Exam 10: Externalities

To economists, good environmental policy begins by acknowledging one of the Ten Principles of Economics:

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

If the social value of producing a good is always higher than the private value of producing it, then there is a

Corrective taxes that are imposed upon the producer of a nasty smell can be successful in reducing that smell because the tax makes the producer

Table 10-6 The following table shows the total costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $46, and for Firm A to eliminate two units of pollution, it would cost a total of $103. -Refer to Table 10-6. If the government charged a fee of $93 per unit of pollution, how many units of pollution would the firms eliminate altogether?

Figure 10-7 -Refer to Figure 10-7. Which quantity represents the social optimum for this market?

The tax on gasoline causes deadweight losses, as is the case with all taxes.

Which of the following policies is an example of a command-and-control policy?

Education is heavily subsidized through public schools and government scholarships. This subsidization of education reflects the fact that

Figure 10-12 -Refer to Figure 10-12. Which of the following is an appropriate label for Line 1?

Honey producers provide a positive externality to orchards because

When we identify public policies toward externalities, we contrast command-and-control policies with what other type of policies?

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c). Which of the following is correct?

Tradable pollution permits

Figure 10-6 -Refer to Figure 10-6. Which price represents the equilibrium price of the product in this market?

Suppose that elementary education creates a positive externality. If the government does not subsidize education, then

Two firms, A and B, each currently dump 20 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 gives each firm 10 pollution permits, which it can either use or sell to the other firm. 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. After the two firms buy or sell pollution permits from each other, we would expect that

Which of the following is a difference between corrective taxes and tradable pollution permits?

Figure 10-4 -Refer to Figure 10-4. Without government intervention, the equilibrium quantity would be

Figure 10-11 -Refer to Figure 10-11. Which of the following statements is correct?