Exam 10: Externalities

A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,

Corrective taxes are more efficient than regulations for keeping the environment clean.

Once tradable pollution permits have been allocated to firms,

A command-and-control policy is another term for a

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000^th gallon of gasoline entails the following: • a private cost of $3.10; • a social cost of $3.55; • a value to consumers of $3.70. -Refer to Scenario 10-1. The production of the 1,000^th gallon of gasoline entails an

If the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots.

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels?

If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should

When externalities exist, buyers and sellers

Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?

Beverly owns a rabbit and receives a $600 benefit from owning it. Sometimes Beverly's rabbit makes its way onto the lawn of her neighbor, Charles, and eats the vegetables in Charles' garden. This intrusion by the rabbit costs Charles $400. Can both individuals become better off if Charles pays Beverly some amount of money to get rid of the rabbit? Explain.

When correcting for an externality, command-and-control policies are always preferable to market-based policies.

Patents do not

In the case of a technology spillover, the government can encourage firms to internalize a positive externality by

Table 10-3 -Refer to Table 10-3. The socially optimal quantity of output is

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

Which of the following is not an effective method of reducing negative externalities?

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

The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution.

Suppose that flu shots create a positive externality equal to $9 per shot. Further suppose that the government offers a $9-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?