Ch18 - CHAPTER 18 Externalities and Public Goods MULTIPLE...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: CHAPTER 18 Externalities and Public Goods MULTIPLE CHOICE Section 18.1 easy 1. Externalities a. are not reflected in market prices, so they can be a source of economic inefficiency. b. do become reflected in market prices, so they can be a source of economic inefficiency. c. are not reflected in market prices, so they do not adversely affect economic efficiency. d. do become reflected in market prices, so they do not adversely affect economic efficiency. e. may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event. easy 2. Constructing plastic containers produces air pollutants. Therefore, in the market for plastic containers, a. the marginal social cost curve is above and to the right of the demand curve. b. the marginal social cost curve is below and to the left of the demand curve. c. the marginal social cost curve is above and to the left of the supply curve. d. the marginal social cost curve is below and to the right of the supply curve. e. there is a gap between quantity supplied and quantity demanded in equilibrium. easy 3. Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, equilibrium price a. and output are too low to be optimal. b. and output are too high to be optimal. c. is too low to be optimal, and equilibrium quantity is too high. d. is too high to be optimal, and equilibrium quantity is too low. e. is optimal, but there is an excess supply. easy 4. The presence of pollution in the dry cleaning industry leads in the long run to dynamic inefficiencies because a. people will buy fewer clothes that need dry cleaning than they otherwise would have. b. people will develop substitutes for dry cleaning that are wasteful. c. firms will be induced to leave the industry because of artificially high costs. d. firms whose average private cost is less than price will stay in (or enter) the dry cleaning industry even though their average social cost exceeds price. e. firms whose average private cost exceeds the price will exit (or fail to enter) the dry cleaning industry even though their average social cost is less than price. 122 CHAPTER 18 TEST BANK EXTERNALITIES AND PUBLIC GOODS SIXTH EDITION easy 5. Because trucking as an industry involves the generation of pollutants in engine exhaust, a. the supply curve of trucking services overstates the true cost of providing those services. b. the supply curve of trucking services understates the true cost of providing those services. c. the demand curve for trucking services overstates the true benefit of providing those services. d. the demand curve for trucking services understates the true benefit of providing those services....
View Full Document

This note was uploaded on 08/07/2011 for the course ECON 105 taught by Professor Prof.eco during the Spring '11 term at Indian School of Business.

Page1 / 34

Ch18 - CHAPTER 18 Externalities and Public Goods MULTIPLE...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online