Exam 17: Externalities

-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. An independent government agency determines that the efficient number of students is 40,000. What subsidy per student must be given to colleges to make the efficient number of students undertake education?

Why do firms ignore external costs when they pollute?

A common resource is used efficiently if marginal social benefit equals marginal social cost.

When external benefits are present,

Marginal social cost is equal to ________.

-The tables above show the marginal costs and benefits from production of paper. The efficient level of output is ________ of paper.

School vouchers can be used to arrive at the efficient market equilibrium because vouchers

The Coase Theorem is the proposition that private transactions are efficient if property rights exist, if only a ________ number of parties are involved, and if transactions costs are ________.

Which of the following episodes would most likely contain an externality?

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. The marginal external ________ of the man's movement of feral pigs is ________.

-The demand for bus service is perfectly elastic at a price of $1.00 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. The competitive quantity of bus rides per week is ________.

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency?

-In the above figure, if the market is unregulated, the equilibrium quantity is

When people determine the quantity of education they will undertake, they ________ the external benefits. As a result, if education were left to an unregulated market, people would undertake too ________ education.

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then

List and briefly define the three methods government can use to cope with an external cost, such as pollution.

The market price of an individual transferable quota is equal to the