Exam 10: Externalities- When the Price Is Not Right

The Centers for Disease Control and Prevention (CDC) wants at least 90% of the population vaccinated against preventable diseases, since the chance of a disease outbreak decreases as vaccine coverage increases. We can conclude that:

If an external cost is present in a market, economic efficiency may be enhanced by:

Command and control refers to:

Government subsidies for goods that generate external benefits may increase economic efficiency.

Use the following to answer questions: Figure: Palm Oil -(Figure: Palm Oil) Refer to the figure. Indonesian palm oil producers deforest tropical rainforests to grow the plants that excrete the oil. According to this diagram, what is the external cost (per ton) of producing palm oil?

An example of a transaction cost for a shirt is the price you pay for a shirt.

The paper industry and brewery industry each emit 60 tons of particulates into the air. It costs the paper industry $1,000 to remove 1 ton of particulates, and it costs the brewery industry $1,400 to remove 1 ton of particulates. In an effort to reduce particulate pollution, the government gives each industry tradable allowances worth 50 tons of particulates. We would expect that:

If in an attempt to correct an externality the government sets a Pigouvian subsidy too high the equilibrium quantity will be:

Which statement about taxes is INCORRECT?

When external benefits are present in a market:

Government can be used to solve externality problems that are too costly for private parties to solve.

In the presence of significant externalities, a market equilibrium maximizes:

Use the following to answer questions: Figure: Dishwashing Detergent -(Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, what is the external cost of using dishwashing detergent?

Two parties fail to solve an externality problem because reaching an agreement requires high-priced lawyers to negotiate and write up contracts. This illustrates the problem of:

Which is an example of an external benefit?

The conditions under which the Coase theorem applies are common in cases of externality.

Antibiotics tend to be overused, as the producers of antibiotics are required to bear all the costs of antibiotic use.

The social cost of antibiotic consumption equals the private cost of producing antibiotics plus the cost of increased bacterial resistance to antibiotics.

The price of antibiotics sends the wrong signal because it includes the:

Because there are external benefits from higher education: