Exam 5: Externalities, environmental Policy, and Public Goods

Which of the following is an example of a product that is nonexcludable and rivalrous?

Congressman Murphy made the following proposal: "We should establish policies that completely eliminate air pollution.This is the only way to ensure that none of our citizens suffers the negative effects of air pollution." If Congressman Murphy's proposal was adopted and all forms of air pollution were eliminated,which of the following would be true?

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The private profit maximizing quantity for the firm is

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?

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?

A public good that is a good that is both rival and excludable.

"When it comes to public goods,individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

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

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

Which of the following must be present to reach a private solution to an externality problem?

When negative externalities exist,the competitive market supply curve does not include all of the costs borne by members of society.

What is a private benefit from consumption? What is a social benefit from consumption? When is the private benefit from consumption equal to the social benefit from consumption?

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Suppose Bella is lazy and a spendthrift and Sefronia suspects that Bella will be willing to pay $80.What is Sefronia likely to do,given that she is as rational as any other person?

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

Figure 5-8 Consider a chemical plant that discharges toxic fumes over a nearby community. To reduce the emissions of toxic fumes the firm can install pollution abatement devices. Figure 5-8 shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions. -Refer to Figure 5-8.Suppose the emissions reduction target is currently established at 8 million tons.What is the area that represents the cost of eliminating an additional 1 million tons?

Which of the following is an example of the U.S.government's use of a "command and control" approach to reducing pollution?

The supply curve of a public goods shows

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

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