Exam 10: Externalities

Both pollution permits and Pigovian taxes are viewed as cost-effective ways to keep the environment clean.

Government intervention in the economy that aims to promote technology-enhancing industries is called technology policy.

To produce honey, beekeepers place hives of bees in orchards and crop fields.As bees gather nectar that they use to produce honey, they pollinate the orchards and fields increasing their yields of fruit and grain.This arrangement results in:

Graph 10-5 -Refer to Graph 10-5.Which of the graphs shown best depicts the case of a negative consumption externality?

When regulating a market in which an externality arises, the government can only command how much of the good companies are allowed to produce.

Which of the following are characteristics of tradeable pollution permits? (i) they are a scarce resource (ii) they can be traded in a market governed by supply and demand (iii) they eventually lead to an efficient elimination of all pollution

Taxation is often able to correct market externalities at a lower cost than regulations designed to achieve the same goal.

In France, drivers in one central region are required to carry breathalysers in their cars.This is an example of:

Organisers of an outdoor concert in a park surrounded by residential neighbourhoods are likely to consider the noise and traffic cost to residential neighbourhoods when they assess the financial viability of the concert venture.

A local cafe that allowed patrons to smoke was recently forced to close its doors because it did not comply with local clean air standards.This decision provides an example of:

Private markets fail to reach a socially optimal level when positive consumption externalities are present because:

Graph 10-5 -Refer to Graph 10-5.Which of the graphs shown best depicts the case of a positive production externality?

A broad-based carbon tax may be preferred to a targeted carbon tax because:

The ability of individuals to arrive at a private solution to an externality is dependent on the initial distribution of rights.

Charities are an example of a private solution to an externality.

The size and scope of technology spillovers is easy for governments to measure.

Graph 10-5 -Refer to Graph 10-5.A policy that restricts the use of a mobile phone while driving an automobile would best be applied to a market characterised by:

Graph 10-3 This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees. -Refer to Graph 10-3.The producer surplus derived from the most efficient kiwifruit production levels is represented by the area:

Graph 10-4 -Referring to Graph 10-4, which curve best represents a Pigovian tax?

Graph 10-3 This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees. -Refer to Graph 10-3.The social cost curve is above the supply curve because: