Exam 5: Externalities, Environmental Policy, and Public Goods

Figure 5-4 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 5-4 shows the paper market. Use this Figure to answer the following question(s). -Refer to Figure 5-4. What is the deadweight loss from producing at the market equilibrium?

What are property rights?

Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?

The demand curve for a public good is also called the

Who was the economist who first proposed that governments use taxes and subsidies to correct for externalities?

Figure 5-3 -Refer to Figure 5-3. In the absence of any government intervention, the private market

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2. The true marginal cost of the last unit produced is represented by the price

If you burn your trash in the back yard in spite of regulations against it, then you are

Which of the following displays rivalry and excludability in consumption?

The "tragedy of the commons" refers to the phenomenon where

Figure 5-5 Figure 5-5 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 5-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D1 represent?

If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

A. C. Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Figure 5-12 College education benefits society by producing a more employable workforce, reducing crime and creating a better informed citizenry. Thus, the social benefits of college education exceed the private benefits for any level of college education. This is illustrated in Figure 5-12. -Refer to Figure 5-12. One way to obtain the economically efficient amount of college education is for governments to subsidize college education. What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.)

James Meade, who won the Nobel Prize in Economics in 1977, argued that positive externalities resulted from

Common resources differ from public goods in that

Figure 5-1 Figure 5-1 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 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent?

Figure 5-9 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market. -Refer to Figure 5-9. The efficient output is

The social cost of cutting trees for firewood in a government forest is

"A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus." This statement