The University of Adelaide - ECON 7200Quiz 7. Graded A

The University of Adelaide - ECON 7200Quiz 7

Question 1

10 out of 10 points

The Coase theorem suggests that externalities usually arise because:

·  Question 2

10 out of 10 points

·  Question 3

10 out of 10 points

The private interest theory of government regulation argues that regulations are implemented to satisfy the demands of:

·  Question 4

10 out of 10 points

In markets with asymmetric information:

·  Question 5

10 out of 10 points

Issuing marketable emission allowance permits to polluting firms:

·  Question 6

10 out of 10 points

The problem that exists before an insurance policy transaction is:

·  Question 7

10 out of 10 points

The social cost of cutting trees for firewood in a national forest is:

·  Question 8

10 out of 10 points

Refer to Figure 11.4 for the following question(s).

Figure 11.4 Consider a chemical plant that discharges toxic fumes over a nearby community. To reduce the emissions of toxic fumes the firm can install pollution abatement devices. This figure shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions.




Refer to Figure 11.4. Suppose the emissions reduction target is currently established at 8 million tonnes. What is the area that represents the cost of eliminating an additional 1 million tonnes?

·  Question 9

10 out of 10 points

Which of the following statements about the economically efficient level of air pollution is correct?

·  Question 10

10 out of 10 points

Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter. If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction would be:

·  Question 1

10 out of 10 points

·  Question 2

10 out of 10 points

Refer to Figure 11.2 for the following question(s).

Figure 11.2 The Market for Paper. Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing town, discharge a large amount of waste into the river. The waste material affects the number of fish in the river and the use of the river for recreational purposes.




Refer to Figure 11.2. What is the deadweight loss from producing at the market equilibrium?

·  Question 5

10 out of 10 points

Which type of protection does Australian law grant the creator of a book, film or piece of music?

·  Question 6

10 out of 10 points

Which of the following is not an example of rent-seeking behaviour?

·  Question 7

10 out of 10 points

·  Question 8

10 out of 10 points

According to the private interest view, government policy makers:

·  Question 9

10 out of 10 points

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost then:

The problem that can develop at the time of an insurance policy transaction is:

The free market fails to provide public goods because:

Refer to Figure 11.5 for the following question.

Figure 11.5 In many countries, coal burning utilities release sulphur dioxide and nitric acid which react with water to produce acid rain. Acid rain damages trees and crops and kills fish. Because the utilities do not bear the cost of the acid rain, they over-produce the quantity of electricity. Figure 11.5 illustrates this.



Refer to Figure 11.5. S₁ represents the supply curve that reflects the private cost of production and S₂ represents the supply curve that reflects the social cost of production. One way to internalise the external cost generated by utilities is to impose a Pigovian tax on the production of electricity. What is the size of the Pigovian tax that will internalise the cost of the externality?

Refer to Figure 11.2 for the following question(s).

Figure 11.2 The Market for Paper. Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing town, discharge a large amount of waste into the river. The waste material affects the number of fish in the river and the use of the river for recreational purposes.




Refer to Figure 11.2. Why is there a deadweight loss?

Which of these statements is incorrect?

A positive externality causes:

Refer to Figure 11.3 for the following question(s).

Figure 11.3 The market for measles vaccinations, a product whose use generates positive externalities.




Refer to Figure 11.3. Why is there a deadweight loss?

Which of the following is true when a negative external effect creates a deadweight loss?

Which of the following is a characteristic of a contestable market?