Exam 10: Externalities

Education yields positive externalities. For example,

Table 10-3 -Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

Which of the following statements is not correct?

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then

Tradable pollution permits

When firms internalize a negative externality, the market supply curve shifts to the left.

Figure 10-3 -Refer to Figure 10-3. The social cost curve is above the supply curve because

Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Multiple Choice - Section 02: Public Policies toward Externalities -Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that

As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Even if possible, it would be inefficient to prohibit all polluting activity.

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 farmer has the right to compensation for any damage that his crops suffer. Assume that there are no transaction costs. Which of the following characterizes the efficient outcome?

Figure 10-4 -Refer to Figure 10-4. If this market is currently producing at Q4, then total economic well-being would be maximized if output

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

The impact of one person's actions on the well-being of a bystander is called

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000^th gallon of gasoline entails the following: -a private cost of $3.10; -a social cost of $3.55; -a value to consumers of $3.70. -Refer to Scenario 10-1. The production of the 1,000th gallon of gasoline entails an

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

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

Figure 10-12 -Refer to Figure 10-12. Suppose, on the figure, represents the quantity of education and represents the price of education. Then the quantity represents