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Exam 16: Externalities

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Question 31

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Means of coping with negative externalities include all of the following except

A) implementing abatement technology.
B) patents.
C) property rights.
D) Pigovian taxes.
E) cap-and-trade.

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Question 32

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The marginal private benefit curve (MB) is a negatively-sloped straight line. If marginal external benefit decreases as output increases, the marginal social benefit curve is a negatively-sloped straight line

A) parallel to and above the MB curve.
B) parallel to and below the MB curve.
C) above the MB curve and steeper than the MB curve.
D) above the MB curve and flatter than the MB curve.
E) below the MB curve and flatter than the MB curve.

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Question 33

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If positive externalities exist and production is left to the private market, then at the quantity produced,

The Coase theorem applies when transactions costs are

Use the table below to answer the following question. Table 16.2.3 -Refer to Table 16.2.3. The first two columns of the table show the demand schedule for electricity from a coal burning utility; the second and third columns show the utility's cost of producing electricity. The marginal external cost of the pollution created is equal to the marginal cost. Suppose the government levies a pollution tax such that the utility generates the efficient quantity of electricity. The pollution tax is ________ cents a kilowatt hour.

Use the table below to answer the following questions. Table 16.3.1 -Refer to Table 16.3.1. The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer. Choose the correct statement.

A homeowner planting an attractive garden in front of his house creates ________. A bakery baking bread creates ________.

Use the figure below to answer the following questions. Figure 16.2.1 -Refer to Figure 16.2.1. The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve. If the market is unregulated, then the price is

Use the figure below to answer the following questions. Figure 16.2.2 -Refer to Figure 16.2.2. This figure shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A. Production of the 6th unit of output generates a marginal external

Most governments subsidize basic education because

CoolU has solved its smoking problem by allocating each student 5 smoking permits a day, and allowing trading. This is an example of

One way to solve negative externality problems is

Producing paper creates pollution. There is no externality in the consumption of paper. The efficient quantity of paper produced occurs when the

Smoking tobacco creates a ________ externality.

Use the figure below to answer the following questions. Figure 16.2.1 -Refer to Figure 16.2.1. The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve. To promote an efficient allocation of resources, the government could impose a constant per unit tax equal to

Use the figure below to answer the following questions. Figure 16.3.2 -In Figure 16.3.2. The figure shows the market for good B. Which of the following government policies creates an efficient outcome?

Use the figure below to answer the following questions. Figure 16.3.1 -Refer to Figure 16.3.1. The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve. If production is left to the private market, then

The marginal private cost curve (MC) is a positively-sloped straight line starting at the origin. If marginal external cost increases as output increases, then the marginal social cost curve is a positively-sloped straight line

Use the figure below to answer the following questions. Figure 16.3.2 -Refer to Figure 16.3.2. The figure shows the market for good B. How many units of good B are produced and consumed in an unregulated market?

In the absence of government intervention, a profit-maximizing firm producing a good with an external cost will produce a quantity at which