Exam 10: Externalities

Suppose a certain good conveys either an external cost or an external benefit. If the private cost of the last unit of the good that was produced is equal to the private value of that unit, then the sum of producer and consumer surplus is maximized.

When externalities exist, buyers and sellers

Assume the production of a good causes a negative externality. In the market equilibrium, the marginal consumer values the good at

In terms of their economic effects, which of the following policies toward pollution are most similar to one another?

Externalities can be corrected by each of the following except

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

Suppose that electricity producers create a negative externality equal to $5 per unit. Further suppose that the government imposes a $5 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Suppose the Environmental Protection Agency issues pollution permits in order to limit the quantity of pollution. Under this policy, is the supply of pollution rights perfectly elastic or is it perfectly inelastic?

Figure 10-3 -Refer to Figure 10-3. What price and quantity combination best represents the optimum price and number of concerts that should be organized?

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

Figure 10-11 -Refer to Figure 10-11. The graph represents a market in which

Firms that can reduce pollution easily would be willing to sell their pollution permits.

Which of the following statements is not correct?

Figure 10-10 -Refer to Figure 10-10. The socially optimal quantity of output is

The likelihood of successful private solutions to problems caused by externalities depends, in part, upon the number of interested parties. Briefly explain.

Suppose the socially-optimal quantity of good x is larger than the market-equilibrium quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Briefly explain how research into new technologies gives rise to a positive externality.

Which of the following statements is correct?

In recent years, the Canadian province of British Columbia has increased its carbon tax. Which of the following statements is correct?