Exam 10: Externalities

Cameron lives in an apartment building and gets a $700 benefit from playing his stereo. Renee, who lives next door to Cameron and often loses sleep due to the music coming from Cameron's stereo, bears a $1,000 cost from the noise. At which of the following offers from Renee could both Renee and Cameron benefit from the silencing of Cameron's stereo?

Table 10-4 -Refer to Table 10-4. The table represents a market in which

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

Table 10-3 -Refer to Table 10-3. The social value of the 4th unit of output that is produced is

Suppose that elementary education creates a positive externality. If the government subsidizes education by an amount equal to the per-unit externality it creates, then

To determine the optimal level of output in a market with negative externalities, a benevolent social planner would look for the level of output at which private cost equals private value.

The business activities of Firm A confer positive externalities on Firm B, and the business activities of Firm B confer positive externalities on Firm A. If the two firms merged, then

What are the three externalities that are associated with driving cars and trucks?

Which of the following is not an advantage of corrective taxes?

Suppose that elementary education creates a positive externality. If the government does not subsidize education, then

Market failure can be caused by

Suppose a Pigovian tax is imposed on a market that is characterized by one or more externalities. Is this a command- and-control policy or is it a market-based policy?

A corrective tax

Figure 10-11 -Refer to Figure 10-11. The socially optimal quantity of output is

Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200. Suppose that the railroad is not liable for any damage caused to the crops. Assume that there are no transaction costs. Which of the following characterizes the efficient outcome?

Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking. Local governments address this problem by

That some firms are engaged in more than one type of business is explained, in some cases, by

The difference between a corrective tax and a tradable pollution permit is that

Briefly explain how research into new technologies gives rise to a positive externality.

Figure 10-16 -Refer to Figure 10-16. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is