A) graph AB) graphs A and BC) graph BD) neither graph A nor graph B Ans: c
6. Refer to Figure 5.7 in the textbook. What does it mean if all firms have to reduce to a point
(Z* X*)
2?
A) Firm X will reduce more than optimal. B) Firm Z will reduce less than optimal.
C) The new point is between X* and Z*.D) All of the above.Ans: d 7. The Coase theorem has problems because
A) generally, bargaining costs are not zero.B) individuals are not concerned with others.C) markets always exist.D) all of the above. Ans: a
8. Pollution rights may be traded if
A) polluters try to hide pollution.B) administrators are uncertain about Pigouvian taxes. C) there is no market for pollution.D) pollution is harmless. Ans: b
9. Externalities can be produced by ____________, as well as ____________. A) individuals; firmsB) market prices; market incomes C) oceans; streamsD) none of the aboveAns: a 10. A Pigouvian tax corrects for
A) market congestion.B) market losses.C) inefficient sales.D) low market prices. Ans: d
11. Which of the following is correct?
A) SMC = PMC - MD B) MPB = MSB + MEB
C) SMC = PMC + MD D) MSC = MPB E) MSB =MSC + MPB Ans: c
12. Marginal benefits are downward sloping when
A) there are no total benefits.B) the slope of the marginal benefits curve is negative.
C) total benefits are increasing at a decreasing rate.D) marginal costs are upward sloping. Ans: b
13. A Pigouvian subsidy
A) can not exist with externalities. B) is the same thing as a Pigouvian tax. C) is measured in terms of Pigouvian dollars.