Exam 10: Externalities

Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking.Local governments address this problem by

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $15 per-shot subsidy to producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Most economists prefer regulation to taxation because regulation corrects market inefficiencies at a lower cost than taxation does.

In some cases,tradable pollution permits may be better than a corrective tax because

A positive externality

The Environmental Protection Agency (EPA)cannot reach a target level of pollution through the use of pollution permits.

Figure 10-3 -Refer to Figure 10-3.The social cost curve is above the supply curve because

With pollution permits,the supply curve for pollution rights is

Suppose that alcohol consumption creates a negative externality.What can the government do to equate the equilibrium quantity of alcohol and the socially optimal quantity of alcohol?

A negative externality

The term market failure refers to

Most taxes distort incentives and move the allocation of resources away from the social optimum.Why do corrective taxes avoid the disadvantages of most other taxes?

Dioxin emission that results from the production of paper is a good example of a negative externality because

Which of the following statements is not correct?

Dick owns a dog whose barking annoys Dick's neighbor Jane.Dick receives personal benefit from owning the dog,and Jane bears a cost of Dick's ownership of the dog.Assuming Jane has the legal right to peace and quiet,which of the following statements is correct?

Figure 10-9 -Refer to Figure 10-9,Panel (b).The market equilibrium quantity is

Once tradable pollution permits have been allocated to firms,

An optimal tax on pollution would result in which of the following?

When negative externalities are present in a market,

Assume that your roommate is very messy.According to campus policy,you have a right to live in an uncluttered apartment.Suppose she gets a $200 benefit from being messy but imposes a $100 cost on you.The Coase theorem would suggest that an efficient solution would be for your roommate to