Externalities/Public Private Goods
Learning Check
Name__________________
1) The cost of producing an additional unit of a good or service is defined as the
A) external cost.
B) private cost.
C) marginal cost.
D) marginal external benefit.
E) None of the above answers is correct.
2) A private cost is a cost of production that is borne by the
A) consumer.
B) producer.
C) government.
D) consumer and the government.
E) everyone: consumers, producers, and those who do not consume or produce the good.
3) For a product with an external cost, the supply curve
A) represents the various quantities people can buy.
B) is the same as the marginal private cost curve.
C) is the same as the marginal social cost curve.
D) is the same as the marginal external cost curve.
E) is undefined.
4) For a firm, its labor costs are
A) a marginal benefit.
B) a private cost.
C) an external cost.
D) Both answers A and C are correct.
E) Both answers A and B are correct.
5) The cost of producing an additional unit of a good or service that falls on people other than the producer is
the marginal
A) external cost.
B) private cost.
C) social cost.
D) social benefit.
E) None of the above answers is correct.
6) When logging in the Pacific Northwest destroys forests that hikers would have used for eco-tourism, the
destruction of the trails is an example of
A) an external cost.
B) a private cost.
C) a government cost.
D) an external benefit.
E) None of the above answers is correct.
7) Which of the following is true?
A) MSC = MC + Marginal external cost.
B) MC = Marginal external cost - MSC.
C) MC = Marginal external benefit + MSC.
D) MSC = Marginal external cost + marginal external benefit.
E) MSC = Marginal external cost - marginal external benefit.
8) The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for
each rock concert that is offered. If 5 concerts are put on, then
A) the marginal external cost will be greater than the marginal social cost.
B) the marginal external cost will be greater than the marginal private cost.
C) the marginal external cost will equal the marginal private cost.
D) the marginal social cost will equal the marginal external cost.
E) the marginal external cost will equal zero.
9) The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for
each rock concert that is offered. Suppose the marginal private cost of the 5th concert is $10,000. Then, for the
5th concert, the marginal
A) external cost equals $30,000.
B) social cost equals $30,000.
C) external cost equals the marginal private cost.
D) external cost equals $40,000.
E) external cost equals $10,000.
10) The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for
each rock concert that is offered. At 10 concerts, the marginal
A) private cost equals the marginal external cost.
B) social cost equals $60,000.
C) private cost is more than $40,000.
D) external cost equals $60,000.
E) external cost equals $80,000.
11) The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for
each rock concert that is offered. It also illustrates the marginal benefit. There is no external benefit. If the city
of Seattle puts on 5 concerts per year, then the marginal benefit will
A) exceed the marginal social cost.
B) equal the marginal private cost.
C) be less than the marginal social cost.
D) will equal the marginal social cost.
E) None of the above answers is correct.
12) Producing leather creates external costs in the form of water pollution. The figure above illustrates the
market for leather. In the absence of any government regulation, how many tons of leather will be produced?
A) 0 tons
B) 200 tons
C) 300 tons
D) more than 300 tons
E) None of the above answers is correct.
13) To eliminate the inefficiency resulting from an external cost, the government can impose a tax on producers
that is equal to the
A) MSB.
B) MC.
C) marginal external cost.
D) MSC.
E) price.
14) A tax on a polluting industry
A) is not desirable because it reduces efficiency.
B) leads to less output in this industry.
C) causes more resources to be used in the polluting industry.
D) shifts the marginal (private) benefit curve leftward.
E) shifts the marginal (private) benefit curve rightward.
15) The figure above illustrates the gasoline market. There is no external benefit from gasoline. If a tax on
gasoline is imposed as shown in the figure, then the total tax revenue earned by the government equals
A) $24 million.
B) $16 million.
C) $8 million.
D) more than $24 million.
E) less than $8 million.
16) The figure above shows the market for college education. Left to itself without any government intervention,
a competitive market would create a deadweight loss equal to
A) zero.
B) the area d.
C) the area a + c.
D) the area b + c.
E) the area b + d
17) Which of the following goods is nonexcludable?
A) a lighthouse
B) pay-per-view television
C) a restaurant meal
D) a college education
E) a cow grazing in a pasture
18) One person's rental of the movie Batman Begins prevents someone else from renting. This is an example of
A) a public good.
B) the rival nature of consumption.
C) the nonrival nature of consumption.
D) nonexcludable goods.
E) a common resource.
19) A basketball game aired as a pay-per-view show by your local cable network and to which you can invite
your friends to watch is a ____ good.
A) rival
B) nonrival
C) nonexcludable
D) rival and nonexcludable
E) quasi public/quasi pri
20) An office in the Empire State Building is
A) a private good.
B) nonexcludable, because it is possible to restrict access to it.
C) a common resource.
D) a public good because many people can be in the Empire State Building.
E) excludable and nonrival.