Exam 5: Externalities, Environmental Policy, and Public Goods

Economists argue that the level of pollution should be

Figure 5-9 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market. -Refer to Figure 5-9.The market equilibrium output level is

Which of the following displays these two characteristics: rivalry and nonexcludability?

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

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

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

Private costs

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The private profit-maximizing quantity for the firm is

The marginal private cost of a good or service is the cost borne by the producer.

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

Article Summary According to the online real estate database company Zillow, homes located near a Whole Foods or Trader Joe's location have appreciated in value at double the rate of homes in other areas. From 1997 to 2014, the median U.S. home had appreciated 71 percent, while a median home near a Whole Foods or Trader Joe's appreciated 140 percent and 148 percent, respectively. Although some analysts believe this is due to these retailers often opening stores in high-income neighborhoods, Zillow researchers found that before a Whole Foods or Trader Joe's opened, homes near where the stores would eventually be appreciated at the same pace of comparable homes across the city, but after the stores opened the appreciation rate of homes in close proximity increased at a faster rate. Source: Marian McPherson, "Living near these 2 stores boosts a home's value," inman.com, June 19, 2017. -Refer to the Article Summary.Assuming the findings are correct and all else equal, people who do not shop at Whole Foods or Trader Joe's can still benefit from living near the stores, as is shown by the higher home values.As a result, the marginal social benefit from living near a Whole Foods or Trader Joe's is ________ the marginal private benefit to those who shop at these stores.

An external cost is created when you

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

When there is an externality in a market,

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.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₁ represent?

Economists generally favor the use of tradable emission allowances to reduce pollution.However, the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

Which of the following represents the true economic cost of production when firms produce goods that cause negative externalities?

How does a positive externality in consumption reduce economic efficiency?

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Should they hire a housecleaner?

In the city of Alvarez, with the exception of guide dogs for blind people, all dogs are banned from its three public parks, regardless of whether the animals are leashed.Many residents are pushing for a change in policy.Canine lover Sara Northridge observed, "There are 800 or more homes here.There are three parks within 10 minutes, and almost everyone has a dog, but we can't take our dogs there." Others fear that allowing dogs would detract from their enjoyment of the parks.Tim Cortis retorted, "We're not preventing dog lovers from enjoying the park, just come without your dog." Which of the following is a way of dealing with the problem by assigning property rights to a particular group?