Exam 10: Externalities

Scenario 10-2 The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50^th restored historic building entails the following: • a private cost of $800,000; • a private value of $650,000; • a social value of $800,000. -Refer to Scenario 10-2. Is the socially optimal quantity of restored historic buildings less than, equal to, or greater than 50?

In a certain city, the local government regulates the destruction of historic buildings and provides tax breaks to owners of historic buildings who restore them. These government policies

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Figure 10-19 -Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value"are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of the good that is consumed, and (2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 74th unit of the good is produced and consumed, social well-being

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat. ​

The Coase theorem states that

Corrective taxes

The tax on gasoline

Assuming education results in a positive externality, which of the following statements is correct?

Suppose the market-equilibrium quantity of good x is 5,000 units and the socially-optimal quantity of good x is 4,000 units. Then

Reaching an efficient bargain is difficult when the

Karen's cat causes Danny to sneeze. Karen values her cat's companionship at $300 per year. The cost to Danny of tissues and her allergy medication is $350 per year. Based on the Coase theorem,

If only a few people are affected by an externality, then it is likely that

Which of the following helped reduce sulfur dioxide emissions, a leading cause of acid rain? (i) Corrective taxes (ii) Tradable pollution permits (iii) Amendments to the Clean Air Act

All remedies for externalities share the goal of

Which of the following is an example of an externality?

In Singapore, littering fines are strictly enforced. This is an example of a policy that

Which of the following is not a characteristic of pollution permits?

Positive externalities

For the purpose of protecting the environment, upon which of the following approaches do we rely more and more as time goes by?