Exam 17: Externalities

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level

-A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. The marginal social cost, private marginal cost, and marginal benefit from producing chemicals are in the figure above. Initially the lake is owned by no one. Keeping in mind the Coase theorem, if transactions costs are low then if the chemical factory owns the lake ________ tons of chemicals will be produced and if the fishing club owns the lake, ________ tons of chemicals will be produced.

Which of the following is a possible government solution to the problem posed by a good with an external benefit?

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

If a good has zero external costs, then

-In the figure above showing the costs and benefits of paper production, there is an

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. In this case

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to

-In the above figure, if the market is unregulated, the equilibrium quantity is

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal external benefit is

-In the above figure, the unregulated, competitive market equilibrium is tuition of ________ and the equilibrium quantity is ________ students in college.

If a good has an external cost, the

-The above figure shows the marginal private benefit and marginal social cost of a college education. If students receive a $10,000 voucher

For a good whose production creates a pollution, when marginal social cost equals marginal social benefit, then I there is no pollution. II resources are utilized efficiently.

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

The three main methods that governments use to cope with an external cost of production include all of the following EXCEPT

The benefit from an additional unit of a good or service that people other than the consumer of that good or service receives is the

The granite boulders in Rocky Mountain National Park are a favored place among talented climbers who specialize in the art of bouldering, or climbing harder (but shorter) routes without tying into a rope. Climbers have taken to (illegally) stashing foam crash pads underneath the boulders but marmots and other rodents chew up the pads and the litter is spread by the wind. Why would the park be overused in this manner?

The government can use taxes to

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, what is the efficient quantity of pesticide to produce?