Exam 5: Externalities, Environmental Policy, and Public Goods

Figure 5-15 Figure 5-15 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂. -Refer to Figure 5-15. The current market equilibrium output is partly the result of overfishing. In that case, what does S₁ represent?

Which of the following could be evidence of a market failure?

In economics, the term "free rider" refers to

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Economists argue that the level of pollution should be

If the marginal social benefit of consuming a good or a service exceeds the marginal private benefit

Figure 5-12 College education benefits society by producing a more employable workforce, reducing crime, and creating a better informed citizenry. Thus, the marginal social benefits of college education exceed the marginal private benefits for any level of college education. This is illustrated in Figure 5-12. -Refer to Figure 5-12. One way to obtain the economically efficient amount of college education is for governments to subsidize college education. What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.)

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes. According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution.

Determine if each of the products below displays any of the following characteristics: (i) rivalry (ii) nonrivalry (iii) excludability (iv) nonexcludability. a. a freeway during peak commute hours b. an online college course c. infectious disease prevention d. open source software such as Linux e. a movie showing at Century Theatres

The U.S. government has frequently used a "command-and-control" approach in dealing with pollution. Which of the following describes this approach?

Which of the following is an example of a positive externality?

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2. The deadweight loss due to the externality is represented by the area

A positive externality causes

Figure 5-16 Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights, and the marginal cost of installing the street lights. -Refer to Figure 5-16. Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other. Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

State whether each of the following goods and services is nonrival, nonexcludable or both: a. A toll road b. A public park c. A lighthouse d. An art museum e. A radio broadcast of "A Prairie Home Companion"

Which of the following statements about the economically efficient level of air pollution is correct?

Figure 5-8 Consider a chemical plant that discharges toxic fumes over a nearby community. To reduce the emissions of toxic fumes the firm can install pollution abatement devices. Figure 5-8 shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions. -Refer to Figure 5-8. What is the economically efficient level of pollution reduction?

Figure 5-7 -Refer to Figure 5-7. What is the incremental cost of increasing the quantity of pollution reduction from Q_B to Q_E units?

Figure 5-15 Figure 5-15 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂. -Refer to Figure 5-15. Identify the area that shows the deadweight loss from overfishing.