Test Bank to pany Rosen ’s Public Finance, Seventh Edition Chapter 5 1 CHAPTER 5- Externalities Multiple-Choice Questions 1. Reducing output from the privately optimal level to the socially optimal level will a) cause a loss of consumption to consumers. b) reduce marginal damages. c) reduce the production costs. d) cause allof the above. 2. Marginal damages are hard to measure because a) they can be generated from multiple sources. b) they are hard to graph. c) they happen over time. d)noone cares about them. 3. In Figure , if the marginal damages line did not originate at0, a) it would mean that marginal damages did not exist. b) there isno way to find MSC. c) MSC would not originate at the same intercept as MPC. d) then allof the above. 4. Externalities can be positive because a) marginal damages donot last over time. b) utility can be impacted positively as well as negatively. c) there isno concept for marginal benefit. d) positive externalities are subsidies. 5. Refer to the graphs below. Which graph(s) represent(s) an externality? a) graph Ab) graphs A and B c) graph Bd) neither graph Anor graph BAB Test Bank to pany Rosen ’s Public Finance, Seventh Edition Chapter 5 2 6. Refer to Figure in the textbook. What does it mean if all firms have to reduce toa point 2 *)*(XZ?? a) Firm X will reduce more than optimal. b) Firm Z will reduce less than optimal. c) The new poin
