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

A firm operates and produces pollution that only harms an individual,Bob.The firm and Bob both know the costs and benefits of reducing pollution.Neither the firm nor Bob acts strategically while bargaining,and there are no transaction costs associated with bargaining.Explain how the efficient level of pollution occurs no matter whether the firm or Bob owns the property right to pollution.

If a production process creates pollution,a competitive market produces excessive pollution because

In general,an externality is created when

For the following, please answer "True" or "False" and explain why. -Firms that are most likely to buy marketable pollution rights are those that produce the most pollution per unit of output produced.

-The above figure shows the marginal benefit from pollution for two firms.If each firm receives a marketable permit to produce 25 units of pollution,which one of the following is most likely to happen?

-The above figure shows the market for steel ingots.The socially optimal quantity of steel is

For the following, please answer "True" or "False" and explain why. -Changing the price of a good will usually result in a negative externality.

If a production process generates pollution,then a competitive market will

Explain why state governments may charge a fee for beach access to address the commons problem.

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.Determine the Nash equilibrium without property rights.

Which of the following is NOT a common property?

For the following, please answer "True" or "False" and explain why. -Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

The existence of externalities is due mainly to the fact that

Suppose 100 citizens each derive marginal benefit from submarines according to the function ?MB = 10 - Q.If subs cost $100 each to produce,what is the efficient quantity of submarines?

For the following, please answer "True" or "False" and explain why. -The efficient quantity of a public good occurs when the marginal cost of providing that good equals the sum of the marginal benefits to all individuals.

-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can

In a competitive market,a negative externality creates a deadweight loss because

Which of the following belongs to the government regulation to control pollution?

Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MCP = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MCᵉ = Q.Is social welfare greater under monopoly or under competition?

When majority rule voting is used to determine whether to purchase a public good,