Exam 10: Externalities

Figure 10-9 -Refer to Figure 10-9. The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the market for smokestack scrubbers is shown in

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000^th gallon of gasoline entails the following: • a private cost of $3.10; • a social cost of $3.55; • a value to consumers of $3.70. -Refer to Scenario 10-1. Let Q_MARKET represent the equilibrium quantity of gasoline, and let Q_OPTIMUM represent the socially optimal quantity of gasoline. Which of the following inequalities is correct?

According to the Coase Theorem, individuals can always work out a mutually beneficial agreement to solve the problems of externalities even when high transaction costs are involved.

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 325 units of plastics are produced and consumed, then the

Which of the following policies is not an example of a command-and-control policy?

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods. Figure 10-3 -Refer to Figure 10-3. At the private market outcome, the equilibrium price will be

Which of the following statements is correct?

Table 10-5 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. -Refer to Table 10-5. If the government charged a fee of $84 per unit of pollution, how many units of pollution would the firms eliminate altogether?

If an externality is present in a market, economic efficiency may be enhanced by

Which of the following is true of markets characterized by positive externalities?

Suppose the government imposes a tax in a certain market in order to internalize an externality. This type of policy is based on which of the Ten Principles of Economics?

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If the government offers subsidies for MBAs, then which of the following statements is correct?

Which of the following is the most effective way to internalize a technology spillover?

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c). The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the socially optimal quantity of smokestack scrubbers is represented by point

Barking dogs cannot be considered an externality because externalities must be associated with some form of market exchange.

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

Which of the following statements is not correct?

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000^th gallon of gasoline entails the following: • a private cost of $3.10; • a social cost of $3.55; • a value to consumers of $3.70. -Refer to Scenario 10-1. Suppose the equilibrium quantity of gasoline is 1,150 gallons; that is, Q_MARKET = 1,150. Then the equilibrium price of a gallon could be

Figure 10-19 -Refer to Figure 10-19. The socially optimal quantity of output is

Table 10-6 The following table shows the total costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $46, and for Firm A to eliminate two units of pollution, it would cost a total of $103. -Refer to Table 10-6. Suppose the government wanted to reduce pollution from 16 units to exactly 6 units. Which one of the following fees per unit of pollution would achieve that goal?