.
D. pays a pollution tax to balance social costs.
✓ ~~~ C
_______________ include both the private costs incurred by firms and also costs
incurred by third parties outside the production process.
A. Social costs
B. Private costs
C. Market costs
D. External costs
✓ ~~~ A
Market failure describes a situation in which the market itself
______________________ in a way that balances social costs and benefits.
A. remains outside the transaction
B. incurs the costs outside the production process
C. fails to allocate resources efficiently
D. avoids externalities
, ✓ ~~~ C
Command-and-control regulation is a body of law that
A. fails to consider private costs of firms.
B. specifies allowable quantities of pollution.
C. details which pollution-control technologies must be used.
D. can include both b and c.
✓ ~~~ D
A pollution charge is a form of tax imposed on
A. the quantity of pollution that a firm emits.
B. pollution control technologies.
C. every economy in the world.
D. low-income market-orientated industries.
✓ ~~~ A
Property rights are the legal rights of ownership on which others are
A. allowed to infringe by paying the property owner's pollution tax.
B. able to enforce use of pollution-control technologies.
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