Exam 17: Externalities and the Environment

If the production of a good creates pollution, then the

The cost of producing a good or service that is paid by people other than the producers is

With the debris of more than 50 years of climbing on the beautiful high slopes - oxygen canisters, tents, backpacks and even some bodies - Mount Everest has been called the world's highest garbage dump. It has been suggested that there should be a limited number of climbers allowed on the mountain each year to limit the environmental degradation that occurs. This method of achieving efficient use of a common resource is most like

The marginal social cost is

-A paper mill dumps waste into a lake used by a catfish farmer. The table above shows costs and benefits arising from the production of paper. a) Draw the paper mill's marginal private cost curve, the marginal social cost curve, and the marginal social benefit of paper curve. b) What is the efficient level of paper production? If no one owns the lake and there is no regulation of pollution, what is the quantity of paper produced per week? Illustrate the deadweight loss in your figure. c) If the government introduces a Pigovian tax, what is the tax per ton of paper produced that achieves an efficient outcome? What is the amount of the tax? d) If the catfish farmer owns the lake, how much paper is produced per week and what does the paper mill pay the farmer per ton? Explain you answer. e) If the paper mill owns the lake, how much paper is produced per week? Explain. f) Compare the quantities of paper produced in (c) and (d) and explain the relationship between these quantities.

The marginal social cost of burning garbage in Houston is the sum of the marginal private cost and the marginal external cost." Is this assertion correct or incorrect?

-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 efficient level of output could be achieved by setting a per ton tax of

The marginal social cost of production is the

-The figure above shows the market for transportation services, which produces an external cost due to the air pollution that is created. If the market for transportation services is competitive and unregulated, the equilibrium quantity is ________ and the equilibrium price 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, if no one owns the lake, the market does what?

Explain why a producer who is causing external costs does not have the incentive to reduce these costs.

Air pollution caused by lead

For a common resource, efficiency requires that the ________ equals the ________.

If this pollution occurs, the market equilibrium with no government intervention extracts ________ natural gas than the efficient quantity and ________ a deadweight loss.

-A chemical factory and a fishing club share a lake. The marginal social costs, private marginal costs, and marginal benefits from producing chemicals are in the figure above. The chemicals dumped into the lake have always harmed the fish, but now they begin to damage the fishing boats as well. As a result, the

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that ________.

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, at the equilibrium quantity what is the marginal social cost of producing the pesticide?

When the market for gasoline in Motorland is in equilibrium, the market price of gasoline is ________ the marginal social cost.

If an external cost exists, who bears it in an unregulated, competitive market transaction?

-The amount of the external marginal cost per ton illustrated in the above figure is