Exam 17: Externalities and the Environment

When a production quota is used to remedy the problem of the commons, then

The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established,

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water. -Any such pollution is

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The efficient outcome is raising ________.

The difference between the marginal social cost and the marginal private cost equals the

-The demand for bus service is perfectly elastic at a price of $1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride.

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The market equilibrium with no government intervention is ________.

-The figure above provides information for a factory that produces chemicals that pollute a waterway. The waterway is used by water skiers. If the waterway is owned by a water ski club and the Coase theorem applies, then the factory will produce ________ tons of chemicals a week.

If the government creates a system of pollution permits, firms with low marginal costs of reducing pollution will

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. The marginal private cost when output equals 2 tons of paper per week equals

-The table above shows information about the costs and benefits of a steel smelter that pollutes the air of a city. If the marginal external cost is $10 per ton at every quantity of steel produced, the equilibrium quantity when the steel industry is unregulated is ________ tons per week.

For a good with an external cost, the supply curve

The marginal social cost of a chemical is $100 per ton and its marginal private cost is $85 per ton. What is the marginal external cost of the chemical?

If the government assigns private property rights to a common resource, then the

The problem of the commons arises because ________ exceeds ________ when the resource is used.

If the production of a good creates an external cost, is the supply curve the same as the marginal social cost or the same as the marginal private cost curve or both?

What is the Coase theorem? What conditions need to be present for this theorem to work?

Discuss the difference between a private cost and a social cost.

Consider the production of some industrial good that creates air pollution. The table below gives the marginal social cost (MSC), the marginal cost (MC), and the marginal social benefit (MSB) for each level of output (Q). The inefficient market quantity is ________ and the efficient market quantity is ________.

In the above figure, to achieve the efficient amount of paper production, the government could impose a tax of