Exam 10: Externalities

Corrective taxes are unlike most other taxes because they

Two types of private solutions to the problem of externalities are

Which of the following problems can not be alleviated by a gasoline tax?

Figure 10-9 -Refer to Figure 10-9. Which graph represents a market with a negative externality?

A positive externality will cause a market to produce

What economic argument suggests that if transactions costs are sufficiently low, the equilibrium is economically efficient regardless of how property rights are distributed?

Figure 10-4 -Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If there are no government subsidies for MBAs, then which of the following statements is correct?

Which of the following is not a necessary condition for the Coase theorem?

Scenario 10-3 Suppose the equation for the demand curve in a market is where is the quantity demanded and is the price. Also, suppose the equation for the supply curve in the same market is , where is the quantity supplied. -Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What are the socially optimal quantity and price?

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000^th gallon of gasoline entails the following: -a private cost of $3.10; -a social cost of $3.55; -a value to consumers of $3.70. -Refer to Scenario 10-1. Let Q represent the number of gallons of gasoline and let P represent the price of a gallon of gasoline. Which of the following statements is correct?

Figure 10-9 -Refer to Figure 10-9, Panel (b). The market equilibrium price is

Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently.

The Coase theorem asserts that, if externalities are present and if private parties can bargain over the allocation of resources at no cost, then

In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

Table 10-1 The following table shows the private value, private cost, and external cost for various quantities of output in a market. -Refer to Table 10-1. What is the equilibrium quantity of output in the market?

Table 10-3 -Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Suppose that alcohol consumption creates a negative externality. What can the government do to equate the equilibrium quantity of alcohol and the socially optimal quantity of alcohol?

Since air pollution creates a negative externality,

A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.