Exam 10: Externalities

Scenario 10-4 The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500^th fire extinguisher entails the following: • a private cost of $10; • an external cost of $0; • a private value of $9; • an external benefit of $3. -Refer to Scenario 10-4. Is the socially-optimal quantity of fire extinguishers less than, equal to, or greater than 500? Explain.

Figure 10-10 -Refer to Figure 10-10. Which of the following statements is correct?

Thurman is a writer who works from his home. Thurman lives next door to Phil, the drummer for a local band. Phil needs a lot of practice to earn $250, which is his share of the band's profit. Thurman gets distracted by Phil's drumming but he needs to get his writing done to earn $500 for his current article. Which of the following is an efficient solution?

Which of the following statements is true of both pollution permits and corrective taxes?

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c). The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the external cost of antibiotic overuse is represented by

The Coase theorem asserts that, in the presence of externalities,

If we know that the supply curve for good x fails to reflect the total cost to society of producing that good, then we know that

Figure 10-11 -Refer to Figure 10-11. Which of the following statements is correct?

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

Which of the following statements is correct?

If an objective of public policy is to allocate pollution to those factories that face the highest cost of reducing it, then that objective could be achieved by

Figure 10-14 -Refer to Figure 10-14. Which of the following statements is correct?

Figure 10-12 -Refer to Figure 10-12. The graph, as drawn, could apply to the market for

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Figure 10-16 -Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. In the absence of a pollution permit system, the quantity of pollution would be

Table 10-4 -Refer to Table 10-4. Take into account private and external costs and assume the quantity of output is always a whole number (that is, fractional units of output are not possible). The maximum total surplus that can be achieved in this market is

Which of the following would not be considered a negative externality?

Scenario 10-4 The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500^th fire extinguisher entails the following: • a private cost of $10; • an external cost of $0; • a private value of $9; • an external benefit of $3. -Refer to Scenario 10-4. What is the social value of the 500^th fire extinguisher?

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as