Exam 5: Externalities, Environmental Policy, and Public Goods

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?

What are some of the limitations of the Coase theorem in practice?

Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?

Ronald Coase was awarded the 1991 Nobel Prize in Economics primarily for addressing problems related to externalities.Which of the following describes Coase's work?

Goods can be classified on the basis of whether their consumption is

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

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?

Which of the following is an example of a common resource?

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?

"A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus." This statement

Should the level of pollution be reduced to zero and if not, then to what level?

Which of the following is an example of a nonexcludable product?

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

A product is considered to be rival if

Compare two situations.(A)A firm is not legally responsible for damages that result from air pollution caused by its production of steel.(B)A firm is legally responsible for damages that result from its production of steel.Ronald Coase argued that if the property rights are assigned and transactions costs are low,

Which of the following statements about the economically efficient level of air pollution is correct?

Figure 5-10 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease.Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 5-10. -Refer to Figure 5-10.One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidize these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits?

Classifying a good as rival means

Some environmentalists have criticized tradable emission allowances on the grounds that they give permit holders a license to pollute.Furthermore, environmentalists argue that those who sell their permits receive a monetary benefit from their contribution to polluting the environment.Use economic reasoning to evaluate this criticism.

Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?