Exam 16: Externalities

Which factor is an environmental standard?

(Figure: Environmental Standards versus Emissions Taxes)Use Figure: Environmental Standards versus Emissions Taxes.In the figure,if the goal is to limit the total emissions of the two firms,A and B,to 600 tons,the MOST efficient solution is an _____,and total pollution would be _____ tons. Figure: Environmental Standards versus Emissions Taxes

Licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called:

A familiar example of a negative externality is traffic congestion.In principle,it should be possible to internalize this externality by permitting drivers to negotiate rights to drive during particular times.The most likely reason that these negotiations do NOT happen is that:

When the government attempts to reduce the noise from airplanes by restricting the noise level from a jet engine to less than 50 decibels,it is using a(n):

The marginal social benefit of pollution is always zero.

If at the current amount of pollution its marginal social benefit is greater than its marginal social cost,then there is too little pollution.

A coal-powered electrical generator that discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town has a(n):

Emissions taxes and tradable emissions permits both ensure that any given reduction in total pollution is achieved at the lowest possible cost.This is not the case for environmental standards since they fail to ensure that those who can reduce pollution most cheaply are in fact the ones to do so.

The efficient quantity of pollution emissions occurs where:

Which activity generates a positive externality?

Which example illustrates a negative externality?

(Table: The Marginal Social Benefit of Computer Chips)Use Table: The Marginal Social Benefit of Computer Chips.The production of computer chips generates an external benefit in the form of a technology spillover.If the marginal social benefit is indicated by MSB,the optimal Pigouvian subsidy is equal to $10.

Taxes are a more effective method of controlling pollution than are environmental standards because:

The government has adopted an emissions tax if it:

The socially optimal quantity of pollution is:

Which statement BEST describes a negative externality?

The proposition that,if transaction costs are low enough and property rights are well-defined,the private market can achieve an efficient outcome,regardless of which of the affected parties hold the property rights,is known as the:

Licenses that can be bought and sold by polluters and that enable the holder to pollute up to a specified amount during a given period are called:

By using _____ to reduce emissions,the government can ensure that the marginal benefit of an additional unit of pollution is the same for all polluters.