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

-The above figure shows the market for steel ingots.If the market is competitive,then the deadweight loss to society is

-The above figure shows the market for steel ingots.The optimal quantity of pollution

In the presence of a negative externality in production,a monopoly will produce

Explain why the optimal amount of pollution is often not zero.

The price of pie increases.Some people who purchased pie before the price increase no longer purchase pie.This is

Suppose twenty neighbors share a park.One of the neighbors,Al,leaves trash in the park.This bothers the other neighbors.According to Coase's theorem,assigning the property rights to the park to Al

The total demand for a public good is found by

Fishermen on the East Coast are using lobster traps out of which most of the lobsters that enter can escape.Why?

Suppose the government wishes to regulate mercury emissions of factories in a specific industry by either setting an emissions standard or imposing an emissions fee (per ton of mercury).The government is uncertain as to the marginal abatement costs,which may be high (MC₁)or low (MC₂). MC₁ = 15M + 500 MC₂ = 15M - 500 where M is the units of mercury abated.The government believes there is a 50% chance of each of the marginal abatement costs.The marginal benefit of abatement is known to be: MB = 1500 - 10M a.What is the optimal level of emissions for each of the cost curves above? b.What is the expected marginal abatement cost (equation)? c.What is the optimal emissions standard according to the expected abatement costs? d.What is the optimal abatement fee according to the expected abatement costs? e.Which regulation will result in a lower DWL in the presence of the uncertainty? Explicitly compute the expected DWL arising from each proposal.

A monopoly might produce less than the socially optimal amount of pollution because

Suppose that in the market for paper,demand is p = 100 - Q.The private marginal cost is MC^p = 10 + Q.Pollution generated during the production process creates external marginal harm equal to MC^e = Q.Is social welfare greater under monopoly or under competition?

-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 nobody owns the lake,then

In general,an externality is created when

-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 chemical firm owns the lake,and the beach owner must pay $10 to keep the chemical firm at just one ton of pollution,then

According to the Coase approach,to achieve socially optimal outcome,two sides must bargain.The bargaining might not be successful because

If the social marginal cost of a good is very high relative to the private marginal cost,then a monopoly will most likely

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If the firm owns the river and there are thousands of surrounding neighbors,how much pollution is likely to occur?

Firms that are most likely to buy marketable pollution rights are those that produce the most pollution per unit of output produced.

-The above figure shows the market for steel ingots.What is the change in consumer surplus if the market switches from competitive equilibrium to social optimum?

-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 nobody owns the lake,then