Exam 5: Externalities, environmental Policy, and Public Goods

Economists generally favor the use of tradable emission allowances to reduce pollution.However,the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

Figure 5-3 -Refer to Figure 5-3.At the competitive market equilibrium,for the last unit produced

A market demand curve reflects the

A product is considered to be nonexcludable if

Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The efficient output level is

Figure 5-3 -Refer to Figure 5-3.The private profit-maximizing output level is

Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease.Thus,the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 5-10. -Refer to Figure 5-10.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

"A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus." This statement

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

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

College education benefits society by producing a more employable workforce,reducing crime,and creating a better informed citizenry.Thus,the marginal social benefits of college education exceed the marginal private benefits for any level of college education.This is illustrated in Figure 5-12. -Refer to Figure 5-12.One way to obtain the economically efficient amount of college education is for governments to subsidize college education.What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly;for example,through low-interest student loans. )

If the marginal social benefit of consuming a good or a service exceeds the marginal private benefit

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Figure 5-6 shows the market for measles vaccinations,a product whose use generates positive externalities. -Refer to Figure 5-6.What is the market equilibrium output level?

Suppose the government mandates the installation of a certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Suppose there are several paper mills producing paper for a market.These mills,located upstream from a fishing village,discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source.Figure 5-4 shows the paper market.Use this Figure to answer the following question(s). -Refer to Figure 5-4.Why is there a deadweight loss?

Figure 5-7 -Refer to Figure 5-7.The marginal benefit of reducing pollution curve is the same curve as

The efficient output level of a public good occurs where the

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?

Classifying a good as excludable means