Exam 10: Externalities

What are marketable permits? Suppose there are two firms in an area, each emitting tons of sulfur.The government decides on a target level of 200 tons of sulfur, and gives each firm a permit to emit 100 tons of sulfur.Suppose Firm A is very efficient and can reduce pollution by 100 tons with an abatement cost of $500.Firm B has an older plant, so it will cost Firm B $1,000 to reduce emissions by 100 tons.What will occur with marketable permits?

A private cost is a cost of production that is

-Producing leather creates external costs in the form of water pollution.The figure above illustrates the market for leather.If the government sets a pollution limit that achieves efficiency, how many tons of leather are produced?

Public provision

Food stamps provided by the government to households are an example of

The government can overcome the inefficiency created by a good with an external benefit by using

If a product has an external benefit, how does its marginal private benefit compare to its marginal social benefit?

The marginal cost of production that is borne by the entire society is called the marginal

Externalities

A firm dumps dioxin in a river, thereby severely polluting the river.The cost of the water pollution is I∙zero for the firm. Ii∙an external cost. Iii∙part of the marginal social cost

-The figure above shows the market for steel, the production of which creates pollution. a∙What point represents the equilibrium price and what point represents the equilibrium quantity in an unregulated, competitive market? b∙What area represents the deadweight loss of the unregulated, competitive market outcome? c∙What point represents the efficient quantity? d∙If the output level in part (c)was achieved through the use of a government imposed tax, what price would consumers pay? What price would the producers receive? What distance represents the amount of the tax? e∙If government successfully uses marketable permits to eliminate the external cost, what point represents how much output would be produced?

An external cost in the production of a good creates a difference between the I∙costs borne by the producer and the costs borne by society in general. Ii∙efficient quantity of output and the equilibrium quantity of output. Iii∙marginal social cost and the marginal private cost.

Suppose two neighborhoods (A and B)have identical housing, but neighborhood A has a strictly enforced deed restriction that prohibits homeowners from parking junk cars in the front yard.If houses in neighborhood A sell for $105,000 and houses in neighborhood B sell for $100,000, how would an economist value the external cost of visible junk cars, per house?

If the marginal private cost of running a car is $0.30 a mile and the marginal external cost is $0.10, what is the marginal social cost?

A cost that arises from the production or consumption that falls on someone other than the producer or consumer is called

The marginal social cost of producing a good or service is the

A noisy party that keeps neighbors awake is an example of a

A competitive, unregulated market would

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered.It also illustrates the marginal private benefit.There is no external benefit.The efficient number of concerts in Seattle is

In part, the Coase theorem is a proposition about