Exam 10: Externalities

Corrective taxes are unlike most other taxes because they

Figure 10-9 -Refer to Figure 10-9, Panel (b) and Panel (c). Which of the following is correct?

Which of the following is true of markets characterized by positive externalities?

Private solutions may not be possible due to the costs of negotiating and enforcing these solutions. Such costs are called

Internalizing a positive externality will cause the demand curve to

When a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as

A command-and-control policy is another term for a

Scenario 10-2 The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50^th restored historic building entails the following: -a private cost of $800,000; -a private value of $650,000; -a social value of $800,000. -Refer to Scenario 10-2. Is there an external cost associated with the restoration of the 50th historic building, or is there an external benefit? What is the amount of that external cost or external benefit?

Figure 10-2. The graph depicts the market for plastic. -Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic?

Table 10-5 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. -Refer to Table 10-5. If the government charged a fee of $84 per unit of pollution, how many units of pollution would the firms eliminate altogether?

Suppose that electricity producers create a negative externality equal to $6 per unit. Further suppose that the government imposes a $8 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Figure 10-10 -Refer to Figure 10-10. The socially optimal quantity of output is

The Coase theorem asserts that, if externalities are present and if private parties can bargain over the allocation of resources at no cost, then

Which of the following statements is correct?

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

Suppose a tax is imposed on producers of aluminum as a means of internalizing the externality associated with aluminum production. If the tax accurately reflects the external costs of pollutants released into the atmosphere, then the new supply curve for aluminum coincides with which other curve?

Figure 10-7 -Refer to Figure 10-7. Which quantity represents the social optimum for this market?

Once tradable pollution permits have been allocated to firms,

Table 10-6 The following table shows the total costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $46, and for Firm A to eliminate two units of pollution, it would cost a total of $103. -Refer to Table 10-6. If the government charged a fee of $93 per unit of pollution, how many units of pollution would the firms eliminate altogether?