Exam 10: Externalities

Using a supply-demand diagram, demonstrate how a positive consumption externality leads to market inefficiency.

Assume that your housemate is very messy.Suppose he gets a $200 benefit from being messy but imposes a $300 cost on you.The Coase theorem would suggest that an efficient solution would be:

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

When weighing the costs and benefits of pollution, the costs always exceed the benefits because the benefit equals zero.

In essence, the Pigovian tax places a price on the right to pollute.

An externality is when the impact of one person's actions on the wellbeing of a bystander is captured in the price of a good.

Internalising a positive production externality will cause the demand curve faced by an industry to:

Government can accurately measure the social value of an externality.

Government policies to encourage technology spillovers may go to industries with the most political clout rather than industries with the largest spillovers.

Japanese fishermen use gill nets to catch tuna with great efficiency.Many environmentalists have objected to this practice since many marine animals such as dolphins and sharks are killed by the nets and discarded by the fishermen.Which of the following statements is most correct?

The sound of birds singing from a new bird sanctuary in inner Melbourne could be considered an externality.

Emission controls on automobiles provide an example of a:

Which of the following best defines the situation where the city council fines people who park too long in one spot?

When Jake takes into account how his actions affect Jill, and changes these, an externality is solved.

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 difference between the social cost curve and the supply curve reflects the:

Policy responses that try to deal with market failure resulting from externalities are largely restricted to various forms of taxation.

Suppose that a fish-food manufacturing company is located up the river from a fishing firm and often releases some of the food into the river.This means:

Negative externalities occur when one person's actions:

The height of the demand curve for aluminum for any given quantity, shows the:

Graph 10-2 This graph depicts the market for pork.Use this information to answer the following question(s). -In Graph 10-2, what price and quantity combination efficiently allocates resources in such a way that the total value to consumers who buy and use pork minus the total costs to the producers who make and sell pork is maximised?