Exam 5: Externalities, environmental Policy, and Public Goods

Figure 5-1 Suppose there are several paper mills producing paper for a market.These mills,located upstream from a fishing village,discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river,and the use of the river for recreation and as a public water supply source.Figure 5-1 shows the paper market.Use this Figure to answer the following question(s). -Refer to Figure 5-1.What is the deadweight loss from producing at the market equilibrium?

If the social benefit of consuming a good or a service exceeds the private benefit

Negative externalities and the tragedy of the commons are problems that have a common source.What is this common source?

An external benefit is created when you pursue a college education.

Alternative approaches for reducing carbon dioxide emissions are

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

What is a private benefit from consumption? What is a social benefit from consumption? When is the private benefit from consumption equal to the social benefit from consumption?

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Which of the following best illustrates the free rider problem?

A public good that is a good that is both rival and excludable.

In the past the federal government often employed what is called a "command and control" approach to the reduction of pollution emissions.Many economists are critical of this approach because

The 2005 European Union Emission Trading Scheme is an agreement among ________ to reduce carbon dioxide emissions.

Figure 5-2 Figure 5-2 shows a market with an externality.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂. -Refer to Figure 5-2.If,because of an externality,the economically efficient output is Q₂ and not the current equilibrium output of Q₁,what does D₂ represent?

Figure 5-5 Coal burning utilities release sulfur dioxide and nitric acid which react with water to produce acid rain.Acid rain damages trees and crops and kills fish.Because the utilities do not bear the cost of the acid rain they overproduce the quantity of electricity.This is illustrated in Figure 5-5. -Refer to Figure 5-5.S₁ represents the supply curve that reflects the private cost of production and S₂ represents the supply curve that reflects the social cost of production.One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity.What is the size of the Pigovian tax that will internalize the cost of the externality?

Medical research that ends in a cure for a serious disease produces positive externalities.What is the impact of this positive externality on economic efficiency?

Figure 5-1 Suppose there are several paper mills producing paper for a market.These mills,located upstream from a fishing village,discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river,and the use of the river for recreation and as a public water supply source.Figure 5-1 shows the paper market.Use this Figure to answer the following question(s). -Refer to Figure 5-1.What is the economically efficient output level?

Assume that emissions from electric utilities contribute to pollution in the form of acid rain.Which of the following describes how this affects the market for electricity?

Which of the following is an example of a nonexcludable product?

The "tragedy of the commons" is a term that refers to

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called