Exam 10: Externalities

The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves,without government intervention,regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

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

Sally's cat causes Mike to sneeze.Sally values her cat's companionship at $300 per year.The cost to Mike of tissues and her allergy medication is $350 per year.Based on the Coase theorem,

When he was a candidate for president,Barack Obama proposed which of the following as a means of combating climate change?

If education produces positive externalities,we would expect

Which of the following is a difference between corrective taxes and tradable pollution permits?

A paper plant produces water pollution during the production process.If the government forces the plant to internalize the negative externality,then the

Table 10-4 -Refer to Table 10-4.Take into account private and external costs and assume the quantity of output is always a whole number (that is,fractional units of output are not possible).The maximum total surplus that can be achieved in this market is

Markets sometimes fail to allocate resources efficiently.

When negative externalities are present in a market,

Figure 10-11 -Refer to Figure 10-11.Which of the following statements is correct?

Honey producers provide a positive externality to orchards because

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.The tax depicted on the graph

Which of the following is the most effective way to internalize a technology spillover?

Figure 10-1 -Refer to Figure 10-1.This graph represents the tobacco industry.Without any government intervention,the equilibrium price and quantity are

If an aluminum manufacturer does not bear the entire cost of the smoke it emits,it will

Table 10-3 -Refer to Table 10-3.What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?

Figure 10-4 -Refer to Figure 10-4.At Q₃

A negative externality

Figure 10-17 -Refer to Figure 10-17.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?