Exam 17: Externalities

-In the figure above, in order to promote an efficient allocation of resources, the government could impose a tax equal to

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then consumers will pay a price of

-In the above figure, if a subsidy is granted that generates an efficient allocation of resources, then the output level will be

-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. If property rights to the pasture are granted to a farmer so that the farmer owns the pasture, the farmer raises ________.

The tragedy of the commons is the absence of incentives to

Explain why a producer who is causing external costs does not have the incentive to reduce these costs.

-Left unregulated, the equilibrium amount produced in the market described in the table above is

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government gives a voucher equal to $3,000 per year to each college student, how many students will be accepted?

The marginal cost of production that is borne by the entire society is the

A polluted river has 20 homes on it that rent for $1,000 each per month. Homes on a similar river that is not polluted rent for $2,000 each per month. The river is polluted because there are two factories on the river that dump polluted water in the river. Each factory could install a filter that would cost $5,000 each and would reduce the pollution in the water to a negligible level. In this case

-In the above figure, the efficient amount of output is ________ units.

The problem of the commons is the absence of incentives to prevent overuse and depletion of the common resource.

Which of the following is an example of an external cost?

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the efficient amount of paper will be produced by setting a Pigovian tax of

-In the above table, the efficient level of output can be achieved through a per unit

Food stamps provided by the U.S. Department of Agriculture are an example of

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then the

The concept of externalities means that subsidizing education can be justified on the grounds that as a student becomes better educated, the student will

Suppose a good has an external benefit and no external cost. When a competitive, unregulated market is at its equilibrium, then the

-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?