Economics Chapter10 Section02

Since almost all forms of transportation produce some type of pollution,

a. the government should ban all transportation.
b. the government should ban all pollution.
c. society has to weigh the cost and benefits when deciding how much pollution to allow.
d. refrain from intervening because the market can best solve this problem.
Click the card to flip 👆
1 / 16
Terms in this set (16)
Since almost all forms of transportation produce some type of pollution,

a. the government should ban all transportation.
b. the government should ban all pollution.
c. society has to weigh the cost and benefits when deciding how much pollution to allow.
d. refrain from intervening because the market can best solve this problem.
c. society has to weigh the cost and benefits when deciding how much pollution to allow.
The best remedy for market failure is often

a. a market-based solution.
b. shutdown of the market.
c. no government intervention.
d. externalizing the externalities.
a. a market-based solution.
A command-and-control policy is another term for a

a. pollution permit.
b. government regulation.
c. corrective tax.
d. Both a and b are correct.
b. government regulation.
Emission controls on automobiles are an example of a

a. corrective tax.
b. command-and-control policy to increase social efficiency.
c. policy that reduces pollution by allocating resources through market mechanisms.
d. policy to reduce congestion on urban freeways.
b. command-and-control policy to increase social efficiency.
The tax on cigarettes is an example of

a. a consumption tax.
b. a corrective tax.
c. an income tax.
d. a command-and-control policy.
b. a corrective tax.
Which of the following is not an advantage of corrective taxes?

a. They raise revenues for the government.
b. They enhance economic efficiency.
c. They subsidize the production of goods with positive externalities.
d. They move the allocation of resources closer to the social optimum.
c. They subsidize the production of goods with positive externalities.
Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

a. Corrective taxes apply only to goods that are bad for people's health, such as cigarettes and alcohol.
b. Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders.
c. Corrective taxes provide incentives for the conservation of natural resources.
d. Corrective taxes do not affect deadweight loss.
b. Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders.
A corrective tax

a. allocates pollution to those factories that face the highest cost of reducing it.
b. is a form of regulation.
c. works well for all types of externalities.
d. is inferior to regulatory policy according to most economists.
a. allocates pollution to those factories that face the highest cost of reducing it.
Corrective taxes are unlike most other taxes because they

a. distort incentives.
b. move the allocation of resources away from the social optimum.
c. raise revenue for the government.
d. move the allocation of resources closer to the social optimum.
d. move the allocation of resources closer to the social optimum.
Corrective taxes are typically advocated to correct for the effects of

a. positive externalities.
b. negative externalities.
c. patents.
d. All of the above are correct.
b. negative externalities.
Suppose that alcohol consumption creates a negative externality. What can the government do to equate the equilibrium quantity of alcohol and the socially optimal quantity of alcohol? a. impose a tax on alcohol that is equal to the per-unit externality b. offer a subsidy on alcohol that is equal to the per-unit externality c. impose a regulation limiting the amount of alcohol that each consumer can purchase d. nothinga. impose a tax on alcohol that is equal to the per-unit externalityUniversity researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. What could the federal government do to equate the equilibrium quantity of university research and the socially optimal quantity of university research produced? a. tax university researchers b. offer grants to university researchers c. eliminate subsidized student loans d. nothingb. offer grants to university researchersWhich of the following statements is correct? a. Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost. b. Corrective taxes distort economic incentives. c. Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a faster rate. d. Both a and b are correct.a. Corrective taxes are often preferred over direct regulation because they typicallyWhat is the difference between command-and-control policies and market-based policies toward externalities? a. Command-and-control policies provide incentives for private decision makers to solve the problems on their own, whereas market-based policies regulate behavior directly. b. Command-and-control policies rely on taxes, whereas market-based policies rely on quotas. c. Command-and-control policies regulate behavior directly, whereas market-based policies provide incentives for private decision makers to change their behavior. d. Command-and-control policies are efficient, whereas market-based policies are inefficient.c. Command-and-control policies regulate behavior directly, whereas market-based policies provide incentives for private decision makers to change their behavior.The difference between a corrective tax and a tradable pollution permit is that a. a corrective tax sets the price of pollution and a permit sets the quantity of pollution. b. a corrective tax creates a more efficient outcome than a permit. c. a corrective tax sets the quantity of pollution and a permit sets the price of pollution. d. a permit creates a more efficient outcome than a corrective tax.a. a corrective tax sets the price of pollution and a permit sets the quantity of pollution.In some cases, tradable pollution permits may be better than a corrective tax because a. pollution permits allow for a market solution while a corrective tax does not. b. pollution permits generate more revenue for the government than a corrective tax. c. pollution permits are never preferred over a corrective tax. d. the government can set a maximum level of pollution using permits.d. the government can set a maximum level of pollution using permits.