Exam 17: Externalities

The production of paper creates pollution, an external cost. What happens to the production of paper if the government imposes a tax on paper producers equal to the marginal external cost of the pollution?

One reason that education has external benefits is that

-In the above figure, if the market is competitive and unregulated, the price will be

For a common resource, the marginal social cost of the resource is ________ the marginal private cost.

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.

The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to

-Keeping in mind the Coase theorem, in the figure above, if the residents of the town own the lake, the market does what?

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 a subsidy to colleges of $6,000 per student per year, how many students will be accepted?

The Coase Theorem points out that for an efficient outcome to result, it is irrelevant which party receives the property rights.

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. If paper production is 4 tons per week, the outcome is

"Suppose the market for aluminum is perfectly competitive and unregulated. If aluminum factories emit pollution, the marginal social cost of aluminum is less than the market price." True or false? Explain.

-In the above figure, the efficient amount of output is ________ units.

When CSU sophomore Cody Clow and his housemates chose not to heed the city's ordinance against unreasonable noise and host a loud party at their off-campus residence last fall, they were confronted and ticketed by police. Fort Collins city code describes unreasonable noise as any sound that will "unreasonably interfere with the enjoyment of life or property." What is TRUE about this situation?

-The table above gives the private costs and external costs of producing paper. a) Complete the table by finding the marginal social cost at each level of production. b) If the market is competitive and is left unregulated and 400 tons of paper are produced, what is the price of a ton of paper? c) If the government imposes a tax equal to the external cost at each level of production, what price would be charged if 400 tons are produced?

For a common resource, efficiency requires that the ________ equals the ________.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The efficient outcome is

When people decorate the exteriors of their homes with colored lights, they create ________ for the motorists who pass by.

If the marginal private cost of producing one kilowatt of power in California equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt.

-In the figure above, if the market is unregulated, the output will be

-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. If schools are competitive, how many students are enrolled?