Exam 10: Externalities

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.

When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level.

Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

Education is heavily subsidized through public schools and government scholarships. This subsidization of education reflects the fact that

When the production of a good results in a positive externality, the social value curve is

Dick owns a dog whose barking annoys Dick's neighbor Jane. Dick receives personal benefit from owning the dog, and Jane bears a cost of Dick's ownership of the dog. Assuming Jane has the legal right to peace and quiet, which of the following statements is correct?

Since almost all forms of transportation produce some type of pollution,

Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 40 pollution permits, which it can either use or sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. It is likely that

A positive externality

An optimal tax on pollution would result in which of the following?

A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.

Figure 10-11 -Refer to Figure 10-11. The graph represents a market in which

The Coase theorem suggests that private markets may not be able to solve the problem of externalities

In some situations, private economic actors cannot solve the problem of externalities among themselves because of substantial costs.

In recent years, the Canadian province of British Columbia has increased its carbon tax. Which of the following statements is correct?

Table 10-4 -Refer to Table 10-4. Taking into account private and external costs, total surplus in the market equilibrium amounts to

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000th gallon?

Figure 10-9 -Refer to Figure 10-9, Panel (c). The market equilibrium price is

Figure 10-9 -Refer to Figure 10-9, Panel (c). The market equilibrium quantity is

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by