Exam 10: Externalities

At any given quantity, cost to the marginal seller of soccer balls is shown by:

The social cost of an externality can be described as:

Mobile phones are banned in some public places.This is likely to be because:

To produce honey, beekeepers place hives of bees in the fields of farmers.As bees gather nectar, they pollinate the crops in the fields, increasing the yields of these fields at no additional cost to the farmer.What might be a reasonable private solution to this externality and how might the solution be reached.

Pigovian taxes are typically advocated to correct for the effects of:

Internalising a positive production externality through a government subsidy will cause the industry's supply curve to:

Irrespective of whether an externality is positive or negative, all solutions share the same goal of:

Melbourne city council is trying to quantify the social cost of smoking in order to determine the optimal value of a tax on smoking.What factors should they include when calculating the social cost of smoking?

In some cases, pollution permits may be better than a Pigovian tax because:

Graph 10-2 This graph depicts the market for pork.Use this information to answer the following question(s). -In Graph 10-2, consumer surplus would be maximised at what price and quantity combination?

Transaction costs are:

When there are transaction costs to resolving an externality, the distribution of rights does not matter.

Tom is very tall.When he goes to a music festival it is likely he will create:

Luckily, the free market corrects for the cost to bystanders of a crying child, because the parent is irritated as much as, if not more than the bystander.

If only a few people are affected by an externality, then it is likely that:

If two parties negotiating a private solution to an externality cost employ a lawyer to help draft the contract, the lawyer's costs are a type of:

Aaron has a tree in which bats like to perch.He is worried his children will catch a disease from the droppings if they play in the garden, but knows the droppings are also good fertiliser for the garden.These effects of the bats perching in the trees are examples of:

Paul owns a mushroom farm.The smell from the farm reduces the value of adjacent houses by a total of $20 000.Suppose that the benefit of the mushroom farm to Paul is $30 000.Assuming that Paul has the legal right to own the farm, a possible private solution to this problem is that:

A Pigovian tax:

Inventors in developing countries are usually unable to capture the full benefit of their innovations.They therefore tend to devote too few resources to research.Government can address this problem of under-investment in research by: (i) increasing restrictions on trade (ii) establishing a patent system to provide inventors with exclusive control over their inventions for a period of time (iii) subsidising the purchase of technology from other countries.