Exam 5: Externalities, environmental Policy, and Public Goods

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain then,according to the Coase theorem

Congress passed the Clean Air Act in 1970.Since this act was passed,emissions of the six main air pollutants

Which of the following is an example of a nonexcludable product?

Figure 5-6 shows the market for measles vaccinations,a product whose use generates positive externalities. -Refer to Figure 5-6.Why is there a deadweight loss?

Figure 5-7 -Refer to Figure 5-7.Which of the following statements is true?

Goods differ on the basis of whether their consumption is rival and excludable.Explain the terms "rivalry" and "excludability" as they are used to define goods.List the four categories of goods,and define these categories in terms of rivalry and excludability.

Figure 5-6 shows the market for measles vaccinations,a product whose use generates positive externalities. -Refer to Figure 5-6.What is the deadweight loss resulting from producing at the market equilibrium?

Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 5-9 illustrates the situation in the toilet paper market. -Refer to Figure 5-9.Suppose the government wants to use a Pigovian tax to bring about the efficient level of production.What should the value of the tax be?

An external cost is created when you

How does a positive externality in consumption reduce economic efficiency?

What is an externality?

Figure 5-6 shows the market for measles vaccinations,a product whose use generates positive externalities. -Refer to Figure 5-6.What does D2 represent?

Compare two situations.(A)A firm is not legally responsible for damages that result from air pollution caused by its production of steel.(B)A firm is legally responsible for damages that result from its production of steel.Ronald Coase argued that if the property rights are assigned and transactions costs are low

Because producers do not bear the external cost of pollution

Explain how the decision by parents to not immunize their children,hoping that their children will not get sick because other parents have had their children immunized,is an example of free riding.How is this behavior dangerous to the public?

Consider a chemical plant that discharges toxic fumes over a nearby community.To reduce the emissions of toxic fumes the firm can install pollution abatement devices.Figure 5-8 shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions. -Refer to Figure 5-8.Suppose the emissions reduction target is currently established at 8 million tons.What is the area that represents the cost of eliminating an additional 1 million tons?

The marginal social cost of a good or service is the cost borne by the producer.

When there is a positive externality in a free market,too much of the good is produced and consumed.

Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The marginal benefit of the last unit produced is represented by the price

A market supply curve reflects the