Exam 16: Externalities

Use the following to answer questions: -(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 5 acres is dedicated to the park, this outcome is _____ because _____.

If the marginal social benefit received from pollution is greater than its marginal social cost in a market:

If pollution is such a bad thing, why do economists argue that the optimal amount of pollution is greater than zero?

The proposition that if transaction costs are low enough and property rights are well-defined, the private market can achieve an efficient outcome regardless of which of the affected parties hold the property rights is known as the:

The efficient way to reduce pollution is to impose strict environmental standards on all polluters.

When government attempts to reduce climate change by establishing a minimum level of fuel efficiency on new cars, it is using a(n):

There are two plants in an industry. To reduce pollution, the government has imposed environmental standards forcing each plant to cut emissions by 60%. At the emissions standard, the marginal social benefit of pollution for plant A is $500, and the marginal social benefit of pollution for plant B is $125. The same level of pollution can be achieved at a lower cost by:

With use of _____ to reduce emissions, the marginal benefit of an additional unit of pollution is the same for all polluters.

Suppose government officials have set an emissions tax to reduce pollution. Further suppose that with the emissions tax, the marginal social cost of pollution exceeds the marginal social benefit of pollution. The emissions tax is:

If external costs exist, the competitive free market:

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. If the current level of pollution is at Q₁, _____ pollution is being emitted, as _____.

A coal-powered electrical generator that discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town has 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. Two tons of pollution is:

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. An optimal Pigouvian tax of _____ can move this market to the socially optimal quantity of pollution.

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. The socially optimal quantity of pollution is _____ tons.

With tradable emissions permits, the main problem is to determine the _____, while with emissions taxes the main problem is to determine the _____.

A familiar example of a negative externality is traffic congestion. In principle, it should be possible to internalize this externality by permitting drivers to negotiate rights to drive during particular times. The most likely reason that this does NOT happen is that:

The marginal social cost of pollution rises as the quantity of pollution emissions:

Which of the following generates a positive externality?

The marginal social cost of pollution emissions _____ as the quantity of pollution emissions _____.