Exam 5: Externalities, Environmental Policy, and Public Goods

Figure 5-13 Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium quantity of gasoline is ________ million gallons per month.

Ronald Coase is famous for the Coase Theorem, which is based on the premise that there is an economically efficient level of pollution reduction.Many economists believe that the tradable emissions allowance program that has been used to deal with the problem of acid rain has been successful in reducing emissions of sulfur dioxide in an economically efficient manner.Why isn't this program an example of the Coase Theorem?

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What is the deadweight loss resulting from producing at the market equilibrium?

If electric utilities continually reduce their emissions of sulfur dioxide,

An externality refers to economic events outside a market.

Which of the following would result in a positive externality?

Kenneth Chay and Michael Greenstone examined the impact of reductions in air pollution since the passage of the Clean Air Act of 1970.Which of the following statements summarizes their findings?

A market failure arises when an entire sector of the economy (for example, the airline industry)collapses because of some unforeseen event.

A positive externality causes

A free market fails when

A market demand curve reflects the

Which of the following describes how a positive externality affects a competitive market?

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The size of marginal external costs can be determined by

A negative externality exists if

Classifying a good as rival means

When the government imposes a tax equal to the external cost of producing a product that causes pollution, the government is said to externalize the externality.

A tragedy of the commons occurs when a resource is

A product is considered to be nonexcludable if

Consider the following methods of pollution reduction: A.the government sets a target for maximum emissions B.the government mandates the installation of specific pollution abatement equipment C.the government imposes a per unit tax on the good that creates pollution D.the government gives firms a tax rebate for every unit of pollution abated Which of the above is an example of a command-and-control approach to reducing pollution?

Figure 5-4 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s). -Refer to Figure 5-4.Why is there a deadweight loss?