Exam 10: Externalities and Public Goods

(Figure: Market 4) Use the graph to answer the question. The graph show the marginal social benefit, demand, and supply curves in the milkshake market. Market forces would yield a quantity of _____ and a price of _____ in the milkshake market.

An external benefit is:

The supply curve of a firm is also its _____ cost curve.

(Figure: Market 2) Use the graph to answer the question. ​ The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

Cap and trade is a system of:

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are no external benefits or costs, the output at Q will be:

Which is a private good?

City police services and clean water are similar in that both are _____, but they differ in that clean water is _____, while city police services are not.

A public good, such as national defense, _____ excludable and is _____ in consumption.

The socially optimal amount of an externality is:

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external benefits, a subsidy given to consumers will:

What happens in a supply and demand diagram of the pesticide market when a corrective tax is used to solve a negative externality problem?

Your college roommate has the right to practice her tuba during the day. You, however, find that studying during the day is most conducive to good grades, and her tuba-playing makes it difficult for you to concentrate. You make a deal with your roommate: you will clean the dorm room once a week if she will practice her tuba at other times or elsewhere. This is an example of

The benefit enjoyed by a buyer as a result of purchasing one additional unit of a good is the marginal _____ benefit.

Which good is MOST likely to be a public good?

Suppose that the city of Cleveland has set an emissions tax to reduce the amount of pollution going into the Cuyahoga River. Assume that the optimal tax would be $2,500 but that city officials have set the tax at $1,000. At the equilibrium with the $1,000 tax:

A good has a free-rider problem when:

Which of the following would be both nonrival and nonexcludable?

Which statement illustrates an environmental policy that uses cap and trade?

In general, a corrective subsidy: