Exam 10: Externalities: When the Price Is Not Right

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 tradeable allowances worth 50 tons of particulates. We would expect that:

Figure: Market for Vaccines Reference: Ref 10-5 (Figure: Market for Vaccines) The figure represents the market for vaccines with external benefits. The market's outcome generates a(n):

Government intervention is necessary to correct all externalities.

Because there are external benefits from higher education:

If antibiotic users are required to bear all the costs of antibiotic use, the supply curve would:

Suppose that the private cost of using antibiotics is less than its social cost-we would then expect people to ________ antibiotics, leading to an ________ market outcome.