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Multiple Choice Quiz
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The "Tragedy of the Commons" refers to the
A)The destruction of the Atlantic salmon stocks (for example).
B)The plight of the common man confronted by monopoly power or tyranny.
C)The film (with Juliette Binoche and Ralph Fiennes) of an early Marlowe play.
D)The failure of the Gunpowder Plot.
E)The overuse of resources that are costless.
All but one of the following factors would lessen the ability of the Coase Theorem to solve an externality. Which one?
A)Negotiating requires lawyers and legal documents.
B)Many individuals bear the external cost.
C)When the externality is an external benefit.
D)Many individuals generate the external cost.
E)The parties involved distrust and dislike each other.
If the external benefit of an activity is added to the private benefits, then the:
A)demand curve shifts left.
B)quantity demanded rises.
C)supply curve shifts right.
D)demand curve shifts right.
E)quantity demanded falls.
Assume that a small town has two local radio stations. If one of them invests in the newest over the horizon digital technology, one can predict that:
A)the other station will continue to use its current technology.
B)to maintain its relative standing, the other station will upgrade its technology.
C)the outcome for the other station is indeterminate.
D)to maintain its absolute standing, the other station will upgrade its technology.
E)the quality of broadcasts will remain unchanged.
When some fraction of the benefit of an activity is received by people not participating in the activity, it is called a(n)
A)a negative spillover effect
B)positive externality.
C)external cost.
D)negative externality.
E)efficient allocation.
Which of the following is not an example of a positional arms control agreement?
A)Campaign spending limits.
B)Training period limits limits on professional sports teams.
C)Contracts containing a binding arbitration clause in case of breach.
D)Air pollution limits.
E)A ban on more than three visible body piercings at a high school.
In the case of either an external cost or an external benefit, the invisible hand fails to generate the efficient outcome because:
A)the model is not capable of incorporating externalities.
B)buyers and sellers only take their self interests into account.
C)too much is produced.
D)too little is produced.
E)the environment is treated as a common property.
Which of the following is an example of a governmental solution to an external benefit?
A)Requiring cars to meet minimum emissions regulation.
B)Building safety requirements for office buildings.
C)Regulations of food additives.
D)requiring young children to be innoculated against infectious illnesses.
E)Public service ads discouraging smoking.
If, after an externality is corrected, the equilibrium price rises and the equilibrium quantity falls, the externality must have been a(n):
A)external benefit.
B)internal cost.
C)external cost.
D)positive externality.
E)positional externality.
Which of the following is an example of an external benefit?
A)Honeybees providing honey for beekeepers.
B)Beekeepers providing honey for consumers.
C)Apple trees providing an income for land-ownwers.
D)Honeybees pollinating apple trees.
E)Apple orchards providing fruit for consumers.

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