Question 2 of 40Which of the following would be classified as an external cost?2.5 PointsA. As more firms began hiring c...
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Question 2 of 40
Which of the following would be classified as an external cost?
2.5 Points
A. As more firms began hiring computer programmers, the salaries of computer programmers increased and
therefore the firm's cost of production increased.
B. You eat too much pizza and end up with a stomach ache.
C. You are not able to study at night because there is so much noise coming from the dorm room next to
yours.
D. When you purchase a prescription drug you are not made fully aware of all the possible side effects that
may result from taking the drug.
Question 3 of 40
If a producer is imposing an external cost on society, the best response would be to __________ . ?
2.5 Points
A. lower the producer's taxes to offset pollution
B. increase the production
C. internalize the externality
D. subsidize the producer
2.5 Points
Question 4 of 40
Recall the application about the marginal cost and marginal benefit of reducing methane emissions. What
does the optimal level of methane abatement depend on?
A. the level at which the polluting firms are able to maximize their profits
B. the total cost of abatement
C. the marginal benefit of abatement
D. It is not possible to determine an optimal level of methane.
2.5 Points
Question 5 of 40
When the government taxes a firm that generates an external cost, the profit maximizing firm will produce
__________ .
A. more units of output than before the tax was imposed
B. the same number of units of output as before the tax was imposed
C. fewer units of output than before the tax was imposed
D. either more or fewer units of output than before the tax was imposed
Question 6 of 40
2.5 Points
If the government taxes a firm that is generating an external cost, the price of the firm's product will
__________ .
A. increase and output will decrease
B. increase and output will increase
C. decrease and output will decrease
D. decrease and output will increase
Question 7 of 40
Private goods are __________ .
2.5 Points
A. rival in consumption and their benefits are excludable
B. nonrival in consumption and their benefits are excludable
C. nonrival in consumption and their benefits are nonexcludable
D. rival in consumption and their benefits are nonexcludable
2.5 Points
Question 8 of 40
Chris buys pizza for his football party and he gets to decide who will have a slice of his pizza. This means his
pizza is __________ .
A. nonrival and nonexcludable
B. a private good
C. a public good
D. rival, but nonexcludable
Question 9 of 40
Which of the following would be an example of an external benefit?
2.5 Points
A. More people start to ride the bus and as a result air pollution is reduced.
B. Firms are able to reduce their costs of production by using a more efficient technology.
C. The government requires polluting firms to pay a special tax.
D. A firm has just gotten permission to open a landfill on property that is adjacent to your home.
Question 10 of 40
The government imposes taxes on firms that generate external costs in an effort to __________ .
2.5 Points
A. make it easier for economists to measure external costs
B. lead to a zero level of output
C. force decision makers to consider the full costs of their actions
D. lower the firms' costs of production
Question 11 of 40
An external cost of production is __________ .
A. a cost incurred by someone other than the producer
B. the production cost borne by a producer
C. the result of the sum of private and social cost
D. another word for a tax
Question 12 of 40
2.5 Points
The study of external costs is a major concern of __________ .
A. labor economics
B. international economics
C. environmental economics
2.5 Points
D. macroeconomists
2.5 Points
Question 13 of 40
Jamal and Lauren live in the countryside 30 minutes from a city in Virginia. They moved there because they
wanted to enjoy the fresh air. After a year of living in their house, the 200 acres that surround their
neighborhood were zoned for an industrial property. A paper mill was built on the land and now emits strong
gases that can be smelled from miles away. The paper mill's emission of gases is an example of a(n.
__________ .
A. public good
B. good that imposes an external cost
C. good that provides an external benefit
D. efficient good
Question 14 of 40
2.5 Points
Based on society's perspective, what are the benefits from pollution abatement?
A. better health
B. increased enjoyment of the natural environment
C. lower production costs
D. all of the above
Question 15 of 40
Taxes on a firm's external costs __________ .
2.5 Points
A. are designed to encourage more production
B. are meant to force some firms out of business
C. are simply meant to force decision makers to consider the full costs of their actions
D. are designed primarily as a way to raise money so that the government can compensate the
victims of the spillover
Question 16 of 40
2.5
Points
In the absence of government, an under-allocation of resources generally exists for __________ .
A. goods with external costs
B. imported goods and services
C. public goods
D. all of the above
2.5 Points
Question 17 of 40
Goods that are nonrival in consumption and that have benefits that are nonexcludable are __________ .
A. private goods
B. neighbor effects
C. public goods
D. none of the above
Question 18 of 40
A harbor lighthouse that guides approaching ships is an example of __________ .
2.5 Points
A. a public good
B. a private good
C. a monopoly
D. a good that is rival
Question 19 of 40
Reductions in pollution from a specific starting level of existing pollution is called __________ .
2.5 Points
A. abatement
B. the EPA
C. command and control
D. usage tax
Question 20 of 40
2.5 Points
If, while producing goods and services, a factory is producing pollution and not incurring the cost of this
pollution, then a(n) __________ exists.
A. government failure
B. market failure
C. acceptable outcome
D. none of the above
2.5 Points
Question 21 of 40
Juan is consuming three sandwiches and six sodas. If a sandwich costs twice as much as a soda, then
__________ .
A. Juan should buy more sodas
B. Juan should buy more sandwiches
C. Juan is maximizing his utility if he derives twice as much utility from the last soda as from the last
sandwich
D. Juan is maximizing his utility if he derives twice as much utility from the last sandwich as from the last
soda
2.5 Points
Question 22 of 40
Mario has a company that produces plastic freezer bags. His company objective is to maximize __________ .
A. his company's revenues
B. his company's total out-of-pocket costs
C. his company's opportunity costs of each factor of production
D. his company's economic profits, the difference between total revenue and total cost
2.5 Points
Question 23 of 40
From 1998 to 2010, the cost of electricity produced with nuclear power has __________ and the cost of
electricity produced with solar power has __________ .
A. increased; increased
B. increased; decreased
C. decreased; increased
D. decreased; decreased
Question 24 of 40
The period of time when a firm is unable to change all inputs, or factors of production, is called the
__________ .
2.5 Points
A. economic term
B. short run
C. accounting term
D. long run
2.5 Points
Question 25 of 40
Maxine has a fixed income per month to spend on goods and services, so in allocating her limited income
over a set of goods, she should purchase the goods that __________ .
A. have the highest utility regardless of price
B. have the highest marginal utility
C. provide the most utility per dollar spent
D. have equal marginal utilities
2.5 Points
Question 26 of 40
Sarah has a savings account with a $1,000 balance that earns 3% APY. She decides to withdraw the entire
balance to buy a laptop computer. What will be her opportunity cost in buying the laptop?
A. the cost of the laptop
B. the foregone interest
C. the foregone interest and the cost of the laptop
D. the cost of the laptop minus the foregone interest
Question 27 of 40
The principle of opportunity cost is __________ .
A. what someone sacrifices to get something
B. the satisfaction of obtaining the best next alternative
C. the choice someone has to make between two different goods
2.5 Points
D. the cost of paying for something someone needs
Question 28 of 40
Which of the following is a reason why the marginal product increases as output increases?
2.5 Points
A. decreasing repetition
B. increasing continuity
C. both A and B
D. neither A nor B
Question 29 of 40
2.5 Points
Suppose that MUx / Px < MUy / Py . This implies that __________ .
A. spending a dollar less on Y and spending a dollar more on X increases utility
B. spending a dollar less on X and spending a dollar more on Y increases utility
C. X is more expensive than Y
D. Y is more expensive than X
Question 30 of 40
As more of any one good is consumed in a given period, its __________ .
2.5 Points
A. total utility decreases, then remains constant
B. marginal utility decreases
C. total utility decreases, then increases
D. marginal utility increases
Question 31 of 40
According to the law of diminishing marginal utility __________ .
A. as the consumption of a particular good increases, marginal utility increases
B. as the consumption of a particular good increases, marginal utility decreases
2.5 Points
C. total utility is negative
D. Both B and C are correct.
2.5 Points
Question 32 of 40
Suppose that a consumer is currently spending all of her income on 10 units of good A and 5 units of good B.
The price of good A is $4 per unit, the price of good B is $10 per unit, the marginal utility of the last unit of
good A consumed is 20, and the marginal utility of the last unit of good B consumed is 60. If the consumer
wants to maximize her utility from consuming the two goods, she should __________ .
A. consume more of good B and less of good A
B. consume more of good A and less of good B
C. continue to consume 10 units of good A and 5 units of good B
D. consume more of both goods
Question 33 of 40
2.5 Points
The short run can be defined as any period of time __________ .
A. less than one year
B. in which some inputs are fixed
C. in which all inputs are variable
D. in which price is fixed
Question 34 of 40
2.5 Points
Suppose that Erin spends all of her income on two goods: pizza and fiction novels. If the price of pizza rises,
then __________ .
A. the current marginal utility per dollar spent on pizza will rise
B. the current marginal utility per dollar spent on pizza will fall
C. the current marginal utility per dollar spent on fiction novels will rise
D. the current marginal utility per dollar spent on fiction novels will fall
2.5 Points
Question 36 of 40
You own a building that has four possible uses: an Internet cafe, a coffee shop, an ice cream store, and a
bookstore. The value of the building in each use is $2,000; $3,000; $4,000; and $5,000, respectively. You
decide to open an ice cream store. The opportunity cost of using this building for an ice cream store is
__________ .
A. $2,000, the value if the building is used as an Internet cafe
B. $3,000, the value if the building is used as a coffee shop
C. $3,333, the average of the values if the building is used for either an Internet cafe, a coffee shop, or a
bookstore
D. $5,000, the value if the building is used for a bookstore
Question 37 of 40
The budget line shows __________ .
2.5 Points
A. the different combinations of two goods that a consumer can buy
B. the quantity of a single good that a consumer is willing to buy at different prices
C. the maximized utility from a good
D. none of the above
2.5 Points
Question 38 of 40
You are the owner and only employee of a company that repairs computers. Last year, you earned total
revenues of $75,000. Your costs for equipment, rent, and supplies were $10,000. To start this business you quit
a job at another computer software firm that paid $40,000 a year. During the year, your economic costs were
__________ .
A. $10,000
B. $40,000
C. $50,000
D. $75,000
Question 39 of 40
Consumers should allocate their scarce income so that __________ .
2.5 Points
A. the marginal utility for all goods consumed is zero
B. the marginal utility for all goods consumed is equal
C. the marginal utility divided by price is equal for all goods consumed
D. the marginal utility divided by price is maximized for all goods consumed
2.5 Points
Question 40 of 40
40 .Dan owns a factory that manufactures smartphones. He has many costs every month to keep his factory
running. Which of the following is one of Dan's fixed costs?
A. plastic used to make the smartphones
B. his electricity bill for the factory
C. his mortgage on the factory
D. memory devices used to store music and video on the smartphones
Which of the following would be classified as an external cost?
2.5 Points
A. As more firms began hiring computer programmers, the salaries of computer programmers increased and
therefore the firm's cost of production increased.
B. You eat too much pizza and end up with a stomach ache.
C. You are not able to study at night because there is so much noise coming from the dorm room next to
yours.
D. When you purchase a prescription drug you are not made fully aware of all the possible side effects that
may result from taking the drug.
Question 3 of 40
If a producer is imposing an external cost on society, the best response would be to __________ . ?
2.5 Points
A. lower the producer's taxes to offset pollution
B. increase the production
C. internalize the externality
D. subsidize the producer
2.5 Points
Question 4 of 40
Recall the application about the marginal cost and marginal benefit of reducing methane emissions. What
does the optimal level of methane abatement depend on?
A. the level at which the polluting firms are able to maximize their profits
B. the total cost of abatement
C. the marginal benefit of abatement
D. It is not possible to determine an optimal level of methane.
2.5 Points
Question 5 of 40
When the government taxes a firm that generates an external cost, the profit maximizing firm will produce
__________ .
A. more units of output than before the tax was imposed
B. the same number of units of output as before the tax was imposed
C. fewer units of output than before the tax was imposed
D. either more or fewer units of output than before the tax was imposed
Question 6 of 40
2.5 Points
If the government taxes a firm that is generating an external cost, the price of the firm's product will
__________ .
A. increase and output will decrease
B. increase and output will increase
C. decrease and output will decrease
D. decrease and output will increase
Question 7 of 40
Private goods are __________ .
2.5 Points
A. rival in consumption and their benefits are excludable
B. nonrival in consumption and their benefits are excludable
C. nonrival in consumption and their benefits are nonexcludable
D. rival in consumption and their benefits are nonexcludable
2.5 Points
Question 8 of 40
Chris buys pizza for his football party and he gets to decide who will have a slice of his pizza. This means his
pizza is __________ .
A. nonrival and nonexcludable
B. a private good
C. a public good
D. rival, but nonexcludable
Question 9 of 40
Which of the following would be an example of an external benefit?
2.5 Points
A. More people start to ride the bus and as a result air pollution is reduced.
B. Firms are able to reduce their costs of production by using a more efficient technology.
C. The government requires polluting firms to pay a special tax.
D. A firm has just gotten permission to open a landfill on property that is adjacent to your home.
Question 10 of 40
The government imposes taxes on firms that generate external costs in an effort to __________ .
2.5 Points
A. make it easier for economists to measure external costs
B. lead to a zero level of output
C. force decision makers to consider the full costs of their actions
D. lower the firms' costs of production
Question 11 of 40
An external cost of production is __________ .
A. a cost incurred by someone other than the producer
B. the production cost borne by a producer
C. the result of the sum of private and social cost
D. another word for a tax
Question 12 of 40
2.5 Points
The study of external costs is a major concern of __________ .
A. labor economics
B. international economics
C. environmental economics
2.5 Points
D. macroeconomists
2.5 Points
Question 13 of 40
Jamal and Lauren live in the countryside 30 minutes from a city in Virginia. They moved there because they
wanted to enjoy the fresh air. After a year of living in their house, the 200 acres that surround their
neighborhood were zoned for an industrial property. A paper mill was built on the land and now emits strong
gases that can be smelled from miles away. The paper mill's emission of gases is an example of a(n.
__________ .
A. public good
B. good that imposes an external cost
C. good that provides an external benefit
D. efficient good
Question 14 of 40
2.5 Points
Based on society's perspective, what are the benefits from pollution abatement?
A. better health
B. increased enjoyment of the natural environment
C. lower production costs
D. all of the above
Question 15 of 40
Taxes on a firm's external costs __________ .
2.5 Points
A. are designed to encourage more production
B. are meant to force some firms out of business
C. are simply meant to force decision makers to consider the full costs of their actions
D. are designed primarily as a way to raise money so that the government can compensate the
victims of the spillover
Question 16 of 40
2.5
Points
In the absence of government, an under-allocation of resources generally exists for __________ .
A. goods with external costs
B. imported goods and services
C. public goods
D. all of the above
2.5 Points
Question 17 of 40
Goods that are nonrival in consumption and that have benefits that are nonexcludable are __________ .
A. private goods
B. neighbor effects
C. public goods
D. none of the above
Question 18 of 40
A harbor lighthouse that guides approaching ships is an example of __________ .
2.5 Points
A. a public good
B. a private good
C. a monopoly
D. a good that is rival
Question 19 of 40
Reductions in pollution from a specific starting level of existing pollution is called __________ .
2.5 Points
A. abatement
B. the EPA
C. command and control
D. usage tax
Question 20 of 40
2.5 Points
If, while producing goods and services, a factory is producing pollution and not incurring the cost of this
pollution, then a(n) __________ exists.
A. government failure
B. market failure
C. acceptable outcome
D. none of the above
2.5 Points
Question 21 of 40
Juan is consuming three sandwiches and six sodas. If a sandwich costs twice as much as a soda, then
__________ .
A. Juan should buy more sodas
B. Juan should buy more sandwiches
C. Juan is maximizing his utility if he derives twice as much utility from the last soda as from the last
sandwich
D. Juan is maximizing his utility if he derives twice as much utility from the last sandwich as from the last
soda
2.5 Points
Question 22 of 40
Mario has a company that produces plastic freezer bags. His company objective is to maximize __________ .
A. his company's revenues
B. his company's total out-of-pocket costs
C. his company's opportunity costs of each factor of production
D. his company's economic profits, the difference between total revenue and total cost
2.5 Points
Question 23 of 40
From 1998 to 2010, the cost of electricity produced with nuclear power has __________ and the cost of
electricity produced with solar power has __________ .
A. increased; increased
B. increased; decreased
C. decreased; increased
D. decreased; decreased
Question 24 of 40
The period of time when a firm is unable to change all inputs, or factors of production, is called the
__________ .
2.5 Points
A. economic term
B. short run
C. accounting term
D. long run
2.5 Points
Question 25 of 40
Maxine has a fixed income per month to spend on goods and services, so in allocating her limited income
over a set of goods, she should purchase the goods that __________ .
A. have the highest utility regardless of price
B. have the highest marginal utility
C. provide the most utility per dollar spent
D. have equal marginal utilities
2.5 Points
Question 26 of 40
Sarah has a savings account with a $1,000 balance that earns 3% APY. She decides to withdraw the entire
balance to buy a laptop computer. What will be her opportunity cost in buying the laptop?
A. the cost of the laptop
B. the foregone interest
C. the foregone interest and the cost of the laptop
D. the cost of the laptop minus the foregone interest
Question 27 of 40
The principle of opportunity cost is __________ .
A. what someone sacrifices to get something
B. the satisfaction of obtaining the best next alternative
C. the choice someone has to make between two different goods
2.5 Points
D. the cost of paying for something someone needs
Question 28 of 40
Which of the following is a reason why the marginal product increases as output increases?
2.5 Points
A. decreasing repetition
B. increasing continuity
C. both A and B
D. neither A nor B
Question 29 of 40
2.5 Points
Suppose that MUx / Px < MUy / Py . This implies that __________ .
A. spending a dollar less on Y and spending a dollar more on X increases utility
B. spending a dollar less on X and spending a dollar more on Y increases utility
C. X is more expensive than Y
D. Y is more expensive than X
Question 30 of 40
As more of any one good is consumed in a given period, its __________ .
2.5 Points
A. total utility decreases, then remains constant
B. marginal utility decreases
C. total utility decreases, then increases
D. marginal utility increases
Question 31 of 40
According to the law of diminishing marginal utility __________ .
A. as the consumption of a particular good increases, marginal utility increases
B. as the consumption of a particular good increases, marginal utility decreases
2.5 Points
C. total utility is negative
D. Both B and C are correct.
2.5 Points
Question 32 of 40
Suppose that a consumer is currently spending all of her income on 10 units of good A and 5 units of good B.
The price of good A is $4 per unit, the price of good B is $10 per unit, the marginal utility of the last unit of
good A consumed is 20, and the marginal utility of the last unit of good B consumed is 60. If the consumer
wants to maximize her utility from consuming the two goods, she should __________ .
A. consume more of good B and less of good A
B. consume more of good A and less of good B
C. continue to consume 10 units of good A and 5 units of good B
D. consume more of both goods
Question 33 of 40
2.5 Points
The short run can be defined as any period of time __________ .
A. less than one year
B. in which some inputs are fixed
C. in which all inputs are variable
D. in which price is fixed
Question 34 of 40
2.5 Points
Suppose that Erin spends all of her income on two goods: pizza and fiction novels. If the price of pizza rises,
then __________ .
A. the current marginal utility per dollar spent on pizza will rise
B. the current marginal utility per dollar spent on pizza will fall
C. the current marginal utility per dollar spent on fiction novels will rise
D. the current marginal utility per dollar spent on fiction novels will fall
2.5 Points
Question 36 of 40
You own a building that has four possible uses: an Internet cafe, a coffee shop, an ice cream store, and a
bookstore. The value of the building in each use is $2,000; $3,000; $4,000; and $5,000, respectively. You
decide to open an ice cream store. The opportunity cost of using this building for an ice cream store is
__________ .
A. $2,000, the value if the building is used as an Internet cafe
B. $3,000, the value if the building is used as a coffee shop
C. $3,333, the average of the values if the building is used for either an Internet cafe, a coffee shop, or a
bookstore
D. $5,000, the value if the building is used for a bookstore
Question 37 of 40
The budget line shows __________ .
2.5 Points
A. the different combinations of two goods that a consumer can buy
B. the quantity of a single good that a consumer is willing to buy at different prices
C. the maximized utility from a good
D. none of the above
2.5 Points
Question 38 of 40
You are the owner and only employee of a company that repairs computers. Last year, you earned total
revenues of $75,000. Your costs for equipment, rent, and supplies were $10,000. To start this business you quit
a job at another computer software firm that paid $40,000 a year. During the year, your economic costs were
__________ .
A. $10,000
B. $40,000
C. $50,000
D. $75,000
Question 39 of 40
Consumers should allocate their scarce income so that __________ .
2.5 Points
A. the marginal utility for all goods consumed is zero
B. the marginal utility for all goods consumed is equal
C. the marginal utility divided by price is equal for all goods consumed
D. the marginal utility divided by price is maximized for all goods consumed
2.5 Points
Question 40 of 40
40 .Dan owns a factory that manufactures smartphones. He has many costs every month to keep his factory
running. Which of the following is one of Dan's fixed costs?
A. plastic used to make the smartphones
B. his electricity bill for the factory
C. his mortgage on the factory
D. memory devices used to store music and video on the smartphones
