Exam 17: Externalities

-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.

What is an individual transferable quota (ITQ)?

The granite boulders in Rocky Mountain National Park are a favored place among talented climbers who specialize in the art of bouldering, or climbing harder (but shorter) routes without tying into a rope. Climbers have taken to (illegally) stashing foam crash pads underneath the boulders but marmots and other rodents chew up the pads and the litter is spread by the wind. Why would the park be overused in this manner?

A government subsidy for a good

-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. If schools are competitive, how many students are enrolled?

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The efficient outcome is ________.

The marginal social cost of a chemical is $100 per ton and its marginal private cost is $85 per ton. What is the marginal external cost of the chemical?

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If no property rights exist on the waterway and if there is no regulation of pollution, then the factory produces ________ of chemicals a week.

-The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created. Suppose that the government decides to introduce a pollution tax. What is the tax per vehicle mile that will achieve the efficient outcome?

If property rights for air and water exist, then polluters bear the costs of pollution.

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, what is the efficient quantity of pesticide to produce?

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external ________ of ________ per ton.

Marginal social cost is the

Which of the following is a possible government solution to the problem posed by a good with an external benefit?

Consider an industry that produces an output Q with marginal private cost (MC) and marginal social cost (MSC) as given in the table: The marginal external cost associated with the production of unit 3 is

Why is it not efficient to eliminate all pollution?

According to the Coase theorem, which of the following are necessary for the efficient levels of pollution to be achieved? I. Property rights are defined. II) Transactions costs are low.

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

Burning coal to generate electricity can create pollution. If the market for generating electricity is competitive and is allowed to operate without any government intervention, is the equilibrium quantity of coal burned equal to, more than, or less than the efficient quantity?

If a local fishing club spends time each year cleaning up local streams by removing trash thrown by motorists, efficiency would be improved if