Exam 8: Market Failure Versus Government Failure

An effluent fee is an example of:

James enjoys gardening in the nude because he says it puts him in touch with nature. His neighbors find his gardening routine very offensive, but James replies that they should mind their own business and not watch him. To an economist this situation illustrates the concept of:

The Environment Ministry in Japan proposed a new carbon tax to meet Japan's obligations to reduce carbon dioxide emissions under the Kyoto Treaty. The tax would be levied on producers and importers of fossil fuels, and the expectation is that it would be largely passed on to consumers. This proposal is an example of a:

If a negative externality exists in the market for dirt bikes and that market is perfectly competitive:

The efficient amount of pollution control is:

The problem that arises when people don't have to bear the negative consequence of their actions is known as:

A per-unit tax designed to internalize the costs of production imposed on third parties is called:

Refer to the graph shown. There is a $.010 per-gallon marginal cost external to the trade associated with the use of gasoline. Assuming that gasoline is sold in perfectly competitive markets, the market equilibrium price will be:

Opponents of government intervention in the economy argue that externalities:

An economist argues that the states that have spent the most on higher education in the last 25 years have experienced the least economic growth. One might conclude that higher education:

The following table shows four firms, the amount each pollutes, the marginal cost for each firm to clean up pollution, and the total cost to each firm of eliminating all pollution. Firm Total Discharge (in tons) Marginal Cost of Cleanup (per ton) Total Cost of Cleanup A 60 \ 5.00 \ 300 B 70 \ 8.00 \ 560 C 80 \ 7.50 \ 600 D 90 \ 4.00 \ 360 The total discharge of these four companies is 300 tons. Assume there is no one else who pollutes. If the goal of the government is to reduce pollution by 50 percent, the cheapest way would be to have:

In a tax incentive program, the person who conserves the most pays:

A person who has auto insurance is likely to drive a little less safely and to take less care in parking their car in a safe place off the street. This is an example of a problem called:

A European Union official, Mr. McGreevey, claims a portion of EU law involves overregulation. McGreevey is suggesting the EU suffers in part from:

Direct regulation means that government sets specific limits on the use of scarce resources.

Economists believe that free riders often can undermine the social commitment of many in the society, causing voluntary policies to fail.

Refer to the graph shown, which shows the demand and supply for a new vaccine against the common cold. Suppose once vaccinated, a person cannot catch a cold or give a cold to someone else. As a result, the marginal social benefit curve will:

Which of the following does not illustrate the free rider problem?

The following table shows four firms, the amount each pollutes, the marginal cost for each firm to clean up pollution, and the total cost to each firm of eliminating all pollution. Firm Total Discharge (in tons) Marginal Cost of Cleanup (per ton) Total Cost of Cleanup A 60 \ 5.00 \ 300 B 70 \ 8.00 \ 560 C 80 \ 7.50 \ 600 D 90 \ 4.00 \ 360 The total discharge of these four companies is 300 tons. Assume there is no one else who pollutes. If the government establishes an effluent fee of $7.00 per ton, how much would the firms spend on reducing pollution?

A lawyer who drives a beat-up car and wears frumpy clothes may have a hard time getting clients. Potential clients may conclude from his appearance that he is poor, and if he is poor, he probably is not very good. If this is true for a lawyer, dressing in expensive and stylish clothing is a way of: