Exam 15: Externalities, Environmental Policy and Public Goods

State and local governments subsidise university students with grants and low-interest loans.The loans and subsidies are examples of

Figure 15.8 Consider a chemical plant that discharges toxic waste into a nearby waterway.To reduce the emissions of toxic waste, the firm can install pollution abatement devices.Figure 15.8 shows the marginal benefit and the marginal cost from reduction the toxic waste emissions. -Refer to Figure 15.8.Suppose the emissions reduction target is currently established at 8 million tons.What is the area that represents the cost of eliminating an additional 1 million tons?

A product is considered to be rival if

What is an externality?

Figure 15.5 Figure 15.5 shows a market with an externality.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂. -Refer to Figure 15.5.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does D₂ represent?

Figure 15.2 Figure 15.2 shows a market with a negative externality. -Refer to Figure 15.2.What is the efficient output level?

The private cost of a good or service is the cost borne by the producer.

In economics, the optimal level of pollution is the level for which the net benefit from reducing the pollution is the greatest.

A quasi-public good differs from a public good in that unlike a public good, it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.

Which of the following is an example of a Pigovian tax?

Which of the following displays rivalry and excludability in consumption?

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.