Exam 18: Externalities, Open-Access, and Public Goods

-The above figure shows the marginal benefit from pollution for two firms. If both firms receive a marketable permit to pollute 25 units of pollution each, how much will each firm pollute and how much will a permit for one unit of pollution be worth?

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output, and the marginal cost to the surrounding neighbors. The marginal cost of production is zero for the firm. If the firm owns the river and there are thousands of surrounding neighbors, how much pollution is likely to occur?

If a market is subject to a positive externality,

Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's Theorem, the optimal level of trash in the park can be achieved if

-The above figure shows the market for steel ingots. If the market is competitive, then the private producer surplus is

A firm operates and produces pollution that only harms an individual, Bob. The firm and Bob both know the costs and benefits of reducing pollution. Neither the firm nor Bob acts strategically while bargaining, and there are no transaction costs associated with bargaining. Explain how the efficient level of pollution occurs no matter whether the firm or Bob owns the property right to pollution.

-The above figure shows the market for steel ingots. If the market is competitive, then the competitive market level of output is

-Suppose that the market for steel is shown in the above figure. What specific tax would result in a competitive market producing the socially optimal quantity of steel?

The productivity of the employees of a bakery is reduced because of the excessive noise coming from a next door car repair shop. This is an example of

In the presence of a negative externality in production, a monopoly will produce

-The above figure shows the market for steel ingots. If the market is competitive, then to achieve the socially optimal level of pollution, the government can

-The above figure shows the marginal benefit from pollution for two firms. If each firm receives a marketable permit to produce 25 units of pollution, which one of the following is most likely to happen?

If the social marginal cost of a good is very high relative to the private marginal cost, then a monopoly will most likely

The result that, under certain circumstances, no government action is needed to control an externality because it can be eliminated by bargaining between the affected parties is called

Students who talk loudly with each other in class

Positive externalities are created when

What is one reason drunk driving is held in such disrepute?

Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MC^p = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MC^e = Q. What is the total external harm at the competitive market level of output?

Suppose a city has 20 citizens. The first 10 citizens each derive marginal benefit from traffic lights according to the function MB = 10 - Q, and the remaining 10 citizens each derive marginal benefit from traffic lights according to the function MB = 20 - Q. If traffic lights cost $20 each to produce, what is the efficient quantity of traffic lights?

To maximize welfare in a competitive market that has a negative externality in production, government should tax a pollution-generating good at a specific tax equal to the marginal cost of producing the good.