Exam 17: Externalities and the Environment

-In the figure above, in order to promote an efficient allocation of resources, the government could impose a tax equal to

The ________ is the cost of paid by the producer plus any cost paid by everyone else when another unit of a good or service is produced.

-Use the figure above to answer this question. Explain what the marginal social cost curve and the marginal external cost mean. In the figure, if the market is competitive and unregulated, what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

-Suppose unregulated production of pesticides results in an equilibrium price and quantity of $400 and 1,000 tons per day, respectively, and a marginal external cost of $10 a ton. a) If the government were to eliminate the external cost by using taxes, what should the tax equal? b) Would the government action described above affect the quantity of pesticides produced? If yes, how? If no, why not?

Why are fish in the ocean an example of a resource that suffers from the tragedy of the commons but cattle grazing in a farmer's pasture do not suffer from the tragedy of the commons?

Why is it not efficient to eliminate all pollution?

-A copper ore refiner pollutes the water upstream from a brewery. These are the only two parties involved. The transactions costs of reaching an agreement between the refinery and the brewery are low. The amount of water pollution will be at the efficient level

What is the tragedy of the commons?

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, the equilibrium price per ton will be

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

The Coase theorem is the proposition that private economic transactions are efficient if the number of involved parties is small, if property rights _______, and transactions costs are ________.

If this pollution occurs, one way of reaching efficient production levels is by setting a Pigovian Tax. To achieve efficiency with this tax means that the tax must equal the

According to the Coase theorem, part of what is needed for private transactions to be efficient is that property rights

A polluted river has 20 homes on it that rent for $1,000 each per month. Homes on a similar river that is not polluted rent for $2,000 each per month. The river is polluted because there are two factories on the river that dump polluted water in the river. Each factory could install a filter that would cost $5,000 each and would reduce the pollution in the water to a negligible level. The external cost in this problem is

________ played a large role is removing lead from the atmosphere in the United States.

-Based on the data in the above table, the table shows a market for a good with

When the production of a good creates an external cost, one method of achieving the efficient allocation is to impose a tax such that

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________.

Generating electricity creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium because

If a good has an external cost, the