Which of the following is not a solution to the problem of negative externalities due to pollution?
a. Create private property rights.
b. Levy pollution taxes.
c. Create obligatory controls.
d. Reward the production of these products through subsidies.
e. Establish strict limits on the amount of pollution allowed.
QUESTION 2In the case of negative externalities in production, the firm's internal costs:
a. exceed the external costs.
b. are less than the external costs.
c. equal the external costs.
d. understate the true cost of producing the product.
e. overstate the true cost of producing the product.
QUESTION 3Which of the following would be an external cost associated with the manufacture of cigarettes?
a. Price of a pack of cigarettes.
b. Price of leaf tobacco.
c. Cost to the government of the hospital expenses of indigent smokers.
d. Cost to the employer of the higher health insurance premiums due to the hiring of a smoker.
e. Cost to the employer of the extra effort lost due to the increased missed days of work as a result of smoking.
QUESTION 4Which of the following would be a private cost to a cigarette manufacturer?
a. Price of leaf tobacco.
b. Cost to the government of the hospital expenses of indigent smokers.
c. Increased risk of cancer to the nonsmoking passengers in the smoker's carpool.
d. Price of a pack of cigarettes.
e. The loss in utility received because the smoker must stand outside her office building in the winter to smoke.
QUESTION 5Which of the following would be an external cost to the consumption of cigarettes?
a. Price of a pack of cigarettes.
b. Loss of income resulting from extra missed days of work.
c. Higher life insurance premiums due the practice of smoking.
d. The loss in utility received because the smoker must stand outside her office building in the winter to smoke.
e. Increased risk of cancer to the nonsmoking passengers in the smoker's carpool.
QUESTION 6Which of the following would be a private cost to a cigarette smoker?
a. Cost to the employer of the higher health insurance premiums due to the hiring of a smoker.
b. Cost to the employer of the extra effort lost due to the increased missed days of work as a result of smoking.
c. Cost to the city of extra park cleanup due to the presence of cigarette butts.
d. Price of the pack of cigarettes.
e. Cost to the government to pay the hospital expenses of indigent smokers.
QUESTION 7Which of the following is a free rider?
a. Butch breeds the feared pit bulls, and his neighbors now erect fences around their property.
b. Fred watches many public television programs, but he has never sent in a contribution.
c. Barry steals candy from the store where he works.
d. Betty regularly uses the local public library.
e. Joe drives 20,000 miles a year on public streets, but he pays no more in taxes than Sam, who only drives 1,000 miles.
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