Exam 17: Externalities

When the consumption of a good creates an external benefit

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then the private market outcome is inefficient because

Scientists have said for years cod was so seriously overfished in European Union waters that there was a risk of extinction due to stock collapse. Why would overfishing occur in this common market?

Which of the following is TRUE?

Education in the United States is heavily subsidized by the government. This fact suggest that I. less than the efficient amount of education would be provided by an unregulated market. II) the marginal social benefit of education is greater than marginal social cost of education.

Describe some of the external benefits associated with education. What can government do to encourage production of the efficient amount of education?

When the production of a good creates an external cost, in order for taxes to be effective in achieving the efficient allocation of resources, the tax must be set equal to the

Using the Coase theorem, why might a firm that currently pollutes a river no one owns pollute the river less if it owned the river?

For a common resource, the equilibrium with no government intervention is such that ________ is less than ________.

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient level of college education, tuition is

Does the existence of the University of Oklahoma affect citizens who do not attend the University?

-In the above figure, to achieve efficiency, the government should

-In the above figure, in order to promote an efficient allocation of resources, the government could grant a subsidy equal to

A polluted river has 20 homes on it that rent for $1,000 each per month. Homes on a similar river that is not polluted rent for $2,000 each per month. The river is polluted because there are two factories on the river that dump polluted water in the river. Each factory could install a filter that would cost $5,000 each and would reduce the pollution in the water to a negligible level. The external cost in this problem is

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, the market does what?

-Keeping in mind the Coase theorem, in the figure above, if the residents of the town own the lake, how much do they charge the factories to dump waste?

-If the government regulates the market in the above figure in a way to achieve efficiency, then ________ tons of paper will be produced and consumed.

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. What is the efficient amount of education?

Subsidizing education can lead an efficient level of production because education has external benefits.