Exam 10: Externalities

Suppose that Bill wants to dine at a fancy restaurant, but the only available table is in the smoking section. Bill dislikes the smell of cigarette smoke. He notices that only one person, Peter, is smoking in the smoking section. Bill values the absence of smoke at $15. Peter values the ability to smoke in the restaurant at $10. In order for Bill to pay Peter not to smoke, he will need to tip the waiter $10 to facilitate the transaction. Which of the following represents an efficient solution?

In the case of a technology spillover, internalizing a positive externality will cause the supply curve of an industry to

Gretchen is a writer who works from her home. Gretchen lives next door to Randall, the trumpet player for a local band. Randall needs lots of practice to earn his share of the band's profit, which will amount to $350. Gretchen gets distracted by Randall's trumpet playing but she needs to get her writing done to earn $570 for her current article. If Gretchen needs to hire a lawyer to help her reach an agreement with Randall, then what price is Gretchen willing to pay the lawyer?

Education yields positive externalities. For example,

Figure 10-11 -Refer to Figure 10-11. "The social value of the last unit produced exceeds the private cost of the last unit produced by $13.50." This statement is correct at which quantity of output?

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as

William engages in an activity that influences the well-being of a bystander. In which of the following instances does an externality arise?

Which of the following represents a way that a government can help the private market to internalize an externality?

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. The private value of the 200th unit of plastic exceeds the social cost of the 200th unit of plastic by

In the absence of externalities, the "invisible hand" leads a market to maximize

Which of the following statements is correct?

Beverly owns a rabbit and receives a $600 benefit from owning it. Sometimes Beverly's rabbit makes its way onto the lawn of her neighbor, Charles, and eats the vegetables in Charles' garden. This intrusion by the rabbit costs Charles $400. Can both individuals become better off if Charles pays Beverly some amount of money to get rid of the rabbit? Explain.

Dee loves to landscape her yard, but her neighbor Marvin places a low value on his landscaping. When Marvin's grass is neglected and gets long, Dee will mow it for Marvin. This is an example of

The government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities.

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

Which of the following is not a characteristic of pollution permits?

Organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture.

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

Altering incentives so that people take account of the external effects of their actions