Exam 5: Externalities, Environmental Policy, and Public Goods

A carbon tax which is designed to reduce pollution is an example of a

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6. What is the market equilibrium output level?

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?

Which of the following displays these two characteristics: nonrivalry and excludability?

Article Summary According to a study by the Center for Neighborhood Technology, homes located within one-half mile of frequently-used public transportation held their value much better during the recent housing market downturn than did those without easy access to public transportation, and the greater home values reflect greater demand for neighborhoods in close proximity to public transportation. In addition to higher home values, the study found that close proximity to public transportation offers lower transportation costs, a wider variety of travel options, and access to more employment opportunities. Source: Meg Handley, "Study: Proximity to Public Transit Boosts Home Values," U.S. News & World Report, March 22, 2013. -When there is a positive externality in a free market, too much of the good is produced and consumed.

Figure 5-16 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 5-16 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 5-16. 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?

Which of the following is an example of a common resource?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13. The amount of the gasoline tax is ________ per gallon.

Figure 5-2 Figure 5-2 shows a market with a negative externality. -A market demand curve reflects the

Which of the following exemplifies the tragedy of the commons?

Which of the following could be evidence of a market failure?

Article Summary According to a study by the Center for Neighborhood Technology, homes located within one-half mile of frequently-used public transportation held their value much better during the recent housing market downturn than did those without easy access to public transportation, and the greater home values reflect greater demand for neighborhoods in close proximity to public transportation. In addition to higher home values, the study found that close proximity to public transportation offers lower transportation costs, a wider variety of travel options, and access to more employment opportunities. Source: Meg Handley, "Study: Proximity to Public Transit Boosts Home Values," U.S. News & World Report, March 22, 2013. -The social cost of a good or service is the cost borne by the producer.

Which of the following activities create a negative externality?

The supply curve of a public goods shows

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

If there are no externalities, a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because

The Wilfer Resort Hotel has a spectacular view of a pine forest along a river bank. Suppose a commercial logger has purchased the pine forest and is planning to clear-cut the forest in a way that has a negative impact on the resort. Can the two parties arrive at a Coasian solution and if so, what is it?

In economics, the optimal level of pollution is

All of the following are examples of public goods except

Parents who do not have their children immunized and attempt to benefit from other parents who did have their own children immunized are exhibiting an economic behavior known as