Exam 15: Externalities, Environmental Policy and Public Goods

If the social benefit of consuming a good or a service exceeds the private benefit,

Figure 15.4 Suppose there are several paper mills producing paper for a market.These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source.Figure 15.4 shows the paper market.Use this Figure to answer the following question(s). -Refer to Figure 15.4.What does S₁ represent?

An example of a product that is non-excludable and rival is

Ronald Coase is famous for the Coase theorem, which is based on the premise that there is an economically efficient level of pollution reduction.Many economists believe that the tradable emissions allowance program that has been used to deal with the problem of acid rain has been successful in reducing emissions of sulphur dioxide in an economically efficient manner.Why isn't this program an example of the Coase theorem?

Explain how the decision by parents to not immunise their children, hoping that their children will not get sick because other parents have had their children immunised, is an example of free riding.How is this behaviour dangerous to the public?

Figure 15.7 -Refer to Figure 15.7.The marginal benefit of reducing pollution curve is the same curve as

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.Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?

How does a negative externality in production reduce economic efficiency?

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

The United States Energy Information Administration estimates that total carbon dioxide emissions from the consumption of energy are highest in

A public good is

Which of the following is a source of market failure?

From the list below, the best example of a positive externality is

Which of the following best illustrates the free rider problem?

Figure 15.3 -Refer to Figure 15.3.The size of marginal external benefits can be determined by

The market demand for a public good can be determined by

When products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.

Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain.This is an example of

Figure 15.1 Figure 15.1 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 15.1.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₂ represent?

If transactions costs are low, private bargaining will always result in an efficient solution to the problem of externalities.