Exam 10: Externalities

The production of paper creates pollution,an external cost.What happens to the production of paper if the government imposes a tax on paper producers equal to the marginal external cost of the pollution?

Some policymakers have proposed giving parents of children in poorly performing schools tax dollars to help send their children to private schools.This proposal is an example of

Suppose two neighborhoods (A and B)have identical housing,but neighborhood A has a strictly enforced deed restriction that prohibits homeowners from parking junk cars in the front yard.If houses in neighborhood A sell for $105,000 and houses in neighborhood B sell for $100,000,how would an economist value the external cost of visible junk cars,per house?

If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents,then the marginal external cost equals ________ per kilowatt.

Which of the following is NOT an example of a good with an external cost?

-The figure above shows the market for steel,the production of which creates pollution. a.What point represents the equilibrium price and what point represents the equilibrium quantity in an unregulated,competitive market? b.What area represents the deadweight loss of the unregulated,competitive market outcome? c.What point represents the efficient quantity? d.If the output level in part (c)was achieved through the use of a government imposed tax,what price would consumers pay? What price would the producers receive? What distance represents the amount of the tax? e.If government successfully uses marketable permits to eliminate the external cost,what point represents how much output would be produced?

When Ronald takes another economics class,other people in society benefit.The benefit to these other people is called the marginal ________ benefit of the class.

Explain the difference between a negative production externality and a negative consumption externality.

For a product with an external cost,the supply curve

Suppose unregulated production of pesticides results in an equilibrium price and quantity of $400 and 1,000 tons per day,respectively,and a marginal external cost of $10 a ton. a.If the government were to eliminate the external cost by using pollution charges,what should the pollution charge be set at? b.If the government were to eliminate the external cost by using taxes,what should the tax equal? c.Would the government actions described above affect the quantity of pesticides produced? If yes,how? If no,why not?

Suppose two neighborhoods with 10 homes each in Buffalo,New York are identical except one of them is near a toxic waste dump.If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000,the external cost of the dump is

-The figure above represents the relationship between output and cost in an industry with an external cost.Which line represents the marginal private cost (MC)curve?

The benefit the consumer of a good or service receives is the

Which of the following is an example of an external cost?

-The figure above shows the market for a good with an external benefit.When 6 units are produced,marginal social benefit equals ________ and marginal external benefit equals ________.

Explain why a producer who is causing external costs does not have the incentive to reduce these costs.

If the production of a good causes an external cost,then the efficient quantity is

An external cost in the production of a good creates a difference between the i.costs borne by the producer and the costs borne by society in general. ii.efficient quantity of output and the equilibrium quantity of output. iii.marginal social cost and the marginal private cost.

-The figure above illustrates the gasoline market.There is no external benefit from gasoline.If a pollution tax equal to the marginal external cost is imposed on gasoline,then the quantity of gasoline produced and consumed equals

Why does an external cost lead to inefficient overproduction?