Exam 10: Externalities and Public Goods

(Figure: Market 4) Use the graph to answer the question. ​ The graph shows the marginal social benefit, demand, and supply curves in the milkshake market are in the graph. What are the socially optimal quantity and price?

Quotas change _____, and taxes change _____ when they are used to deal with externalities.

What two characteristics are used to classify a good as a "public good," and what implications do these characteristics have for the good?

When an activity has a side effect that harms bystanders, the side effect is referred to as:

A corrective subsidy is:

The socially optimal outcome is the outcome that:

(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 sellers will:

When a good is a rival good:

Which activity generates a negative externality?

Pedro attends a university that requires all students, faculty, and staff to have antivirus software on their personal computers and even provides - at no cost to students, faculty, and staff - antivirus software for their personal computers. Why would the university pay for the protection for the personal computers of students, faculty, and staff?

When farmers grow apples, there are a number of external costs. In particular, apples not sold or picked in a timely fashion spoil and become rotten and thus generate methane gas. If the marginal external cost is $10 per bushel of apples, and the government imposes a tax of $20 per bushel of apples, then at the new equilibrium price and quantity of apples:

Which statement illustrates an environmental policy based on cap and trade?

Which of the following statements describes the Coase Theorem?

A price change will NOT cause:

An apartment complex imposes a rule prohibiting loud noise from 9 p.m. until 7 a.m. This is an example of using _____ to reduce externalities from noise.

Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is:

Marginal social benefit is the term for:

A familiar example of a negative externality is loud music in a busy park on a weekend. In principle, it should be possible to solve this externality by permitting park visitors to negotiate rights to play music in particular locations or at specific times. The most likely reason these negotiations do NOT occur is that:

Mario is willing to sell an extra unit of his product as long as price is:

Which of the following is NOT part of the three-step recipe used to analyze externalities? (Note: the steps are not necessarily in order.)