Exam 5: Externalities, environmental Policy, and Public Goods

Policies that mandate the installation of specific pollution control devices are called

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually,the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.The reason the grass was depleted was

Explain how the decision by parents to not immunize their children,hoping that their children will not get sick because other parents have had their children immunized,is an example of free riding.How is this behavior dangerous to the public?

Figure 5-3 Figure 5-3 shows the market for measles vaccinations,a product whose use generates positive externalities. -Refer to Figure 5-3.What does D₁ represent?

Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?

If transactions costs are low,private bargaining will always result in an efficient solution to the problem of externalities.

According to Steven Cheung: "Pollination contracts usually include stipulations regarding the number and strength of ...[bee] colonies,the rental fee per hive,the time of delivery...the protection of bees from pesticides,and the strategic placing of hives." Cheung cites this as evidence that

Which of the following describes the difference between the market demand curve for a private good and the demand curve for a public good?

Figure 5-8 Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-8 shows their willingness to pay for different quantities of street lights,the market demand for street lights and the marginal cost of installing the street lights. -Refer to Figure 5-8.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

Classifying a good as rival means

The Coase Theorem asserts that government intervention is a prerequisite for addressing externality problems.

If the EPA does implement its plan to enact tougher limits on smog-forming ozone,the quantity of product being produced by the polluting firms will ________ and the product price will ________.

Which of the following would result in a positive externality?

When there is an externality in a market

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 does S₁ represent?

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists,which of the following methods of pollution control best uses economic incentives to reduce pollution?

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.Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality.The economically efficient output is Q₂.In that case,diagram shows

Private solutions to the problem of externalities are most likely when

The efficient level of paper production will occur where the

The cost borne by a producer in the production of a good or service is called