Exam 17: Property Rights, externalities, rivalry, and Exclusion

In the case of a good that has no exclusion and no rivalry,private markets fail because

Suppose three neighbors must vote on the installation of a traffic light that costs $210.The cost of the light will be shared by all three.Voter A values the light at $50; voter B values the light at $50; and voter C (who drives the most)values the light at $200.If the voting rule is that the majority wins,does the light get purchased? Is it efficient to purchase the light?

Because a monopoly ignores external costs,it is possible that it will

Students who talk loudly with each other in class

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If the firm owns the river and there is just one neighbor affected by the pollution,how much pollution is likely to occur?

-The above figure shows the market for steel ingots.If the market is competitive,then

Two neighboring farmers must each decide whether to contribute to a fence that separates their properties.The fence costs a total of $20.Both farmers currently have a profit of $30 each.With a fence to keep each farmer's animals from wandering onto the other's property,both farmers would experience a $15 rise in profits.Draw the payoff matrix and discuss the possible outcomes.

Explain why the social demand curve for a public good is the vertical sum of the demand curves of each individual.

-The above figure shows the market for steel ingots.If the market is competitive,then the deadweight loss to society is

For the following, please answer "True" or "False" and explain why. -To maximize welfare in a competitive market that has a negative externality in production,government should tax a pollution-generating good at a specific tax equal to the marginal cost of producing the good.

A specific tax in a monopoly market equal to the marginal harm of pollution

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If the firm owns the river and there are thousands of surrounding neighbors,how much pollution is likely to occur?

Monopolizing the sale of liquor

-The above figure shows the market for steel ingots.What is the change in externality cost if the market switches from competitive equilibrium to social optimum?

Negative externalities are created when

Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's theorem,the optimal level of trash in the park can be achieved if

If the social marginal cost of a good is very high relative to the private marginal cost,then a monopoly will most likely

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If property rights are not defined,how much pollution will occur?

Fishermen on the East Coast are using lobster traps out of which most of the lobsters that enter can escape.Why?

Explain how a specific tax equal to the marginal harm of pollution can increase or decrease total welfare in a monopoly market.