Exam 16: Externalities, Public Goods, and Common Resources

For ________ goods, market demand is the horizontal summation of individual demand curves and for ________ goods, market demand is the vertical summation of individual demand curves.

Refer to the information provided in Figure 16.4 below to answer the question(s) that follow. Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel. Figure 16.4 -Refer to Figure 16.4. Suppose the government assigns property rights to the residents of Playa Del Rey, then the airlines and the residents engage in negotiations. The ________ of air travel is 100 units.

Assume there are two people in a society. Person A is willing to pay $140 to have one unit of a public good produced and Person B is willing to pay $160 to have one unit of a public good produced and $140 to have two units produced. As a result, society would be willing to pay a price of ________ of this public good.

A local campaign is asking for contributions of $5.00 per citizen to fund the renovation of the boardwalk in Atlantic City following Hurricane Sandy. The total cost of the renovation is estimated to be $125 million. You decide not to contribute because your contribution would be so small relative to the total that it wouldnʹt make any difference whether you contribute or not. This is an example of the

Every good that the government provides is an example of a public good.

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, Beta Chemicals is emitting ________ tons of pollution.

If a tax is placed on perfectly competitive firms that impose external costs on society, the firm's ________ curve will shift up and the industry ________ curve will shift to the left.

A national campaign is asking for contributions of $1.00 per citizen to fund the building of the September 11th memorial in New York City. The total cost of the memorial is estimated to be $260 million. You decide not to contribute, because your contribution would be small relative to the total that it won't make any difference whether you contribute or not. This is an example of the ________ problem.

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 the firm maximizes profits and the government ________, it will produce 20 units of output.

Refer to the information provided in Figure 16.6 below to answer the question(s) that follow. Figure 16.6 -Refer to Figure 16.6. In the top portion of the figure are the demand curves of two people in this society for a public good. Which of the panels represents the market demand curve for the public good?

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

If private bargaining to resolve an externality is to result in an efficient outcome,

You will still be able to listen to NPR (National Public Radio) whether or not you contribute to their fund-raising campaign, so you decide not to contribute. This is an example of the

Refer to the data provided in Table 16.2 below to answer the following question(s). Table 16.2 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution. Table 16.2 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 \ 1 \ 1 1 \ 8 \ 8 2 3 4 2 12 20 3 6 10 3 16 36 4 10 20 4 20 56 5 15 35 5 24 80 -Refer to Table 16.2. 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?

Relating to the Economics in Practice on page 338: A number of companies are using their own internal carbon taxes to reflect the social cost of carbon emissions on the environment. The price per ton of carbon emissions that they are using

Refer to the information provided in Figure 16.4 below to answer the question(s) that follow. Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel. Figure 16.4 -Refer to Figure 16.4. If the government assigns property rights to ________ and no negotiations occur between the parties, the resulting level of air travel is 120 units.

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 not allowed to trade permits, what is the total cost of the pollution reduction?

Property rights are protected by

Taxes can be used to internalize negative externalities.

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. What is the total damage imposed as a result of producing the market (unregulated) level of cars?