Exam 17: Externalities and the Environment

-The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, the efficient amount of paper will be produced by setting a Pigovian tax of

When the production of a good creates an external cost, in order for taxes to be effective in achieving the efficient allocation of resources, the tax must be set equal to the

-In the figure above, if the market is unregulated, at the equilibrium output the marginal external cost is

If the government regulates the market in the above figure in a way to achieve efficiency, then ________ tons of paper will be produced and consumed.

Scientists have said for years cod was so seriously overfished in European Union waters that there was a risk of extinction due to stock collapse. In October 2008, they called for the EU to set the 2008 number of days fishermen are allowed to fish at less than half of 2006 levels. This policy is most like

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. The competitive equilibrium is at

A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. The marginal social cost, private marginal cost, and marginal benefit from producing chemicals are in the figure above. Initially the lake is owned by no one. Keeping in mind the Coase theorem, if transactions costs are low then if the chemical factory owns the lake ________ tons of chemicals will be produced and if the fishing club owns the lake, ________ tons of chemicals will be produced.

-The above table shows the marginal benefits and costs from production of fertilizer. There are no external benefits. Based on the data in the table, production of fertilizer has

If property rights for air and water exist, then polluters bear the costs of pollution.

In the absence of property rights, factories will dump waste into a waterway up to the point where ________ equals ________.

There are two industries that emit sulfur dioxide. The government decides to use a cap-and-trade policy by issuing permits for pollution. If Harry's industry has a higher marginal cost of reducing sulfur dioxide than does Joe's industry, ________.

Producing paper creates pollution. There is no externality in the consumption of paper. The efficient quantity of paper is when the

-In the figure above, if the market is unregulated, the price will be

-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 borne by the firms plus the people who enjoy a clean lake when output equals 2 tons of paper per week equals

-Based on the data in the table above, the efficient level of output equals

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. In this case,

One way to overcome the problem of the commons is to

The market price of an individual transferable quota is equal to the

What is an individual transferable quota (ITQ)?

The marginal social cost, MSC, of producing a good or service equals