Exam 18: Externalities and Public Goods

If the MSB/MCA graph indicates that an emissions fee of $10 per unit would lead to the optimum level of emissions, but the government set a fee of $5 per unit, emissions would

If error in setting the policy is possible,

A lighthouse is a public good

The city of Econoville has 100 residents who each have the identical demand function for lake area: P = 1,000 - 9.95Q. The marginal cost of maintaining lake area is MC(Q) = 1,500 + 5Q. Lake area is a public good. That is, if the city of Econoville provides public access lake area, all of the residents can enjoy the area. If the city of Econoville does not offer public lake area, how much area of lakes will each individual resident maintain on their own? What is the optimal area of public lakes in Econoville? What flat lake tax should Econoville implement on residents for units of lake area the city provides? With this flat tax, what is the total contribution of each resident for the lake?

To enforce the optimum level of emissions a government could set an emissions standard at the quantity

Three individuals consume a public good, and their demands are expressed as: P₁ = 1.5 - 0.005Q (for Q < 300); P₂ = 4.5 - 0.007Q (for Q < 643); P₃ = 3.0 - 0.002Q (for Q < 1500), where P represents price in dollars per unit and Q represents output in units per day. The marginal cost of providing the service is given as a constant $5.00 per unit. Determine the efficient level of output of this public good.

Use the following statements to answer this question. I. The bubble concept allows an emitter to sum emission limits for all sources of pollutants within a particular firm, and to set emissions reductions from each source as it pleases as long as the total pollutant limit at the plant is not exceeded. II. Under an emissions offsets program, a new source of emissions can locate in a region only if their new emissions are accompanied by reduced emissions from existing sources by at least as much.

Which is NOT an advantage of emissions fees over standards?

Scenario 18.1: It is the factory's choice whether to install a filter. It is the choice of the nearby fishermen whether to install a treatment plant. Dollar figures show profit. The factory and the fishermen can negotiate costlessly, and no one else is affected by the result. Factory Fishermen A: No filter or treatment plant $10,000 $2,000 B: Filter; no treatment plant $6,000 $10,000 C: No filter; treatment plant $10,000 $4,000 D: Filter; treatment plant $6,000 $6,000 -Refer to Scenario 18.1. If the fishermen are given the right to clean water,

The city of Econoville has 100 residents who each have the identical demand function for roads: P = 100 - 1.99Q. The marginal cost of providing road area is: MC(Q) = 2,500 + Q. Road area is a public good. That is, if the city of Econoville provides public access to roads, all of the residents can enjoy the roads. If the city of Econoville does not offer public roads, how much area of roads will each individual resident maintain on their own? What is the optimal area of public roads in Econoville? What flat road tax should Econoville implement on residents for units of roads the city provides? With this flat tax, what is the total contribution of each resident for the roads?

Access to the movie "Casablanca," showing in a half-empty theater, is

The presence of pollution in the trucking industry leads in the long run to dynamic inefficiencies because

Which of the following is a public good?

Having a refundable deposit for recyclable material

Which of the following is NOT a public good?

The operation of large trucks in Econoville causes damages to public roads. The marginal external cost function of operating large trucks in Econoville is: MEC(m) = 0.05m, where m is the number of miles large trucks are driven in Econoville in thousands. The marginal benefit of large truck operation in Econoville is: MB(m) = 1,000 - 2m. How many miles do large trucks drive in Econoville if they are not forced to pay for damage to roads? If Econoville charges a fee for every thousand miles a large truck drives in Econoville, what is the optimal fee? If Econoville sets a standard for the quantity of miles large trucks drive in Econoville, what is the optimal standard? If the profitability of large truck operation in Econoville increases the marginal benefit function to: MB(m) = 1,500 - 2m and Econoville is using a standard, is it optimal for Econoville to increase the standard?

Because air cargo as an industry involves the generation of pollutants in engine exhaust, the equilibrium price of air cargo services

Mr. Barnes has a monopoly in the production of power in the local market. The demand for Mr. Barnes power is: P = 100 - 0.25q $\implies$ MR(q) = 100 - 0.5q. Mr. Barnes marginal costs are constant at 5. In the generation of power, Mr. Barnes plant emits pollution that causes marginal external damages according to: MEC(q) = 0.05q. If the local government does nothing, how much will Mr. Barnes produce to maximize profits? What is the marginal social cost of his level of output? What price do consumers pay for each unit of Mr. Barnes' output? Is this level of production optimal? Should the local government institute a pollution fee? If so, what is the optimal fee?

In equilibrium, the price of a transferable emissions permit

Use the following statements to answer this question: I. The efficient amount of recycling of scrap materials is the amount that equates the marginal social cost of scrap disposal to the marginal cost of recycling. II. The efficient amount of recycling of scrap materials occurs when society recycles all recyclable wastes.