Exam 16: Externalities

Betsy loves to garden, and her rose garden is enjoyed by everyone in her neighborhood. Because her consumption of rosebushes provides a positive externality to the community, the government should _____ because the market quantity of rosebushes is _____ than the socially optimal quantity.

According to the Coase theorem, the private market can achieve an efficient outcome:

Environmental standards ensure that the marginal benefit of pollution is equal for all sources of pollution.

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. At the efficient quantity of pollution the marginal social cost of pollution is:

Use the following to answer questions: Figure: MSB and MSC of Pollution -(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. What level of pollution would be emitted in a market economy without government regulation?

Use the following to answer questions: Figure: Three Firms That Pollute -(Figure: Three Firms that Pollute) Look at the figure Three Firms That Pollute. If the city imposes a tax of $400 per ton of pollution, firm B will produce _____ of mercury, and firm A will produce _____ mercury than firm C.

What is meant by a negative externality? Use an example in your explanation.

With tradable emissions permits, if the demand for goods that produce emissions shifts to the left, the equilibrium price of permits _____ and the equilibrium quantity _____.

If government officials set an emissions tax too high:

When the government attempts to reduce the noise from airplanes by restricting the noise level from a jet engine to less than 50 decibels, it is using a(n):

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 5 tons of pollution is produced, the marginal social benefit is _____, and the marginal social cost is _____.

Use the following to answer questions: -(Table: Externalities from Parks) The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. Without government intervention, at the amount of land dedicated to the public park the marginal social cost will be:

Taxes are a more effective method of controlling pollution than environmental standards because:

The socially optimal quantity of pollution is:

Which of the following is an activity generating a negative externality?

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. At the efficient quantity of pollution the marginal social cost of pollution is _____ the marginal social benefit of pollution.

A familiar example of a negative externality is loud music on a college campus. In principle, it should be possible to internalize this externality by permitting students to negotiate rights to play music during particular times. The most likely reason that this does NOT happen is that:

Use the following to answer questions: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Point _____ in the figure Pollution and Efficiency represents an efficient solution in this market, where sulfur emissions are a result of production.

Which of the following best describes a negative externality?

Which of the following is a solution to externalities?