Exam 17: Externalities and the Environment

For a good whose production creates a pollution, when marginal social cost equals marginal social benefit, then I there is no pollution. II resources are utilized efficiently.

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

The efficient quantity of gasoline to sell in Motorland is

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the equilibrium price is ________ per ton.

The granite boulders in Rocky Mountain National Park are a favored place among talented climbers who specialize in the art of bouldering, or climbing harder (but shorter) routes without tying into a rope. Climbers have taken to (illegally) stashing foam crash pads underneath the boulders but marmots and other rodents chew up the pads and the litter is spread by the wind. The pristine National Park is most like a

The cost of producing an additional unit of a good or service that falls on people other than the producer of that good or service is the

-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. Suppose the government assigns individual transferable quotas (ITQ) set to achieve the efficient outcome. The market price of an ITQ is ________ per pound.

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 deadweight loss in the market?

-The demand for bus service is perfectly elastic at a price of $1.00 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. The competitive quantity of bus rides per week is ________.

The marginal social cost is the cost of producing an additional unit of a good or service that falls on people other than the producer of the good or service.

A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. Initially the lake is owned by no one. Keeping in mind the Coase theorem, suppose transactions costs are low and the chemical factory is given ownership of the lake. Compared to the situation with no property rights, the quantity of chemicals produced

In 2008, a man was charged with one count of illegally stocking wild animals, a civil offense. State investigators had accused him of bringing 31 wild hogs from Texas to Wisconsin to hunt on his private land in 2002, spawning a feral hog population that has caused thousands of dollars in crop damage to hundreds of farms in the region. Can the Coase theorem apply in this example? Why or why not?

Consider an industry that produces an output Q with marginal private cost (MC) and marginal social cost (MSC) as given in the table: The marginal external cost associated with the production of unit 3 is

Mandating clean technology, cap-and-trade, and taxes are tools that government can use to limit pollution.

-In the above figure, the competitive unregulated equilibrium is producing and consuming ________ tons of paper at a price of ________ per ton.

List and briefly define the three methods government can use to cope with an external cost, such as pollution.

Which of the following is true?

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that polluters are taxed on the amount of pollution they discharge.

-In the above figure, the efficient quantity is

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, what is the efficient quantity of pesticide to produce?