Chapter 9 Market Failure: Imperfect Information, External Benefits, and External Costs

| November 9, 2018

7)
A command-and-control policy
A)
usually does not result in the use of the most efficient pollution abatement
technology.
B)
does not affect the production costs of firms.
C)
usually finds the most efficient pollution abatement technology.
D)
increases the incentive for firms to develop efficient abatement technologies.

8)
A command-and-control policy
A)
is unlikely to have any impact on the amount of pollution emitted.
B)
does not affect the production costs of firms.
C)
usually finds the most efficient pollution abatement technology.
D)
decreases the incentive for firms to develop efficient abatement technologies.

9)
As compared to a pollution tax, a command-and-control policy will increase
production costs by a ________ amount and increase equilibrium price by a
________ amount.
A)
larger; larger
B)
larger; smaller
C)
smaller; larger
D)
smaller; smaller

10)
As compared to a pollution tax, a command-and-control policy will
A)
increase production costs by a smaller amount.
B)
increase price by a smaller amount.
C)
shift the supply curve to the left by a smaller amount.
D)
shift the supply curve to the left by a larger amount.

11)
Command-and-control policies usually
A)
result in higher costs for firms when compared to pollution taxes.
B)
don’t raise prices as much to consumers as do pollution taxes.
C)
result in less pollution being produced than when pollution taxes are used.
D)
result in lower costs for firms when compared to pollution taxes.

12)
Command-and-control policies usually
A)
reduce the production of a polluting good more than do pollution taxes.
B)
reduce the production of a polluting good less than do pollution taxes.
C)
increase price less than do pollution taxes.
D)
decrease the quantity demanded by less than do pollution taxes.

13)
Command-and-control policies
A)
allow a low-cost firm to abate more pollution.
B)
encourage firms to develop more efficient abatement technologies.
C)
usually result in relatively low compliance costs.
D)
allow us to predict the total amount of pollution that will be discharged.

14)
Firms are likely to prefer a pollution tax to a command-and-control policy
because the command-and-control policy will
A)
increase the costs of production more than a pollution tax.
B)
result in the price of the good rising more than under a pollution tax.
C)
result in consumers buying less of the good than under a pollution tax.
D)
all of the above

15)
An advantage offered by pollution taxes that is NOT offered by
command-and-control policies is that
A)
under pollution taxes pollution is usually reduced to zero.
B)
a pollution tax decreases the price of the polluting good.
C)
under pollution taxes, the government receives tax revenues that may be used to
clean up pollution.
D)
pollution taxes decrease the demand for the good generating the pollution.

16)
An advantage of pollution taxes that is NOT offered by command-and-control
policies is that
A)
with a pollution tax zero pollution is produced.
B)
a pollution tax decreases the price of the polluting good.
C)
with a pollution tax, firms have flexibility in their choice of strategies to
use to clean up pollution.
D)
a pollution tax decreases the demands for goods that cause pollution.

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