Exam 17: Externalities

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government provides the efficient amount of education, how many students will be accepted?

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service is the

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If the waterway is owned by the factory and the Coase theorem applies, then the factory will produce ________ tons of chemicals a week.

School vouchers can be used to arrive at the efficient market equilibrium because vouchers

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If no property rights exist on the waterway and if there is no regulation of pollution, then the factory produces ________ of chemicals a week.

"The problem with a common resource is that no one gets to use the resource." Comment on the preceding assertion.

The efficient quantity of output of a product with external costs of production is

If a local fishing club spends time each year cleaning up local streams by removing trash thrown by motorists, efficiency would be improved if

The marginal social cost of burning garbage in Houston is the sum of the marginal private cost and the marginal external cost." Is this assertion correct or incorrect?

-The above figure shows the marginal benefits and marginal costs of a college education. If a voucher for $5,000 is given to the students, then colleges charge tuition of

The cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service is the

-In the above figure, in order to achieve efficiency, a tax of ________ per unit is needed.

-In the figure above, S is the supply curve and D is the demand curve in the unregulated, competitive market for gasoline in Motorland. The external cost of gasoline is constant at $1.50 per gallon. The efficient quantity of gasoline to sell in Motorland is

The market price of an individual transferable quota is equal to the

An example of an externality occurs when a chemical factory

The marginal social cost of production is the

The Atlantic City Expressway is a highway that runs from outside Philadelphia to Atlantic City, New Jersey. It is notoriously congested during the summer weekends when many people are driving to the beach about the same time. Because drivers who decide to take this road ignore the impact of their driving on overall traffic congestion the result is ________ cars on the road than the efficient number of cars and a deadweight loss is ________.

-A paper mill dumps waste into a lake used by a catfish farmer. The table above shows costs and benefits arising from the production of paper. a) Draw the paper mill's marginal private cost curve, the marginal social cost curve, and the marginal social benefit of paper curve. b) What is the efficient level of paper production? If no one owns the lake and there is no regulation of pollution, what is the quantity of paper produced per week? Illustrate the deadweight loss in your figure. c) If the government introduces a Pigovian tax, what is the tax per ton of paper produced that achieves an efficient outcome? What is the amount of the tax? d) If the catfish farmer owns the lake, how much paper is produced per week and what does the paper mill pay the farmer per ton? Explain you answer. e) If the paper mill owns the lake, how much paper is produced per week? Explain. f) Compare the quantities of paper produced in (c) and (d) and explain the relationship between these quantities.

If a product has zero external costs, then marginal social cost equal marginal private cost.

If a good has an external benefit, efficiency can be achieved by