Lesson 11 Quiz_ [21FA] ECON 102, Sec 001_ Microeconomic Analysis (WC, Brown)

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12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 1/8 Lesson 11 Quiz Due Dec 5 at 11:59pm Points 10 Questions 10 Available until Dec 6 at 4am Time Limit 45 Minutes Allowed Attempts 2 Instructions Attempt History Attempt Time Score For each of the 12 units of the course, you are required to take a quiz. The quizzes serve multiple purposes: 1. To assess your knowledge of the material. This is a minor aspect, though -- each quiz only counts for 2 points out of 100. 2. To give you practice for the exams. The multiple choice questions for the exams are similar to those on the quizzes. 3. To enhance your learning of course materials by having you answer questions that explore the course subject matter. Instructions: You may take each unit's quiz twice, and you will receive credit for the higher of the two grades if you do so. Questions will be drawn at random from a pool of quiz questions, so each quiz for a given unit will be a bit different. The course calendar spells out the due dates for each quiz. When you are ready to take this quiz, click on the link below to begin. Once you begin the quiz you will have 30 minutes to complete the 10 questions and submit your responses. Once you begin, you must complete the quiz in one sitting. The clock will start when you begin and will continue to run even if you go back to another page or log out of Canvas. Please don't begin the quiz unless you have 30 minutes to complete it! Once time has expired, your quiz will be automatically submitted, even if you have not answered all the questions. Should you encounter any problems in completing a quiz, please write and inform your instructor as soon as possible. Take the Quiz Again

12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 2/8 Attempt Time Score LATEST Attempt 1 34 minutes 8 out of 10 Score for this attempt: 8 out of 10 Submitted Dec 1 at 10:49am This attempt took 34 minutes. 1 / 1 pts Question 1 An example of a positive externality would be the pollution emitted by a paper factory the music your roommate plays loudly while you are trying to sleep the meningitis vaccination you are required to get before you enter college Correct! Correct! the couple chatting behind you while you are trying to listen to your Professor’s lecture A positive externality improves the well-being of a bystander. 1 / 1 pts Question 2 A profit maximizing firm in a competitive market with a negative production externality will produce the quantity of output where price = marginal social cost

12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 3/8 marginal revenue = marginal private cost Correct! Correct! marginal revenue = marginal social cost price = marginal damage cost A firm will only take into consideration its private costs. 0 / 1 pts Question 3 Consider a market with a positive production externality. This type of market does not produce enough output for social efficiency orrect Answer orrect Answer produces too much output for social efficiency ou Answered ou Answered charges a price that is too low for social efficiency none of these are true When there is a positive production externality in a market, too little output is produced for social efficiency. 1 / 1 pts Question 4 When an externality is internalized,

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12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 4/8 economic decision makers are forced to consider the full costs and benefits of their actions Correct! Correct! the pollution from a negative externality is reduced to zero the market does not maximize total economic surplus the external benefits of a positive externality accrue only to those involved in the market transaction When an externality is internalized, all costs and benefits of an action are considered. 0 / 1 pts Question 5 Which of the following is a solution to the problem of externalities? private bargaining ou Answered ou Answered regulation sale of the right to impose externalities all of these are potential solutions to externalities orrect Answer orrect Answer Each choice listed can potentially be used to eliminate the effects of externalities.

12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 5/8 1 / 1 pts Question 6 The Coase theorem states that when externalities are present, under certain conditions private parties can achieve the efficient outcome if there is government intervention private parties can achieve the efficient outcome without government intervention Correct! Correct! private parties can never achieve an efficient outcome private parties will hold out for a better deal, making achieving the efficient outcome impossible Under the Coase theorem, private parties may be able to achieve the efficient outcome without assistance from the government. 1 / 1 pts Question 7 A private good’s market demand is the _______ summation of all individual demand curves. diagonal vertical

12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 6/8 horizontal Correct! Correct! none of these A private good’s market demand is calculated by adding up each individual’s quantity demanded at every price. 1 / 1 pts Question 8 Quantity of the public good Willingness to pay of person 1 Willingness to pay of person 2 1 100 55 2 90 50 3 80 45 4 70 40 5 60 35 Consider the table above. How much is society willing to pay for the 4th unit of the public good? $40 $70 $110 Correct! Correct! $530

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12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 7/8 Society’s willingness to pay for the 4th unit of the public good is $70 + $40. 1 / 1 pts Question 9 Bob, Jack and Norman are the only people living on an island. They are trying to decide whether or not they should build a lighthouse. Bob is willing to pay $1000 for one lighthouse, Jack is willing to pay $1200 for one lighthouse, and Norman is willing to pay $500 for one lighthouse. The cost of providing a lighthouse is $2000. If the lighthouse is a public good, efficiency requires that one lighthouse is built since the willingness to pay of all the residents together is larger than the cost of providing the lighthouse Correct! Correct! that two lighthouses are built since the willingness to pay of all the residents is larger than the cost of providing the lighthouses that three lighthouses be built, one for each island resident that no lighthouses are built since the willingness to pay of each individual resident is smaller than the cost of provision The demand for a public good is determined by the vertical summation of each individual’s demand in order to get society’s demand curve.

12/1/21, 10:50 AM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 8/8 1 / 1 pts Question 10 Dexter lives in New Hampshire where automobile insurance is not required, so Dexter has no car insurance. Dexter is a careful driver and always follows the posted speed limit. Dexter then takes a new job in Pennsylvania where car insurance is required, so Dexter purchases full coverage auto insurance. Now Dexter speeds all the time. Dexter’s behavior is an example of the Tiebout hypothesis the Coase theorem adverse selection moral hazard Correct! Correct! Moral hazard occurs when one party to a contract passes on the costs of its behavior to the other party in the contract. Quiz Score: 8 out of 10

12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 1/8 Lesson 11 Quiz Due Dec 5 at 11:59pm Points 10 Questions 10 Available until Dec 6 at 4am Time Limit 45 Minutes Allowed Attempts 2 Instructions Attempt History Attempt Time Score KEPT Attempt 2 18 minutes 8 out of 10 For each of the 12 units of the course, you are required to take a quiz. The quizzes serve multiple purposes: 1. To assess your knowledge of the material. This is a minor aspect, though -- each quiz only counts for 2 points out of 100. 2. To give you practice for the exams. The multiple choice questions for the exams are similar to those on the quizzes. 3. To enhance your learning of course materials by having you answer questions that explore the course subject matter. Instructions: You may take each unit's quiz twice, and you will receive credit for the higher of the two grades if you do so. Questions will be drawn at random from a pool of quiz questions, so each quiz for a given unit will be a bit different. The course calendar spells out the due dates for each quiz. When you are ready to take this quiz, click on the link below to begin. Once you begin the quiz you will have 30 minutes to complete the 10 questions and submit your responses. Once you begin, you must complete the quiz in one sitting. The clock will start when you begin and will continue to run even if you go back to another page or log out of Canvas. Please don't begin the quiz unless you have 30 minutes to complete it! Once time has expired, your quiz will be automatically submitted, even if you have not answered all the questions. Should you encounter any problems in completing a quiz, please write and inform your instructor as soon as possible.

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12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 2/8 Attempt Time Score LATEST Attempt 2 18 minutes 8 out of 10 Attempt 1 34 minutes 8 out of 10 Score for this attempt: 8 out of 10 Submitted Dec 5 at 1:45pm This attempt took 18 minutes. 1 / 1 pts Question 1 When a paper manufacturer emits pollution levels above the socially efficient level, we can conclude that the manufacturer pays the entire cost of producing the paper. does not pay the entire cost of producing the paper. Correct! Correct! pays a tax equal to the negative externality that paper manufacturing produces is not maximizing profit When a negative production externality exists, the firm does not bear the full social cost of production, the firm only pays the private cost of production. 1 / 1 pts Question 2 Consider a market in equilibrium. At the equilibrium quantity the marginal benefit to the consumer is less than the marginal social cost of production.

12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 3/8 In this situation total economic surplus would rise if production were reduced below equilibrium there is a negative production externality the demand curve is below the marginal social cost curve at the equilibrium quantity all of these are true Correct! Correct! This question describes a negative externality. 1 / 1 pts Question 3 A profit maximizing competitive firm in a market with NO externalities will produce the quantity of output where price = marginal cost marginal revenue = marginal cost marginal benefit = marginal cost all of these are true Correct! Correct! All of the conditions listed describe competitive equilibrium.

12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 4/8 1 / 1 pts Question 4 A steel factory emits air pollution and as a result a negative externality exists. If the government forces the steel factory to internalize the externality, the demand for steel will decrease the demand for steel will increase the supply of steel will increase the supply of steel will decrease Correct! Correct! When the firm must pay the entire cost of production in the presence of a negative externality, costs rise and the supply declines. 1 / 1 pts Question 5

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12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 5/8 Consider the graph above. This graph shows the externality in the market for steel. In order to efficiently internalize this externality, the government could tax the producer Correct! Correct! subsidize the producer subsidize the consumer legislate minimum production levels Placing a tax on the market equal to the externality will move the market to the efficient level of output. 0 / 1 pts Question 6 The Clean Air Act of 1990 reduces the negative externalities caused by power plant air and water pollution by

12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 6/8 direct government regulation ou Answered ou Answered issuing tradable pollution permits to each power plant orrect Answer orrect Answer encouraging private bargaining between the power plants and the parties affected by the pollution taxing power plant emissions Tradable pollution permits allow the U.S.to use a market based solution to limit power plant emissions. 0 / 1 pts Question 7 Public goods are usually provided by governments because no public goods would be provided without government provision the private market is unable to produce public goods. ou Answered ou Answered free-riders prevent the private market from producing the optimal quantity orrect Answer orrect Answer markets typically need government intervention to be efficient Public goods suffer from the free-rider problem. Once a public good is provided, anyone can enjoy the benefits of the good regardless of whether or not they pay for it.

12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 7/8 1 / 1 pts Question 8 It is difficult to provide the efficient quantity of a public good since efficiency would require that the government know everyone in society’s willingness to pay Correct! Correct! tax society in order to provide public goods put up with free-riders use inefficient private markets to provide public goods to society Efficiency requires knowledge of society’s willingness to pay. 1 / 1 pts Question 9 Bob, Jack and Norman are the only people living on an island. They are trying to decide whether or not they should build a lighthouse. Bob is willing to pay $1000 for one lighthouse, Jack is willing to pay $1200 for one lighthouse, and Norman is willing to pay $500 for one lighthouse. The cost of providing a lighthouse is $2000. If the lighthouse is a public good, efficiency requires that one lighthouse is built since the willingness to pay of all the residents together is larger than the cost of providing the lighthouse Correct! Correct! that two lighthouses are built since the willingness to pay of all the residents is larger than the cost of providing the lighthouses

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12/5/21, 1:46 PM Lesson 11 Quiz: [21FA] ECON 102, Sec 001: Microeconomic Analysis (WC, Brown) https://psu.instructure.com/courses/2133248/quizzes/4262698 8/8 that three lighthouses be built, one for each island resident that no lighthouses are built since the willingness to pay of each individual resident is smaller than the cost of provision The demand for a public good is determined by the vertical summation of each individual’s demand in order to get society’s demand curve. 1 / 1 pts Question 10 The classic case of adverse selection is the market for education lemons and oranges used cars Correct! Correct! new cars Asymmetric information in the market for used cars will lead to a used car market made up primarily of low quality cars. Quiz Score: 8 out of 10

Lesson 11 Quiz_ [21FA] ECON 102, Sec 001_ Microeconomic Analysis (WC, Brown)

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