Exam 9: Externalities: Pollution, Education, and Health Care

Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution. If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, then

-The figure above illustrates the gasoline market. There is no external benefit from gasoline. If a pollution tax equal to the marginal external cost is imposed on gasoline, then the quantity of gasoline produced and consumed equals

In order for pollution taxes to be effective in eliminating the deadweight loss resulting from pollution, the pollution tax must be set equal to the

The Coase theorem states that

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC). -In the figure above, suppose the government provides vouchers worth $15,000 per student per year. Then the market equilibrium occurs at a tuition of ________ a year and ________ million students.

-The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the deadweight loss equals

The marginal social cost of burning garbage in Houston is the sum of the marginal private cost and the marginal external cost." Is this assertion correct or incorrect?

Which of the following is true? A)

-The figure above shows the market for college education in the United States. If the government has a goal of enrolling the efficient number of students each year, the government should provide a voucher to students equaling ________.

A subsidy is

-Use the figure above to answer this question. Explain what the marginal social cost curve and the marginal external cost mean. In the figure, if the market is competitive and unregulated, what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

-The figure above shows the market for a good with an external benefit. If the government wants to grant a subsidy so that the efficient quantity is produced, the subsidy must equal ________ per unit.

-The above figure shows the market for fertilizer. When fertilizer is applied to lawns, it runs off into neighboring streams and ponds, killing fish and creating an external cost. a. What is the equilibrium price and quantity of fertilizer in an unregulated, competitive market? b. What is the efficient quantity of fertilizer? c. Suppose government imposes a tax equal to the marginal external cost. What is the equilibrium price paid by consumers and the equilibrium quantity after implementation of the tax? d. At the output level in part (c), how much is the tax? e. How much tax revenue does government collect? f. What is the deadweight loss borne by society if the externality is left uncorrected?

Which of the following is the best example of a good or service with an external benefit?

Quantity of Steel (millions of tons per week) Marginal benefit (dollars per ton) Marginal social cost (dollars per ton) 5 40 20 10 35 25 15 30 30 20 25 35 25 20 40 -The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city. If the marginal external cost is $10 per ton at every quantity of steel produced, the equilibrium quantity when the steel industry is unregulated is ________ tons per week.

If the marginal social cost of producing a ton of cement is $4,000 and the marginal private cost is $3,500, then the

Does inoculation against chicken pox have both private and external benefits?

-The figure above shows an education market in which the government is providing households with vouchers. What is the dollar value of a voucher in this market?

-The figure above shows the market for college education in the United States. If the government intervenes in the market and provides a subsidy to colleges to enroll the efficient number of students, the amount of the subsidy equals ________ per student.

-The figure above shows the market for annual influenza immunizations the United States. If the government does not intervene in this market, deadweight loss equals ________.