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

| November 9, 2018

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Figure 9.9

31)
The pollution tax in Figure 9.9
A)
reduces equilibrium output.
B)
reduces equilibrium price.
C)
increases supply.
D)
all of the above

32)
The pollution tax in Figure 9.9
A)
reduces equilibrium output.
B)
reduces pollution associated with the production of the good.
C)
raises equilibrium price.
D)
all of the above

33)
The pollution tax in Figure 9.9
A)
increases equilibrium output.
B)
internalizes the pollution externality.
C)
increases supply.
D)
all of the above

34)
The pollution tax in Figure 9.9
A)
increases equilibrium output.
B)
decreases equilibrium price.
C)
gives the firm an incentive to switch to a cleaner production process.
D)
all of the above

35)
If the U.S. were to place a carbon tax on fossil fuels, we can expect
A)
the price of fuel oil to decrease.
B)
the price of fuel oil to increase.
C)
no change in the price of fuel oil.
D)
an increase in demand for fuel oil.

36)
A carbon tax on fossil fuels is likely to cause the price of goods produced by
firms that use fossil fuels to
A)
decrease.
B)
not change.
C)
increase.
D)
change, but in a way that cannot be determined.

37)
A carbon tax placed on a fossil fuel
A)
is a pollution tax based on the carbon content of the fuel.
B)
is a form of marketable pollution permit.
C)
is often used in conjunction with command-and-control carbon policies.
D)
will not change the price of the fossil fuel taxed.

38)
A carbon tax placed on coal will ________ the price of coal and ________ the
quantity sold of coal.
A)
raise; decrease
B)
raise; increase
C)
lower; decrease
D)
lower; increase

39)
A carbon tax placed on coal will
A)
shift the supply curve for coal to the right.
B)
shift the supply curve for coal to the left.
C)
not affect the supply curve for coal.
D)
decrease the demand for coal.

40)
A carbon tax placed on coal would
A)
raise the costs of goods produced using coal, raising their price, and thus
decreasing the quantity demanded of these goods.
B)
not affect emissions of greenhouse gases.
C)
shift the demand curve for coal to the right.
D)
make coal a more attractive form of energy.

41)
A carbon tax placed on coal
A)
would decrease the price of coal.
B)
would cause some producers to switch to other forms of energy.
C)
is unlikely to affect the demand for alternative forms of energy.
D)
would increase the quantity of coal demanded at every price.

42)
A carbon tax could reduce greenhouse emissions by
A)
raising the price of gasoline and reducing driving.
B)
raising the price reducing of electricity, the quantity of electricity demanded
and reducing the fossil fuels burned.
C)
cause electricity producers to switch to lower carbon fuels.
D)
all of the above

Recall
the Application about pollution tax variations in rural and urban areas to
answer the following question(s).

43)
Recall the Application. Appropriate pollution taxes are equal to the marginal
damage from pollution, so the tax on a polluter in a rural area should be
________ a tax on a polluter in an urban area.
A)
higher than
B)
equal to
C)
less than
D)
unrelated to

44)
Recall the Application. A 2009 study on air pollution found that the damage
from pollution in rural areas is ________ the damage from pollution in urban
areas.
A)
greater than
B)
equal to
C)
less than
D)
the primary cause of

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