Exam 18: Assymmetric Information, the Rules of the Game, and Externalities

Suppose that in the market for paper, demand is P = 100 - Q. The private cost of producing paper is 10 + Q. However, pollution generated by the production process creates a per unit external harm (i.e., a negative externality)equal to 0.5 (i.e., the level of the externality increases with the quantity produced). i)What is the market equilibrium? ii)What is the socially optimal quantity of paper that should be produced?

The fact that stolen goods command lower prices on the market:

Which of the following does not apply in the world of zero transaction costs?

A rivalrous good is one for which:

A good is said to be non- rivalrous if:

Wealth is maximized when:

When private solutions to externalities are not feasible:

Cobs bakery outlets are usually located in close proximity to Starbucks. This may be an example of

Which of the following is not a critique of the neoclassical model

The Coase theorem does not hold when:

If the marginal willingness to pay for a good exceeds its marginal cost by $4 per unit and the efficient output of the good exceeds actual output by 1 million units, a deadweight loss of $2 million is imposed on the economy.

Externalities occur because:

An economic property right and a legal property right:

Discuss the following statement: "Asymmetric information is a two- edged sword: it allows for large gains from trade, but it also allows for cheating."

In the presence of externalities of any sort:

When private bargaining is costly, courts tend to assign property rights:

When BC Transit built the rapid transit system in Vancouver we found that high- rise apartments were subsequently built around most of the stations. How might this have been inefficient?

Public regulation is often an effective means of dealing with an externality when