Exam 10: Externalities

A positive externality

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

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 railroad is not liable for any damage caused to the crops. Assume that there are no transaction costs. Which of the following characterizes the efficient outcome?

Figure 10-1 -Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are

Figure 10-19 -Refer to Figure 10-19. Each additional unit of the good that is produced yields an external

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Figure 10-10 -Refer to Figure 10-10. Which of the following statements is correct?

When technology spillover occurs,

Why can't private individuals always internalize an externality without the help of government?

When a market is characterized by an externality, the government

Suppose that smoking creates a negative externality. If the government imposes a per-cigarette tax equal to the per-cigarette externality, then

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,

Refer to Figure 10-12. Suppose, on the figure, Q represents the quantity of education and P represents the price of education. Then the quantity

When firms internalize a negative externality, the market supply curve shifts to the left.

When correcting for an externality, command-and-control policies are always preferable to market-based policies.

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

In which of the following cases is the Coase theorem most likely to solve the externality?

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

A corrective tax

Does research into new technologies create a positive externality or does it create a negative externality?