Exam 17: Externalities and the Environment

-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. If property rights to the pasture are granted to a farmer so that the farmer owns the pasture, the farmer raises ________.

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if the output is 180 tons per month, what is the marginal social cost of producing the pesticide?

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

-The tables above show the marginal costs and benefits from production and consumption of paper. From this information we can see that there are

The Coase Theorem points out that for an efficient outcome to result, it is irrelevant which party receives the property rights.

If this pollution occurs, the marginal social cost equals the

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. If the market is unregulated, in equilibrium the external cost of visiting the state park is given by the distance between

Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will

-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, at the equilibrium level of output,

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide. -In the figure above, if no one owns the lake, what is the equilibrium price of the pesticide?

Legally established titles to the ownership, use, and disposal of factors of production are referred to as

The tragedy of commons is the

-Using the above figure, the efficient amount of paper produced is

One way of overcoming the problem of the commons is to make it private property.

-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, at the equilibrium output, the

Marginal social cost is equal to the

-The figure above shows the market for steel, the production of which creates pollution. a) What point represents the equilibrium price and what point represents the equilibrium quantity in an unregulated, competitive market? b) What area represents the deadweight loss of the unregulated, competitive market outcome? c) What point represents the efficient quantity? d) If the output level in part (c) was achieved through the use of a government imposed tax, what price would consumers pay? What price would the producers receive? What distance represents the amount of the tax? e) If government successfully uses marketable permits issued under a cap-and-trade policy to eliminate the external cost, what point represents how much output would be produced?

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then

How does the government determine the quota amount that will produce an efficient use of a common resource?

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.