Explore all topics
Start Free Trial
Need Help? Contact us
back arrowfull exam logo
search
ai logoChat with AI
Servicesarrow
Discoverarrow

Topics

Explore all topics
Discover more topics

Exam 18: Externalities and Public Goods

arrow
Exam 1: Preliminaries78 Questionsadd course
Exam 2: The Basics of Supply and Demand139 Questionsadd course
Exam 3: Consumer Behavior134 Questionsadd course
Exam 4: Individual and Market Demand131 Questionsadd course
Exam 5: Uncertainty and Consumer Behavior150 Questionsadd course
Exam 6: Production125 Questionsadd course
Exam 7: The Cost of Production178 Questionsadd course
Exam 8: Profit Maximization and Competitive Supply164 Questionsadd course
Exam 9: The Analysis of Competitive Markets183 Questionsadd course
Exam 10: Market Power: Monopoly and Monopsony158 Questionsadd course
Exam 11: Pricing With Market Power130 Questionsadd course
Exam 12: Monopolistic Competition and Oligopoly120 Questionsadd course
Exam 13: Game Theory and Competitive Strategy150 Questionsadd course
Exam 14: Markets for Factor Inputs134 Questionsadd course
Exam 15: Investment, Time, and Capital Markets153 Questionsadd course
Exam 16: General Equilibrium and Economic Efficiency126 Questionsadd course
Exam 17: Markets With Asymmetric Information133 Questionsadd course
Exam 18: Externalities and Public Goods131 Questionsadd course
Exam 19: Behavioral Economics101 Questionsadd course
Select questions type
  • Essay
  • Multiple Choice
  • Short Answer
  • True False
  • Matching
  • Select Tags
search iconSearch Question
flashcardsStudy Flashcards
Select questions type
  • Essay
  • Multiple Choice
  • Short Answer
  • True False
  • Matching
  • Select Tags

The food processing industry involves the canning of fruit products, among other things, and the canning process produces canned goods and waste products. The manufacturer of one kind of fruit product produces an external cost for third parties. This external cost is expressed as: MEC = 0.00005Q, where MEC represents marginal external cost (dollars/unit), and Q represents cases produced per week. The marginal cost of production (supply), ignoring MEC, at the industry level is: MC = 2 + 0.000175Q. The industry demand for the product is: P = 10 - 0.00025Q, where price P is in dollars per unit. a. Determine the output rate and price that would be established by profit maximizing firms. b. Determine the efficient output rate and price. c. Determine the cost to society of firms producing at the profit maximizing rate rather than at the efficient output rate.

Free
(Essay)
4.8/5
(41)
Question 1
Correct Answer:
Verified

a.The profit maximizing production rate is based on demand and the industry's marginal cost of production, ignoring MEC. Thus we equate MC with demand to get Q:
MC = demand
2 + 0.000175Q = 10 - 0.00025Q
Q = (10 - 2)/0.000425 = 18,824 cases per week
The selling price is:
P = 10 - 0.00025(18,824) = $5.294 per case.b.The efficient output rate is based on the social costs and demand.MSC = MC + MEC
= 2 + 0.000175Q + 0.00005Q
= 2 + 0.000225Q
MSC = demand
2 + 0.000225Q = 10 - 0.00025Q
Q = (10 - 2)/0.000475 = 16,842 cases per week
The selling price is:
P = 10 - 0.00025(16,842) = $5.79 per case.c.The social cost of not producing at the efficient market rate is the area between MSC and demand between Q of 16,842 and 18,824. The average height, Havg, is:
Height at Q = 18,824 = H1 = -8 + 0.000475(18,824)
= 0.9414
Height at Q = 16,842 = H2 = -8 + 0.000475(16,842)
= 0.0000
Havg = (H1 + H2)/2 = (0.9414 + 0)/2 = 933.52
Thus, the social loss is $933.52 per week.

Due to externalities generated by home landscaping, its price:

Free
(Multiple Choice)
4.8/5
(31)
Question 2
Correct Answer:
Verified

D

If a firm had a fixed proportions technology, then the pollution produced by this firm:

Free
(Multiple Choice)
5.0/5
(31)
Question 3
Correct Answer:
Verified

B

As you move rightward on a marginal cost of abatement curve, emissions are:

(Multiple Choice)
4.8/5
(30)
Question 4

If error in setting the policy is possible,

(Multiple Choice)
4.9/5
(31)
Question 5

The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. A 50 gallon can of recyclable trash costs a resident $3.50 to be collected. The marginal social cost of garbage disposed is: The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. A 50 gallon can of recyclable trash costs a resident $3.50 to be collected. The marginal social cost of garbage disposed is: where is a 50 gallon drum of garbage disposed. The marginal social cost of garbage recycled is: The marginal benefit function of garbage removed from residences is: Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? How much will each resident recycle with this payment plan? Is this level of disposal and recycling efficient? Why or why not? What is the optimal level of garbage disposed and garbage recycled in Econoville? How can Econoville encourage residents to dispose and recycle the optimal amounts of garbage? where The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. A 50 gallon can of recyclable trash costs a resident $3.50 to be collected. The marginal social cost of garbage disposed is: where is a 50 gallon drum of garbage disposed. The marginal social cost of garbage recycled is: The marginal benefit function of garbage removed from residences is: Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? How much will each resident recycle with this payment plan? Is this level of disposal and recycling efficient? Why or why not? What is the optimal level of garbage disposed and garbage recycled in Econoville? How can Econoville encourage residents to dispose and recycle the optimal amounts of garbage? is a 50 gallon drum of garbage disposed. The marginal social cost of garbage recycled is: The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. A 50 gallon can of recyclable trash costs a resident $3.50 to be collected. The marginal social cost of garbage disposed is: where is a 50 gallon drum of garbage disposed. The marginal social cost of garbage recycled is: The marginal benefit function of garbage removed from residences is: Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? How much will each resident recycle with this payment plan? Is this level of disposal and recycling efficient? Why or why not? What is the optimal level of garbage disposed and garbage recycled in Econoville? How can Econoville encourage residents to dispose and recycle the optimal amounts of garbage? The marginal benefit function of garbage removed from residences is: The city of Econoville currently charges a fee of $0.50 to residents for each 50 gallon can of trash the city garbage service collects from their residence. A 50 gallon can of recyclable trash costs a resident $3.50 to be collected. The marginal social cost of garbage disposed is: where is a 50 gallon drum of garbage disposed. The marginal social cost of garbage recycled is: The marginal benefit function of garbage removed from residences is: Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? How much will each resident recycle with this payment plan? Is this level of disposal and recycling efficient? Why or why not? What is the optimal level of garbage disposed and garbage recycled in Econoville? How can Econoville encourage residents to dispose and recycle the optimal amounts of garbage? Given the payment plan for garbage disposal, what level of garbage are the city residents disposing each year? How much will each resident recycle with this payment plan? Is this level of disposal and recycling efficient? Why or why not? What is the optimal level of garbage disposed and garbage recycled in Econoville? How can Econoville encourage residents to dispose and recycle the optimal amounts of garbage?

(Essay)
4.8/5
(37)
Question 6

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. It would be acceptable to both parties to have the fishermen pay the factory:

(Multiple Choice)
4.9/5
(37)
Question 7

Having a refundable deposit for recyclable material:

(Multiple Choice)
4.8/5
(39)
Question 8

Figure 18.2.1 -Refer to Figure 18.2.1 above. In which of the following instances does the reduction in the level of emissions outweigh the harm done from emissions? Figure 18.2.1 -Refer to Figure 18.2.1 above. In which of the following instances does the reduction in the level of emissions outweigh the harm done from emissions?

(Multiple Choice)
4.8/5
(35)
Question 9

Visitors to National Parks cause damage and increased maintenance costs on the parks. The marginal external cost of visitors is: MEC(q) = 1.5q, where q is the number of visitors to National Parks in thousands. The marginal benefit to visitors of attending National Parks is: Visitors to National Parks cause damage and increased maintenance costs on the parks. The marginal external cost of visitors is: MEC(q) = 1.5q, where q is the number of visitors to National Parks in thousands. The marginal benefit to visitors of attending National Parks is: If the Parks do not charge a fee, how many visitors will attend the National Parks. What is the optimal level of park visitation? If the National Parks were to establish a park visitation fee, what is the optimal level of the fee? If the Parks do not charge a fee, how many visitors will attend the National Parks. What is the optimal level of park visitation? If the National Parks were to establish a park visitation fee, what is the optimal level of the fee?

(Essay)
4.9/5
(45)
Question 10

Figure 18.2.2 -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: Figure 18.2.2 -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:

(Multiple Choice)
4.9/5
(37)
Question 11

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

(Multiple Choice)
4.7/5
(32)
Question 12

Because trucking as an industry involves the generation of pollutants in engine exhaust,

(Multiple Choice)
4.8/5
(38)
Question 13

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

(Multiple Choice)
5.0/5
(30)
Question 14

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

(Multiple Choice)
4.9/5
(39)
Question 15

Under a transferable emissions permit system,

(Multiple Choice)
4.8/5
(27)
Question 16

When one party suffers negative external effects due to the actions of another party, a lawsuit may not lead to the efficient outcome if:

(Multiple Choice)
4.8/5
(37)
Question 17

Although digital storage costs have declined sharply in the past few years, many universities and companies still have limited storage space for email messages and impose a fixed limit on the amount of file storage space per user. May we view this as a common property resource problem, and do the fixed limits resolve the problem?

(Multiple Choice)
4.9/5
(35)
Question 18

Which is NOT an advantage of emissions fees over standards?

(Multiple Choice)
4.8/5
(34)
Question 19

You share a room in a large apartment complex with three other students, and you want to have an end-of-semester party that may become very noisy. Your lease clearly states that you are not to disturb the other residents, but you believe the Coase Theorem implies that you should be able to bargain with your neighbors and reach an agreement on hosting the party. However, you are wrong and bargaining is unlikely to achieve an efficient outcome. Which condition of the Coase Theorem is not met in your situation?

(Multiple Choice)
5.0/5
(35)
Question 20
Showing 1 - 20 of 131
close modal

Filters

  • Essay(0)
  • Multiple Choice(0)
  • Short Answer(0)
  • True False(0)
  • Matching(0)