Exam 10: Externalities

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. The equilibrium number of permits is

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then

Figure 10-15 -Refer to Figure 10-15. The supply of pollution permits is

Does research into new technologies create a positive externality or does it create a negative externality?

Figure 10-15 -Refer to Figure 10-15. Which graph illustrates a pollution permit program?

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

Markets are often inefficient when negative externalities are present because

Which of the following illustrates the concept of a negative externality?

When an externality is present, the market equilibrium is

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 market equilibrium quantity of restored historic buildings less than, equal to, or greater than 50?

Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200. Suppose that the farmer has the right to compensation for any damage that his crops suffer. Assume that there are no transaction costs. Which of the following characterizes the efficient outcome?

Figure 10-19 -Refer to Figure 10-19. The social optimum can be reached if

A corrective tax

According to the Coase theorem, the private market will need government intervention in order to reach an efficient outcome.

Which of the following is not correct?

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. The social cost curve is above the supply curve because

Many charities like the Sierra Club are established to deal with externalities.

An example of a private solution to externalities is charities. The government encourages this private solution by allowing ___________ .

​Figure 10-20. ​ -​Refer to Figure 10-20. This market would benefit from a tax equal to $50 per unit.