Exam 10: Externalities

Economists believe that the optimal level of pollution is zero.

A positive externality

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then

Which theorem asserts that private economic actors can often solve the problem of externalities among themselves?

Figure 10-3 -Refer to Figure 10-3. At the private market outcome, the equilibrium price will be

Figure 10-11 -Refer to Figure 10-11. The graph represents a market in which

Figure 10-4 -Refer to Figure 10-4. At Q3

Suppose that smoking creates a negative externality. If the government imposes a per-cigarette tax equal to the per-cigarette externality, then

A patent is used to

Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government will sell 40 pollution permits for $75 each. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. Neither firm produces any less output, but they both conform to the law. It is likely that between the cost of permits and the cost of additional pollution abatement,

Which of the following is an example of a positive externality?

Suppose the Environmental Protection Agency uses a corrective tax to set a price for pollution. Under this policy, is the supply curve for pollution rights vertical or is it horizontal?

Despite the appealing logic of the Coase theorem, private actors often fail to resolve on their own the problems caused by externalities.

Figure 10-12 -Refer to Figure 10-12. Suppose, on the figure, Q represents the quantity of education and P represents the price of education. Then the quantity represents

Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.

Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because

The difference between social cost and private cost is a measure of the

A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x,

Why can't private individuals always internalize an externality without the help of government?

Which of the following is a problem that keeps people from privately solving externality problems?