Exam 10: Externalities

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

Two firms,A and B,each currently dump 50 tons of chemicals into the local river.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river.The government will sell 40 pollution permits for $75 each.It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river,and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river.Neither firm produces any less output,but they both conform to the law.It is likely that between the cost of permits and the cost of additional pollution abatement,

According to recent research,the gas tax in the United States is lower than the optimal level.

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.The equilibrium number of permits is

John lives in an apartment building and gets a $700 benefit from playing his stereo.Mary,who lives next door to John and often loses sleep due to the music coming from John's stereo,bears a $1,000 cost from the noise.At which of the following offers from Mary could both Mary and John benefit from the silencing of John's stereo?

Which of the following is not an argument for imposing a carbon tax to address global warming?

Which of the following is a way to address an externality problem?

Transaction costs

Figure 10-9 -Refer to Figure 10-9.The overuse of antibiotics leads to the development of antibiotic-resistant diseases.Therefore,the market for antibiotics is shown in

A patent is used to

A negative externality will cause a private market to produce

Corrective taxes are unlike most other taxes because they

Which of the following is an example of a positive externality?

Figure 10-4 -Refer to Figure 10-4.This market is characterized by

A negative externality arises when a person engages in an activity that has

Ed is a writer who works from his home.Ed lives nextdoor to Ricky,the drummer for a local band.Ricky needs lots of practice to earn his share of the bands profits,$250.Ed gets distracted by Ricky's drumming but needs to get his writing done to earn $500 for his current article.If Ed needs to hire a lawyer to help him reach an agreement with Ricky,what price is Ed willing to pay the lawyer?

If a sawmill creates too much noise for local residents,

Two firms,A and B,each currently emit 100 tons of chemicals into the air.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air.The government gives each firm 40 pollution permits,which it can either use or sell to the other firm.It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air,and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air.It is likely that

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover,it should

Altering incentives so that people take account of the external effects of their actions