Exam 17: Externalities and the Environment

The Coase Theorem is the proposition that private transactions are efficient if property rights exist, if only a ________ number of parties are involved, and if transactions costs are ________.

Suppose a firm produces pollution when it generates electricity. The cost of the pollution is called the

What is marginal external cost? Give an example.

If a good has an external cost, then the marginal private cost curve

-In the above figure, in order to achieve efficiency, a tax of ________ per unit is needed.

In the above figure, the efficient level of chemicals produced per week is

Marginal social cost is equal to ________.

When CSU sophomore Cody Clow and his housemates chose not to heed the city's ordinance against unreasonable noise and host a loud party at their off-campus residence last fall, they were confronted and ticketed by police. Fort Collins city code describes unreasonable noise as any sound that will "unreasonably interfere with the enjoyment of life or property." The method the local government used cope with the externality most closely resembles a ________.

Keeping in mind the Coase theorem, in the figure above if the pesticide factories own the lake, how much pesticide is produced?

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

When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then

When property rights are assigned and transactions costs are low,

"Suppose the market for aluminum is perfectly competitive and unregulated. If aluminum factories emit pollution, the marginal social cost of aluminum is less than the market price." True or false? Explain.

If production of a good creates an external cost, the amount of output where the marginal social benefit equals the marginal private cost is

The cost of producing an additional unit of a good or service that is borne by the producer of that good or service is the

When production of a good results in an external cost, the unregulated competitive market equilibrium is inefficient because ________.

-The tables above show the marginal costs and benefits from production of paper. The efficient level of output is ________ of paper.

A key contribution of Ronald Coase is that he pointed out that private transactions are efficient when the number of parties involved is small

The problem of the commons is the absence of incentives to prevent overuse and depletion of the common resource.

If a product has zero external costs, then marginal social cost equal marginal private cost.