Exam 11: Market Failure and Externalities

When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students, it is an example of

A Pigovian tax sets the price of pollution while tradable pollution permits sets the quantity of pollution.

Internalizing an externality means

Because there are positive externalities from higher education,

Is it right to say that monetary values can be placed on pollution?

Which of the following is an example of potential flawed government behaviour?

If a market generates a positive externality, the social value curve is above the demand curve (private value curve).

Refer to the figure below. This diagram represents the tobacco industry. The socially optimal price and quantity exchanged are

A positive externality generates

Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?

A negative externality (that has not been internalized) causes the

Use a graph to illustrate the quantity of pollution that would be emitted (a) after a corrective tax has been imposed and (b) after tradable pollution permits have been imposed. Could these two quantities ever be equivalent?

Tax evasion is

Tax avoidance is

Which best describes making political decisions to return favours.

Refer to the figure below. This diagram represents the tobacco industry. The market creates an equilibrium price and quantity exchanged of

A positive externality is an external benefit that accrues to the buyers in a market while a negative externality is an external cost that accrues to the sellers in a market.

For any given demand curve for pollution, a regulator can achieve the same level of pollution with either a Pigovian tax or by allocating tradable pollution permits.

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining. Under what circumstances will private bargaining fail to produce a solution?