Exam 17: Externalities and the Environment

Renewable resources are those for which

Private markets can allocate resources optimally

An externality is

In the U.S., people tend to discard items rather than repair them because

Depletion of tropical rainforests is an example of

As more pollution is abated, the total social benefit from pollution abatement increases.

When consumption of a good creates positive externalities,

The optimal level of pollution occurs where the marginal social benefit is equal to

Marginal external costs are

The Clean Air Act of 1970

Smokers and loud talkers who ignore the external effects of their actions are being rational in the economic sense.

When a system of pollution rights is in effect, polluters have no economic incentive to reduce the amount of pollution they generate.

The Clean Air Act of 1970 has

Exhibit 17-6 In Exhibit 17-6, a per-unit subsidy of __________ would result in production of the socially optimal quantity.

Exhibit 17-6 In Exhibit 17-6, the socially efficient production level is

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold.Other things equal,

As an example of how interrelated the global economy has become, the increased demand for biofuels to replace fossil fuels is a major driver of

Free markets produce too little output when

If tuna in the sea are open-access resources, they will be used until the marginal value of additional use equals

Exhibit 17-1 In Exhibit 17-1, the socially efficient level of output is