Exam 5: Externalities, Environmental Policy, and Public Goods

Public goods are distinguished by two primary characteristics. What are they?

When the government imposes a tax equal to the external cost of producing a product that causes pollution, the government is said to externalize the externality.

When the federal government orders firms to use particular methods to reduce pollution, it is said to be using

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. How much is Amit willing to pay to have 4 street lights installed?

Economists Kenneth Chay and Michael Greenstone find that in the two years following the passage of the Clean Air Act of 1970, the sharp reduction in air pollution also led to a decline in infant deaths. Although this and other studies provide compelling evidence of the link between pollution and infant health, it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect. Which of the following reasons could explain this?

Figure 5-3 -Refer to Figure 5-3. The size of marginal external benefits can be determined by

A free market fails when

The basic cause of deadweight losses from the existence of common resources and externalities is

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 deadweight loss resulting from producing at the market equilibrium?

In the United States, many beekeepers travel from state to state, renting out their bee colonies to farmers for pollination services. This is an example of

Goods can be classified on the basis of whether their consumption is

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Which of the following conditions holds in an economically efficient competitive market equilibrium?

Figure 5-10 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 5-10. -What is the rationale behind a marketable emission allowance scheme?

Private producers have no incentive to provide public goods because

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 products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.

Figure 5-3 -Refer to Figure 5-3. The efficient output level is

The free rider problem refers to a situation in which

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 does D1 represent?

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

Figure 5-7 -Refer to Figure 5-7. The marginal cost of reducing pollution curve is the same curve as