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Exam 5: Externalities, Environmental Policy, and Public Goods

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Question 111

Multiple Choice

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If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

A) external costs.
B) transactions costs.
C) marginal benefits.
D) social costs of the pollution.

E) A) and C)
F) None of the above

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Question 112

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All of the following are examples of public goods except

A) broadcast television with commercials.
B) clean water systems.
C) stock of knowledge in the public domain.
D) crime prevention.

E) B) and C)
F) None of the above

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Question 113

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Figure 5-7 -Refer to Figure 5-7.The marginal cost of reducing pollution curve is the same curve as

Which of the following activities create a negative externality?

The Wilfer Resort Hotel has a spectacular view of a pine forest along a river bank.Suppose a commercial logger has purchased the pine forest and is planning to clear-cut the forest in a way that has a negative impact on the resort.Can the two parties arrive at a Coasian solution and if so what might that solution be?

The free rider problem refers to a situation in which

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

If there is pollution in producing a product, then the market equilibrium price is too high and equilibrium quantity is too low.

Congressman Murphy made the following proposal: "We should establish policies that completely eliminate air pollution.This is the only way to ensure that none of our citizens suffer the negative effects of air pollution." If Congressman Murphy's proposal was adopted and all forms of air pollution were eliminated, which of the following would be true?

What is a "social cost" of production?

Figure 5-4 Suppose there are several paper mills producing paper for a market.These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source.Figure 5-4 shows the paper market.Use this Figure to answer the following question(s) . -Refer to Figure 5-4.What is the deadweight loss from producing at the market equilibrium?

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What does D₁ represent?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The market equilibrium quantity of gasoline is ________ million gallons per month.

According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention.

Applying Coase's theorem, if the cost to you from having the airplane seat in front of you reclined is ________ the benefit to the reclining passenger, you should ________.

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense, these mandatory helmet laws are reducing ________ of risky behavior.

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The efficient equilibrium price of gasoline is ________ per gallon.

The tragedy of the commons was avoided in the Middle Ages by

What does the phrase "internalizing an external cost" mean?

Determine if each of the products below displays any of the following characteristics: (i) rivalry (ii) nonrivalry (iii) excludability (iv) nonexcludability. a.a freeway during peak commute hours b.an online college course c.infectious disease prevention d.open source software such as Linux e.a movie showing at Century Theatres