Exam 8: Externalities, the Environment, and Public Goods

The overuse of _____ goods is known as the tragedy of the commons.

Firm XYZ produces paper products, which cost the company $100,000. However, the production of the paper results in air pollution. The cost of this negative externality is $6,000. What is the marginal private cost (MPC)?

_____ is a tax levied on activities that generate a negative externality so that the externality is considered in the decision making.

The overuse of public goods is known as:

(Figure: Common Resource Goods) This figure shows that MPC is relatively _____ and thus _____ the full cost of the common resource.

Business policies that foster environmental and social benefits are labeled _____ initiatives.

Tradable pollution permits allow firms to pollute up to a given limit. What happens when firms do not reach their allowable pollution limit?

(Figure: Externalities and Social Equilibrium 2) In this figure, which point represents social equilibrium?

An example of a negative externality is:

_____ is the act of altering private costs and benefits to account fully for external effects.

(Figure: Externalities 0) In this figure, which point represents private equilibrium?

How is a corrective tax on pollution used by firms in their decision making?

An example of a positive externality is:

The expense of complex negotiated settlements in cases where many people are affected by negative externalities is known as:

The Rainbow Paint Company has lowered its cost of doing business by illegally dumping waste materials into a nearby river in order to reduce the company's costs. This is an example of _____ failure.

Because of a _____ externality, marginal social cost is greater than marginal private cost.

Because of a _____ externality, marginal social benefit is greater than marginal private benefit.

With _____, the government directly regulates business by setting strict pollution limits or by requiring the use of pollution control devices.

(Figure: Externalities 0) In this figure, which point represents social equilibrium?

_____ goods are rival in consumption and nonexcludable.