Exam 16: Externalities

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution,the marginal social benefit of pollution is:

(Scenario: Private and External Benefits)Use Scenario: Private and External Benefits.The community decides that the marginal benefit to external parties from lawn upkeep is $15 and that it is important to maintain the socially optimal number of lawn upkeep hours.To achieve this goal,the community will: Scenario: Private and External Benefits A small community finds that tidy lawns and neighborhoods provide both private and external benefits.They determine that the marginal private benefit (MPB)of lawns can be represented by the equation MPB = 50 - 0.5Q,where Q is the number of hours spent on keeping lawns tidy.The marginal private cost (MPC)of such lawn upkeep is represented by the equation MPC = 0.5Q,where Q is again the number of hours engaged in lawn upkeep.

A negative externality:

The optimal Pigouvian tax is equal to the marginal social cost of pollution at the socially optimal quantity of pollution (assuming there are no private costs from pollution to the polluter).

When farmers raise hogs,there are a number of external costs.In particular,hogs generate methane gas.Without government regulation:

Use the following to answer question: Figure: MSB and MSC of Pollution -(Figure: MSB and MSC of Pollution)Use Figure: MSB and MSC of Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.What level of pollution represents the socially optimal level?

Environmental standards ensure that the marginal benefit of pollution is equal for all sources of pollution.

Economists and environmentalists agree that pollution is undesirable and that government policy should aim to achieve a zero-pollution society.

There are two plants in an industry.To reduce pollution,the government has imposed environmental standards forcing each plant to cut emissions by 60%.At the emissions standard,the marginal social benefit of pollution for plant A is $500,and the marginal social benefit of pollution for plant B is $125.The same level of pollution can be achieved at a lower cost by:

The marginal social benefit of pollution:

The additional cost imposed on society as a whole by an additional unit of pollution is:

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass.In this situation:

Use the following to answer question: -(Table: Externalities from Parks)Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If 1 acre is dedicated to the park,the park is _____ from a social perspective.