Exam 17: Externalities

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, if no one owns the lake, what is the deadweight loss in the market?

In which of the following cases does the tragedy of the commons occur? I. Cattle grazing on private ranches. II) Catching lobsters off the coast of Florida. III) Raising salmon on salmon farms. IV) Using legal services provided by the courts.

Generating electricity creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium because

-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, the marginal cost of the externality is ________ per unit.

A marginal external cost is the cost of producing an additional unit of a good that falls on the producer.

If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit

-The figure above shows the market for education. Education has an external benefit. a) If the market is competitive and left unregulated, how many students will be enrolled per year? b) What is the efficient number of students? c) In the figure, show the effect of a government private subsidy that moves the market to the efficient number of students. What is the amount of the subsidy and what tuition must the students pay?

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. A quota to prevent the overuse of the common pasture sets the number of goats to be raised equal to ________.

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that polluters are taxed on the amount of pollution they discharge.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, at the equilibrium level of output,

The marginal private cost of a chemical is $100 per ton and its marginal external cost is $20 per ton. What is the marginal social cost of the chemical?

-The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created. If the market for transportation services is competitive and unregulated, the equilibrium quantity is ________ and the equilibrium price is ________.

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, what is the price of college education?

Keeping in mind the Coase theorem, in the figure above, if the residents of the town own the lake, the market does what?

The Coase theorem says that which of the following is necessary to lead to an efficient use of resources?

Legally established titles to the ownership, use, and disposal of factors of production are referred to as

The ________ is the cost of paid by the producer plus any cost paid by everyone else when another unit of a good or service is produced.

When the consumption of a good creates an external benefit,

In 2008, a man was charged with one count of illegally stocking wild animals, a civil offense. State investigators had accused him of bringing 31 wild hogs from Texas to Wisconsin to hunt on his private land in 2002, spawning a feral hog population that has caused thousands of dollars in crop damage to hundreds of farms in the region. What is the externality in this example?

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive and unregulated, the equilibrium quantity of steel is ________ tons and the efficient quantity of steel is ________ tons.