Exam 5: Externalities, environmental Policy, and Public Goods

Which of the following would result in a positive externality?

Economists Kenneth Chay and Michael Greenstone found that in the two years following the passage of the Clean Air Act of 1970,the sharp reduction in air pollution also led to a decline in infant deaths.Although this and other studies provide compelling evidence of the link between pollution and infant health,it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect.Which of the following reasons could explain this?

When a tax on output is imposed to internalize the external costs of pollution,the supply curve shifts down by the amount of the tax.

Private costs

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually,the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.The reason the grass was depleted was

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The deadweight loss due to the externality is represented by the area

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists,which of the following methods of pollution control best uses economic incentives to reduce pollution?

When there is a negative externality,the competitive output is greater than the economically efficient output level.

Kenneth Chay and Michael Greenstone examined the impact of reductions in air pollution since the passage of the Clean Air Act of 1970.Which of the following statements summarizes their findings?

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Alternative approaches for reducing carbon dioxide emissions are

A major problem with using a tradable emission allowances system to control pollution is

An externality is an example of a market failure.

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.What is the deadweight loss from producing at the market equilibrium?

Figure 5-5 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 5-5.If,because of an externality,the economically efficient output is Q2 and not the current equilibrium output of Q1,what does D2 represent?

What are some of the limitations of the Coase theorem in practice?

Haiti was once a heavily forested country.Today,80 percent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has lead to devastating floods when it rains heavily.This is an example of

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?

Figure 5-15 shows the market for Atlantic salmon,a common resource.The current market equilibrium output of Q1 is not the economically efficient output.The economically efficient output is Q2. -Refer to Figure 5-15.Identify the area that shows the deadweight loss from overfishing.