Exam 10: Externalities

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub.Further suppose that the local government offers a $7 per-shrub subsidy to planters.The number of shrubs that are planted is then

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Figure 10-11 -Refer to Figure 10-11.Taking only private value and private cost into account,total surplus at the market equilibrium amounts to

Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?

Scenario 10-2 The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward.The production of the 50^th restored historic building entails the following: • a private cost of $800,000; • a private value of $650,000; • a social value of $800,000. -Refer to Scenario 10-2.Could the government impose a tax or provide a subsidy to move the market to the social optimum? If your answer is "Yes," should it be a tax or should it be a subsidy?

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.Which of the following statements is correct?

Writing in the New York Times in August 2009,N.Gregory Mankiw asserted that the remedy for climate change that is overwhelmingly supported by economists is

Figure 10-4 -Refer to Figure 10-4.This market is characterized by

A corrective tax places a price on the right to pollute.

In the case of a technology spillover,internalizing a positive externality will cause the supply curve of an industry to

Figure 10-15 -Refer to Figure 10-15.Which graph illustrates a pollution permit program?

The business activities of Firm A confer positive externalities on Firm B,and the business activities of Firm B confer positive externalities on Firm A.If the two firms merged,then

Suppose that cigarette smokers create a negative externality.Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality.What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

Figure 10-11 -Refer to Figure 10-11.A benevolent social planner would prefer

Negative externalities lead markets to produce

Assume the production of a good causes a negative externality.In the market equilibrium,the marginal consumer values the good at

As a means of dealing with pollution,do economists generally prefer corrective taxes or do they prefer regulations?

Figure 10-4 -Refer to Figure 10-4.If all external costs were internalized,then the market's equilibrium output would be

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Figure 10-18.The graph represents a corrective tax to reduce pollution.On the axes,Q denotes the quantity of pollution and P represents the price of pollution. -Refer to Figure 10-18.What is the appropriate label for the downward-sloping line on the graph?