Exam 17: Externalities and Public Goods

The Coase Theorem implies that victims of pollution should be able to pay polluters not to pollute if the victims value a reduction in pollution more than the polluters value the production of the pollution. Which of the following does not explain why this type of payment does not work in "real life"?

The reason why we sum the demand curves of individual consumers vertically rather than horizontally in a public goods market is that:

A nonrival good is a good where consumption by one person does not reduce the quantity that can be consumed by others.

An example of a good that is nonexclusive but rival is:

An externality arises when:

If the detriment to society from a negative externality is measure as $5 per unit of output of a particular good, the best way of moving closer to the social optimum would be to:

Suppose that a smoker and a non-smoker are seated next to each other in a restaurant. This restaurant does not offer a non-smoking section. The smoker is indifferent between 1)smoking and 2)not smoking and consuming a $6 dessert. The non-smoker values being able to eat in a smoke-free environment at $10. According to the Coase Theorem, and assuming no bargaining costs, what will happen?

Which of the following is a key feature of a public good?

When the government can set emissions standards for polluting industries, the government should set the emissions standard to achieve the socially optimal level of production which, in general, is not equal to zero.

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be +30. The market demand curve for the industry can be expressed as P = 60-Q. What is the socially optimal level of output?

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be $\mathrm { MSC } = 2 \mathrm { Q } + 30$ and the marginal private cost of production to be $M P C = Q$ $+ 30$ . The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the equation of the marginal external cost is:

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be $M S C = 2 Q + 30$ and the marginal private cost of production to be $M P C = Q$ $+ 30$ . The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the deadweight loss from producing at the market equilibrium is:

The efficient amount of pollution in society:

When the government can set emissions standards for polluting industries, the government should employ emissions taxes instead because emissions standards cannot generally achieve the social optimum.

A governmental limit on the amount of pollution that may be emitted is referred to as:

When the government can set emissions standards for polluting industries, the government should not set emissions standards because the market equilibrium will coincide with the social optimum in the absence of intervention.

When the government can set emissions standards for polluting industries, the government should set the emissions standard to zero because pollution is bad for people.

What must be true for the provision of wireless service in an airport to be considered a public good?

Which of the following is not an example of a free rider problem?

A rival good is one: