ECON 2106 Final Exam Questions With
Correct Answers
Refer to the graph below. Currently Q0 of electrical power is being produced.
The demand curve is represented by D, and the current market supply is
represented by S0. It is discovered that the Rocky Mountain Electrical Co-op and
Power Company is discharging waste into the area water supply. As a result, S1
represents________ and a price of _________ would represent the true
internalized cost of production at that level of output. - ANSWER The supply
curve with external costs included; P2
If a good that includes a negative externality is produced in a free market, the
good will be - ANSWER Overproduced and undervalued
An externality occurs when: - ANSWER people other than those making the
demand/supply decisions share the benefits or costs of an activity.
An example of a negative externality is: - ANSWER The sleep you lose when your
neighbor throws a loud party next door that keeps you awake.
Negative externalities/external costs are costs: - ANSWER borne by
nonconsenting secondary parties not directly engaged in the transaction.
Market failure describes a situation in which the market itself
______________________ in a way that balances social costs and benefits. -
ANSWER Fails to allocate resources efficiently
Command-and-control regulation is a body of law that - ANSWER Can include
both b and c.
The problem of pollution arises in ______________ economies around the world. -
ANSWER All of the above
Which of the following has become the least willing to sacrifice their
environmental quality for some additional economic output? - ANSWER the
European Union
Which of the following will need to strike some balance between economic
output and environmental quality as a prominent climate change priority? -
ANSWER Every country
Correct Answers
Refer to the graph below. Currently Q0 of electrical power is being produced.
The demand curve is represented by D, and the current market supply is
represented by S0. It is discovered that the Rocky Mountain Electrical Co-op and
Power Company is discharging waste into the area water supply. As a result, S1
represents________ and a price of _________ would represent the true
internalized cost of production at that level of output. - ANSWER The supply
curve with external costs included; P2
If a good that includes a negative externality is produced in a free market, the
good will be - ANSWER Overproduced and undervalued
An externality occurs when: - ANSWER people other than those making the
demand/supply decisions share the benefits or costs of an activity.
An example of a negative externality is: - ANSWER The sleep you lose when your
neighbor throws a loud party next door that keeps you awake.
Negative externalities/external costs are costs: - ANSWER borne by
nonconsenting secondary parties not directly engaged in the transaction.
Market failure describes a situation in which the market itself
______________________ in a way that balances social costs and benefits. -
ANSWER Fails to allocate resources efficiently
Command-and-control regulation is a body of law that - ANSWER Can include
both b and c.
The problem of pollution arises in ______________ economies around the world. -
ANSWER All of the above
Which of the following has become the least willing to sacrifice their
environmental quality for some additional economic output? - ANSWER the
European Union
Which of the following will need to strike some balance between economic
output and environmental quality as a prominent climate change priority? -
ANSWER Every country
