Exam 17: Property Rights, Externalities, Rivalry, and Exclusion

The optimal provision of a public good occurs when the sum of the marginal rate of substitution for all members of society equals 1,the marginal rate of transformation.What is the relationship between the marginal rates of substitution in the competitive market? Use this relationship to explain why too few public goods are provided in the competitive market.

A public good in which exclusion is possible is called

Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's theorem,one necessary condition to alleviate the externality is that

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.Determine the Nash equilibrium without property rights.

In the presence of a negative externality,a specific tax can achieve the social optimum because

Monopolizing the sale of liquor

If a production process creates pollution,a competitive market produces excessive pollution because

Explain how a specific tax equal to the marginal harm of pollution can increase or decrease total welfare in a monopoly market.

Production of a good produces pollution that is very damaging with each additional unit.A monopoly facing a very elastic demand curve will most likely produce

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the beach owner also owns the lake,and the chemical firm must pay $10 per ton to pollute,then

Because a monopoly ignores external costs,it is possible that it will

Which of the following statements about externality is INCORRECT?

Students who talk loudly with each other in class

If a production process generates pollution,then a competitive market will

The exclusive privilege to use an asset is called a(n)

Positive externalities are created when

In the presence of no externalities,

When majority rule voting is used to determine whether to purchase a public good,

If both a monopoly and a competitive market with the same marginal cost would produce a quantity that is greater than the social optimum in a market because of externalities,then

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.Joint profits are maximized when