Exam 5: Externalities, Environmental Policy, and Public Goods

"When it comes to public goods, individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry, installing this equipment may not be the most cost effective method of reducing pollution.

Economists argue that the level of pollution should be

The demand curve for a public good is also called the

In economics, the optimal level of pollution is

Why was the Montreal Protocol necessary to reduce the use fo chlorofluorocarbons (CFC)which damage the ozone layer and increase cases of skill cancer?

A quasi-public good differs from a public good in that unlike a public good, it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.

Figure 5.2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5.2.The efficient output level is

Figure 5.1 Figure 5-1 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂. -Refer to Figure 5.1.Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality.The economically efficient output is Q₂.In that case, the diagram shows

For-profit producers will produce only private goods because

Which of the following displays these two characteristics: nonrivalry and excludability?

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle accidents which cost the health care system millions of dollars a year.In this sense, these mandatory helmet laws are reducing ________ of risky behavior.

How does the construction of a market demand curve for a private good differ from that for a public good?

Determine if each of the products below displays any of the following characteristics: (i) rivalry (ii) nonrivalry (ii) excludability (iv) nonexcludability. a.a highway during peak commute hours b.an online course c.infectious disease prevention d.open source software such as Linux e.a movie showing at Cineplex Theatres

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

Table 5.1 Number of Acres Deidre's Willingness to Pay (dollars) Eugene's Willingness to Pay (dollars) Farhad's Willingness to Pay (dollars) Marginal Social Benefit (dollars) 1 \ 180 \ 140 \ 150 2 160 130 130 3 140 120 110 4 120 110 90 5 100 100 70 6 80 90 50 7 60 80 30 8 40 70 20 In an effort to maintain privacy and enhance property values, three homeowners, Deidre, Eugene and Farhad, are considering leasing a portion of adjoining vacant land for a private park. Table 5.1 shows each person's willingness to pay for each quantity of the land. a.Complete the column in Table 5.1. b.Graph the marginal social benefit curve. c.Suppose the landowner is willing to lease a portion of her land according to the following supply schedule given in Table 5.2. On the same diagram, graph the supply curve. Table 5.2 Number of Acres Price per Acre (dollars) 1 \ 260 2 280 3 300 4 320 5 340 6 360 7 380 8 400 d. What is the optimal quantity of land that homeowners should lease? Explain your answer. e.Explain why a park of 5 acres is not optimal.

The basic cause of deadweight losses from the existence of common resources and externalities is

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

If pollution is created when producing a product, then the market equilibrium price is too high and equilibrium quantity is too low.

Who was the economist who first proposed that governments use taxes and subsidies to correct for externalities?