Exam 5: Externalities, environmental Policy, and Public Goods

Figure 5-5 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 5-5 illustrates the situation in the toilet paper market. -Refer to Figure 5-5.An efficient way to get the firm to produce the socially optimal output level is

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 S₂ represent?

Economist A.C.Pigou argued that to deal with a negative externality in production,the government should impose a tax equal to the cost of the externality.What did Pigou believe should be done in the case of a positive externality in consumption? How would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality?

What is the rationale behind a marketable emission allowance scheme?

State the Coase theorem.

Determine if each of the products below displays any of the following characteristics: (i) rivalry (ii)nonrivalry (ii)excludability (iv)nonexcludability. a.a freeway during peak commute hours b.an online college course c.infectious disease prevention d.open source software such as Linux e.a movie showing at Century Theatres

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

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

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Figure 5-5 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 5-5 illustrates the situation in the toilet paper market. -Refer to Figure 5-5.Suppose the government wants to use a Pigovian tax to bring about the efficient level of production.What should the value of the tax be?

An externality is

A product is considered to be excludable if it is jointly owned by all members of a community.

Which of the following represents the true economic cost of production when firms produce goods that cause negative externalities?

Which of the following activities create a negative externality?

Which of the following displays these two characteristics: rivalry and nonexcludability?

A tragedy of the commons occurs when a resource is

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

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.If the government decided to impose a tax on soda,the government will cause

If there is pollution in producing a product,then the market equilibrium price is too high and equilibrium quantity is too low.

The Coase theorem states that