Exam 5: Externalities, Environmental Policy, and Public Goods

If there are no externalities, a competitive market achieves economic efficiency.If there is a negative externality, economic efficiency will not be achieved because

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Alternative approaches for reducing carbon dioxide emissions are

Figure 5-12 College education benefits society by producing a more employable workforce, reducing crime, and creating a better informed citizenry. Thus, the marginal social benefits of college education exceed the marginal private benefits for any level of college education. This is illustrated in Figure 5-12. -Refer to Figure 5-12.One way to obtain the economically efficient amount of college education is for governments to subsidize college education.What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.)

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes.According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution.

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

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

Figure 5-16 Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights, and the marginal cost of installing the street lights. -Refer to Figure 5-16.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

For-profit producers will produce only private goods because

Figure 5-3 -Refer to Figure 5-3.The efficient output level is

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.Let's suppose the government imposes a tax of $50 per unit of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

When there is a negative externality, the competitive output is greater than the economically efficient output level.

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 price of gasoline is ________ per gallon.

Private producers have no incentive to provide public goods because

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 does D₂ represent?

Medical research that results in a cure for a serious disease produces positive externalities.What is the impact of this positive externality on economic efficiency?

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 market equilibrium price of gasoline is ________ per gallon.

Which of the following is a source of market failure?

The supply curve of a public good shows