Exam 16: Externalities, Public Goods, and Common Resources

Refer to the information in Figure 16.5 below to answer the question(s) that follow. Figure 16.5 Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free. -Refer to Figure 16.5. Before any tax on pollution is imposed, Alpha Chemicals is emitting ________ tons of pollution.

Refer to the information provided in Figure 16.2 below to answer the question(s) that follow. Figure 16.2 -Refer to Figure 16.2. The ________ amount of cars is 35.

Governments often ________ activities that generate external ________.

Refer to the information in Figure 16.5 below to answer the question(s) that follow. Figure 16.5 Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free. -Refer to Figure 16.5. The government decides to impose a tax on pollution emissions to cut total emissions in this industry in half, and based on this decision it has set the tax at $100 per ton of emissions. Following the implementation of this tax, the total amount of emissions reduction in this industry will be ________ tons.

Refer to the information provided in Figure 16.3 below to answer the question(s) that follow. Figure 16.3 -Refer to Figure 16.3. If this firm is maximizing profits and is not required to take into account damages, it will produce

Refer to the data provided in Table 16.1 below to answer the following question(s). Table 16.1 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution. Table 16.1 Firm A Firm A Firm A Firm B Firm B Firm B Reduction of Pollution by Firm A MC of reducing pollution for Firm A TC of reducing pollution for Firm A Reduction of Pollution by Firm B MC of reducing pollution for Firm B TC of reducing pollution for Firm B 1 \ 4 \ 4 1 \ 8 \ 8 2 6 10 2 12 20 3 9 19 3 16 36 4 13 32 4 20 56 5 18 50 5 24 80 -Refer to Table 16.1. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?

Education generates external benefits. When these external benefits are not considered, the market will produce

The Coase theorem will apply only if

The consumption of a common resource by one person does not affect the availability of that resource to others.

When the government imposes a tax on a firm that generates external costs, the tax is

Which of the following contains most of the characteristics of a public good?

________ is (are) an example of selling externality rights.

Refer to the information in Figure 16.5 below to answer the question(s) that follow. Figure 16.5 Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free. -Refer to Figure 16.5. The government decides to impose a tax on pollution emissions to cut total emissions in this industry in half, and based on this decision it has set the tax at $100 per ton of emissions. The total amount of pollution emissions desired by the government is ________ tons.

When the government pays part of my university education, it is

There are 25,000 families in a small community that are affected by air pollution from a local factory. The air pollution could be reduced if the company spent $10,000 on upgraded ventilators. The company agrees to install the ventilators if the families in the community contribute the $10,000. Since there are so many families they fail to come to a resolution to which they will all agree. This outcome is an example of the

When the government taxes a firm that generates external costs, the firm will produce

Refer to the data provided in Table 16.3 below to answer the following question(s). Table 16.3 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution. Table 16.3 Firm A Firm A Firm A Firm B Firm B Firm B Reduction of Pollution by Firm A MC of reducing pollution for Firm A TC of reducing pollution for Firm A Reduction of Pollution by Firm B MC of reducing pollution for Firm B TC of reducing pollution for Firm B 1 \ 8 \ 8 1 \ 16 \ 16 2 12 20 2 24 40 3 18 38 3 32 72 4 26 64 4 40 112 5 36 100 5 48 160 -Refer to Table 16.3. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade permits, what is the total cost of the pollution reduction?

The drop-in-the-bucket problem is intrinsic to public goods.

If firms have to account for external costs in production, then they will produce an output level that is ________ the efficient level.

According to the Coase theorem, bargaining will bring the contending parties to the correct solution only if the rights are initially assigned to the party causing the externality.