Chapter 18 Test Bank KEY
1. Markets fail to maximize total surplus when:
2. If people took external costs like pollution into consideration, they would on net:
3. If people took external costs like pollution into consideration:
4. We call costs that fall directly on an economic decision maker:
5. Any cost that is imposed without compensation on someone other than the person who caused it is
called:
6. External costs are those costs:
7. Social costs are:
8. All externalities:
9. Benefits that accrue directly to the decision maker of a market exchange are called:
10. Private benefits are those benefits that accrue:
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11. A benefit that accrues without compensation to someone other than the person who caused it is
called:
12. External benefits are those that accrue:
13. When we add private benefits and external benefits together, the result is called:
14. External costs and external benefits are collectively referred to as:
15. We typically call an external cost:
16. A positive externality is:
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17. A network externality is:
18. The effect that an additional user of a good or participant in an activity has on the value of that good
or activity for others is called:
19. An example of a good that creates a positive network externality is:
20. An example of a good that exhibits a negative network externality is:
21. When negative externalities are present, it means that:
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22. When negative externalities are present in a market, it means that:
23. When private costs equal social costs, it means that:
24. If a negative externality were present in a market, the social benefit curve would be:
25. If the social cost is greater than the private cost in a particular market, the private equilibrium will be at
a quantity:
26. If the social cost is greater than the private cost in a particular market, the socially optimal equilibrium
will be at a quantity:
27. When negative externalities exist in a market, if the producers are forced to pay a Pigouvian tax then:
28. Who are the only ones not affected by a Pigouvian tax when a negative externality exists in a
market?
29. Who is affected when a Pigouvian tax is imposed on a market with a negative production externality?
30. When a negative externality is present in a market, total surplus is:
32. If a production process created pollution, then the social cost curve would be:
33. If companies that were creating pollution had to pay the social cost of production, they would want to
supply:
34. If companies who took into account an externality want to supply less at any given price compared to
the original market supply, it must be a:
35. When a negative externality exists in a market, total surplus:
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36. When an externality is present in a market, and correcting it increases the efficiency of the market, we
can conclude it is a:
37. The net increase to total surplus when a negative externality is corrected or eliminated is due to:
38. When a negative externality is present in a market, the quantity consumed:
39. When positive externalities are present, it means that:
40. When positive externalities are present in a market, it means that:
41. When private benefits equal social benefits, it means that:
42. When private benefits are less than social benefits, it means that:
43. If a positive externality were present in a market, the social benefit curve would be:
44. If the social benefit is greater than the private benefit in a particular market, then the private
equilibrium will be at a quantity:
45. If the social benefit is greater than the private benefit in a particular market, then the socially optimal
equilibrium will be at a quantity:
46. Who gains surplus when consumers in a market are given a Pigouvian subsidy for a positive
externality?
47. When positive externalities exist in a market, if a Pigouvian subsidy is imposed:
48. Who are the only ones not affected when a Pigouvian subsidy is implemented for a positive
externality in a market?
49. Who is affected when a Pigouvian subsidy is imposed on a market with a positive externality?
50. When a positive externality is present in a market, total surplus is:
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51. When a positive externality is present in a market, total surplus is:
52. When a Pigouvian subsidy is imposed on a market with a positive externality efficiency:
53. If companies who took into account an externality want to supply more at any given price compared to
54. When Pigouvian subsidy is imposed on a market with a positive externality, total surplus:
55. When a positive externality exists in a market, total surplus:
56. The net increase to total surplus when a positive externality is corrected is due to:
57. When a positive externality is present in a market, the quantity consumed:
58. If it’s possible to eliminate the problems created by externalities, why do they persist?
59. If it’s possible to eliminate the problems created by externalities, why do they persist?
60. When a market is corrected for externalities, it:
61. When a market is corrected for externalities, it:
62. Efficient solutions to solving externality problems:
63. Knowing that the presence of externalities reduces surplus, it implies that:
64. The idea that individuals can reach an efficient equilibrium through private trades, even in the
presence of an externality, is called:
65. The Coase theorem is the idea that:
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66. The Coase theorem will hold only if:
67. The Coase theorem will hold only if:
68. The assumptions needed for the Coase theorem to work:
69. If the costs of coordination and enforcement are _______________ the surplus lost to the externality,
then ________________.
70. When there are significant costs involved with coordinating a private solution to an externality:
71. With the Coase theorem, the private solution yields: