Exam 10: Externalities

Table 10-4 The following table shows the total costs for each of four firms (A,B,C,and D)to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $46,and for Firm A to eliminate two units of pollution,it would cost a total of $103. -Refer to Table 10-4.If the government charged a fee of $93 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Suppose that Company A's railroad cars pass through Farmer B's corn fields.The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops.There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks.The grease costs $1,200.Suppose that the farmer has the right to compensation for any damage that his crops suffer.Assume that there are no transaction costs.Which of the following characterizes the efficient outcome?

If an externality is present in a market,economic efficiency may be enhanced by

Figure 10-11 -Refer to Figure 10-11.This graph shows the market for pollution when permits are issued to firms and traded in the marketplace.In the absence of a pollution permit system,the quantity of pollution would be

Internalizing a positive externality will cause the demand curve to

Because there are positive externalities from higher education,

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₂,then total economic well-being would increase if output

Which of the following statements is correct?

Figure 10-4 -Refer to Figure 10-4.Without government intervention,the equilibrium quantity would be

Most economists prefer corrective taxes to regulation to correct the pollution problem because:

In a market characterized by externalities,the market equilibrium fails to maximize the total benefit to society as a whole.

When an externality is present,the market equilibrium is

When negative externalities are present in a market

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Many charities like the Sierra Club are established to deal with externalities.

Markets are often inefficient when negative externalities are present because

One reason that private solutions to externalities do not always work is that

All externalities